Hands off Wales’ pensions
Rob Jones
Among the various announcements made by the new UK Labour Government in the last few weeks was the Chancellor, Rachel Reeves’, desire to set off a ‘big bang of growth’ in the UK. To do this, she wants to harness the power of pensions to invest in businesses and infrastructure.
Among the ideas floated by the new government is the proposal to amalgamate the Local Government Pension Scheme (LGPS) in England and Wales. The current 87 funds would combine to create the ‘seventh largest pension fund in the world’ with £360bn of assets according to the Guardian .
I can certainly see the benefits, such as cost savings, and its sheer size allowing it to make more strategic, long-term investments that can boost the economy. After all, the purpose of pensions is twofold – to build up retirement savings, but also to redirect those savings into productive investment.
Swallowed
My issue is that, once again, Wales is being swallowed up into what will ostensibly be an English LGPS Fund.
I can see it now – Welsh local government employee’s pensions being used to fund infrastructure projects in England. Perhaps they’ll use it to revive HS2 given it apparently no longer exists.
If this government is serious about promoting economic development across the UK, and serious about backing Wales, then we should have our own stand-alone LGPS Fund. Otherwise, they’ll be lost to Wales forever.
According to the most recent annual reports from the eight funds in Wales, their combined assets are £22.5bn. That is huge in the context of the Welsh economy.
Basing that fund in Wales and ideally with an in-house investment team (instead of outsourcing that work to the City of London) would bring good quality financial sector jobs to Wales. It would also be able to focus on infrastructure, property and business investments in Wales.
I acknowledge that we may only be talking about a few hundred million of investment, but that is better than nothing. There’s also the possibility that its presence in projects through Wales could draw in further investment.
Catalyst
It could also be the catalyst for a future Welsh Government thinking strategically about how we can create a thriving financial sector in Wales.
At present, we have very few pension and insurance funds operating in Wales. Instead, our hard-earned money goes to primarily London- and Edinburgh-based pension funds, depriving us of the jobs and investment we need.
Although pensions are not within the remit of the Welsh Government, I do not believe there is anything to stop the Welsh Government working to build a thriving pensions sector here.
Instead of workplaces throughout Wales choosing one of the big pension schemes to run their workplace pensions, how about the Welsh Government supports the set up of a ‘Welsh Retailers Pension Scheme’, or a ‘Welsh Builders Pension Scheme’.
According to Welsh Government statistics, there are some 127,000 micro and small businesses in Wales employing a total of 573,000 staff. Even at a conservative estimate of those staff on average earning a basic salary of £18,000 annually, the total annual contributions would be around £825 million.
Before long there would be billions added to the schemes, and some of that money would be invested in Welsh businesses and Welsh infrastructure.
The first step is for the Welsh Government to ensure that our eight individual schemes do not get swallowed up into an all-encompassing English scheme.
Ministers need to stand up and fight for the creation of a single Welsh LGPS. Then we can harness them to invest in our economy and perhaps build a thriving financial sector in Wales.
Rob Jones is a financial adviser with a keen interest in Welsh politics.
Support our Nation today
For the price of a cup of coffee a month you can help us create an independent, not-for-profit, national news service for the people of Wales, by the people of Wales.
This really goes to the heart of the matter so far as Wales’ constitutional status is concerned. In one example, all that is wrong with lumping Cymru in with England both economically and politically is revealed. All our resources are pooled, the core sucks in the wealth, we are left with the scraps and told how wonderful and progressive this all is by the British nationalist Left and how benificent it is by their Right wing counterparts. What a sham! What a lie! This UK State denies Cymru the means to retain and invest its wealth to our benefit and… Read more »
This is how much the woman who wants pensioners to give up their heating allowance earns.
This is a good indication of how out of touch ALL in government have risen.
Rob Ford’s timely plea for Welsh control over Welsh assets is likely to be ignored by the Labour league of empire loyalists in the Senedd. Just as the Bank of England’s Monetary Policy Committee (‘high interest rates are good for us – no, not you, or you’) is beyond transparency and accountability, the leadership vacuum that has descended on Welsh Labour, their directionless policies and overall incompetence will fail us too. Starmer, clearly no democrat, won’t allow any further devolution (always a mostly wasted effort anyway and easily reversed), and Reeves’ contradictory and ignorant policies will continue to impoverish Cymru,… Read more »
Apologies, Rob Jones! And more power to your arm…
The pension funds should be left to make their own decisions on investment, not act as ‘piggy bank’ to the ‘New Tory Party’.
Rob Jones makes a couple of valid points. No – Wales should not be swallowed up in a pension fund overwhelmingly run for England. Yes- there should be a stand alone fund to meet the needs of Wales. But, his solution, allowing Welsh pension priorities to be set by an indigenous financial sector, oversimplifies a complicated issue. He risks replicating the current model which is deeply flawed. Pension funds are currently not answerable in any meaningful way to elected representatives. They are run by investment managers and officials. These delegate decisions to huge overseas investment companies who charge millions for their services Those who contribute… Read more »
Each LGPS in Wales have a board of trustees, including councillors of the constituent authorities, existing pensioners of that LGPS, there are staff who manage the staff contribution/pensioner side while there are staff who manage the investment side with Financial Business investing those pension funds.
There maybe savings on pooling the funds in Wales in staff costs and service costs, but almagamate into English LGPS and I suspect UK civil service fund would lose the regional links that we currently have and maybe result in more fees for pensioners in Wales.
People in Westminster brush off the fact that Cymru isn’t represented on the Union Jack, UK coat of arms or the British Royal Standard due to Wales still being seen as part of England as not a major issue but this continual bunching together of the two countries affects us enormously in other ways too, and this use of Welsh pension funds is just one example. Just after the election Starmer was seen trying to promote the different countries of the UK, with the flags of the countries behind him, but equality amongst the nations is only seen when Westminster… Read more »