The Joint Pensions Committee met to discuss the government's Fit for the Future consultation on the Local Government Pension Scheme (LGPS), which proposes significant changes to how pension funds are managed and invested. The committee also reviewed the quarterly investment performance report and updated its communications policy.

Response to MHCLG LGPS Consultation Fit for the Future

The committee extensively debated the government's Fit for the Future consultation, which aims to reform LGPS asset pools, boost local investment, and strengthen governance. The proposed changes would see local authorities delegate the implementation of their investment strategies to pension pools, such as London CIV, with the pools becoming responsible for investment advice and management. While local authorities would retain responsibility for setting high-level investment objectives, the ability to determine detailed asset allocation, including the split between active and passive investments, geographical focus, and style bias, would be transferred to the pools.

Councillor Mrs. Kim Caddy expressed concern that this shift would remove the committee's control over risk management, particularly the active versus passive investment decision. She argued that this was a fundamental aspect of risk management and should remain with the local authority. Councillor Aydin Dikerdem questioned the government's approach to consultation, suggesting that focusing on only a few key areas might be disingenuous. However, the Director of Financial Services, Fenella Merry, explained that the government had indicated a strong unwillingness to deviate from its proposals, making a focused approach necessary to achieve any changes. She highlighted that the active versus passive debate was considered the most critical area for the committee to influence.

Concerns were also raised about the democratic pathway for scheme members to influence investment decisions once implementation is delegated to the pools. Councillor Dikerdem noted that the current proposals offered limited influence for individual members or local authorities, potentially creating a black box of decision-making. The committee acknowledged the need for stronger contract management arrangements and dispute resolution policies with the pools.

Regarding local investment, the committee agreed that local should be defined as UK to ensure sufficient investment opportunities and a diversified portfolio. They also supported the proposal for shareholder representation on pool boards but felt it did not go far enough given the pools' increased control over investment implementation.

The committee resolved to note the government's proposals and provide comments on the proposed response to the consultation, with a focus on retaining control over the active versus passive investment split, ensuring the pools have sufficient capacity to manage legacy assets, defining local investment as UK-based, and strengthening governance and contract management arrangements.

Quarterly Investment Performance Report - 2024/25 Q2

The committee received a report summarising the performance of the Pension Fund's investments up to 30 September 2024. The overall fund performance was positive, outperforming its benchmark for the quarter. However, concerns were raised about the performance of some active equity managers, with all three active equity managers having below-benchmark returns over the last three years. The report also noted that the London CIV Global Focus Fund exceeded 15% of the Fund's total value, and cash holdings were above the higher benchmark threshold. The committee noted these points and the investment performance shown in the appendices.

General Matters

The committee received updates on several general matters:

• Transition of assets to the Pool: The report detailed the progress and challenges in transitioning assets to the London CIV pool, with a particular focus on illiquid assets and the deadline of March 2026. Concerns were raised about the availability of suitable investments within the pool and the current lack of a Chief Investment Officer at London CIV, which was seen as a risk.
• Nuveen UKPF: An update was provided on the proposed merger of the Nuveen UK Real Estate UK Property Fund. The committee noted that the Director of Financial Services had been delegated authority to vote on the merger if required before the next meeting, to avoid a forced sale of properties.
• Climate Reporting Update: The committee was informed about efforts to compare climate reporting data from Mercer and London CIV, with a view to establishing a consistent reporting mechanism for Scope 3 emissions.
• Update on Responsible Investing: Following a petition regarding disinvestment from companies linked to the Israeli military action in Gaza, the committee noted that any future actions would need to be implemented through London CIV, requiring consensus across all London boroughs due to the upcoming changes in investment regulations.

The committee resolved to note the updates and delegate authority to the Director of Financial Services to vote on the Nuveen UKPF merger.

Communications Policy Review

The committee reviewed and approved updates to the Communications Policy for the Wandsworth Pension Fund. The changes were primarily to reflect updated job titles and organisational names. The policy ensures clear, timely, and accessible communication with all stakeholders, including scheme members, employers, and elected officials.

The meeting concluded with the exclusion of the press and public for a fund manager presentation.