Potential ‘grab’ of Welsh pensions by England blocked by ministers

Martin Shipton

Campaigners have welcomed a decision by UK Government ministers not to introduce new arrangements under which billions of pounds-of Welsh public sector pension assets would be controlled from England.

In November 2024 Nation.Cymru reported how plans had been published that proposed major reform in the way such funds were managed. It was suggested that pension investments across Britain could be consolidated into a smaller number of funds, opening the door to the possibility that the control of Welsh assets could transfer to an entity in England.

Hywel Davies, of the group Divest Cymru, told us at the time: “I belong to a group that has long campaigned against local government pension funds’ investment in fossil fuels. The group has had some success in lobbying funds to divest from oil and gas, though always in the teeth of opposition from fund managers.

“We have had dialogue with pension trustees, the Wales Pension Partnership [WPP, which manages pension investments on behalf of thousands of public sector workers] and elected councillors across Wales. We have questioned the failure of pension funds to follow the mandate set for them by elected councillors and Senedd members.”

‘Mega funds’

He added: “Recently we have had a speech from Rachel Reeves at the Mansion House that makes it clear that big changes will be happening to local government pension funds. By 2030 she intends to create eight mega funds. These will have assets of £50bn each on average. No details of the geographical areas covered by these mega funds nor their governance have been discussed, but the proposals have been put out for consultation. Discussion of the issue in the press has been very low key.

“The total amount of WPP assets, pooled and non-pooled, is £22.5bn, so Wales has less than half the necessary funding. It seems clear therefore that unless some special dispensation is made for our nation status, perhaps alongside funds for Scotland and Northern Ireland, we are at risk of being amalgamated into a combined region.

“I would suggest that now is the time to draw attention to the political and financial consequences for Wales if it does not retain a say over its own pension assets. The benefits to sustainable investment projects could be significant – in the order of £1,5bin at 5% of the total sum.

“We have not been told whether there would be a role for the Senedd in overseeing any Welsh pension, or whether all decisions will be handed to fund managers and the UK Treasury. Will we have the space to assert our own, distinct democratic priorities?

“Could we for example decide that our pensions will no longer be used to invest in oil or gas? I would argue that this issue is a significant test of this government`s respect for the devolution settlement and our ability to manage our own affairs. It is part of a narrative that includes HS2, Levelling Up, the Crown Estate. the Barnett formula etc.”

Joint letter

Now Pensions Minister Torsten Bell – the MP for Swansea West – and Treasury Minister Jim McMahon have issued a joint letter in which they have lifted the threat of an English takeover.

In their letter to the Wales Pension Partnership, they state: “In November, [the] government set out its proposed reforms in our Fit for the Future consultation with the aim of establishing a world-class LGPS [Local Government Pension Scheme] made up of large pools of professionally managed capital, held to account by Administering Authorities who have confidence in robust and transparent governance structures and who are delivering the best value to members and their communities.

“We want to see strong and resilient foundations for a scheme projected to reach £1tn by 2040 and have been clear that this is the moment for creative and collaborative proposals to that end.

“[The] government wrote to each pool, asking for transition proposals setting out how they would seek to achieve the minimum standards proposed in the consultation by March 2026, focusing on the benefits of scale, long-term resilience, value for money and viability against the deadline, with consideration given to the opportunity for closer collaboration across the scheme and merger of pools. We recognise how significant an undertaking this has been for each pool in a short space of time and thank you for the spirit in which you have participated in this process and for your close engagement throughout.

“Your submission and engagement have formed a critical part of our assessment of the viability and strength of the proposals set out in the consultation. [The] government has considered the responses to the consultation and is currently preparing next steps, including our consultation response and the implementation of the reforms via legislation.

“We have reviewed your proposal and are supportive of you proceeding as you have set out, and in line with the March 2026 deadline. Your proposal meets the above criteria, as well as the overall ambition that was set out in the government’s consultation to put the LGPS on the strongest possible footing for the future.

“It is clear Wales Pension Partnership has embraced the ambition to create a standalone LGPS investment company to deliver for your eight partner Authorities and for the benefit of Wales as whole. We also note the WPP ambition to become a leader on local and impact investing within the scheme, as part of your five-year plan.”

‘Good news’

Responding to the news, Mr Davies of Divest Cymru said: “Yes, it is good news that the WPP will continue as a stand alone fund.

“Hopefully, that will allow it to invest in sustainable projects in Wales and not squander members’ contributions on fossil fuel investments which are bad for the planet and subject to the vagaries of the markets. It is also important that there is democratic accountability for the fund with a role for the Senedd.

“Provided there are no amalgamations hidden in the detail, there is the potential to build a fund that serves Wales and honours its commitment to the planet.”