The Pension Fund Committee of Westminster Council met on Wednesday 05 November 2025 to discuss an impact investment opportunity for temporary accommodation and to consider changes to the Local Government Pension Scheme (LGPS). The committee decided to approve the pension fund's participation in an impact investment opportunity for temporary accommodation, and also agreed to respond to a government consultation on LGPS scheme improvements.

Pension Fund Impact Investment Opportunity: Temporary Accommodation

The committee discussed a proposal for the pension fund to participate in an impact investment opportunity focused on providing temporary accommodation. This investment would involve the pension fund providing a loan to a Limited Partnership (LLP) which would then acquire and lease properties to the council for use as temporary accommodation.

Officers explained that the investment structure is designed to protect the pension fund's interests. The properties, alongside a credit tenant lease, serve as security for the loan. The credit tenant lease requires the council to manage and maintain the properties as if they had full ownership, thereby mitigating property-level risks. Councillor Ryan Jude, Cabinet Member - Climate, Ecology, Culture and Air Quality, raised concerns about the potential for the pension fund to be held liable if properties did not meet Minimum Energy Efficiency Standards (MEES). Patrick Porega, who worked on the financial modelling, assured the committee that the pension fund would not be liable as it is a debt holder, not the property owner. He also noted that the council's future tax revenues would also serve as security for the loan, in the unlikely event of default.

The committee also discussed the comparison between this proposed investment and a similar arrangement with A2 Dominion. It was clarified that Westminster's approach is a debt-based investment, whereas the A2 Dominion deal was equity-based. The use of a Special Purpose Vehicle (SPV) or LLP was explained as a mechanism to overcome the legal restriction of a council contracting with itself.

The committee agreed to proceed with the investment, with the understanding that properties selected would ideally already meet or exceed EPC C ratings. If this is not possible, a clear plan to meet MEES will be outlined in the report to the Cabinet.

Government Consultation: LGPS Scheme Improvements (Access and Protections)

The committee reviewed a government consultation on proposed improvements to the Local Government Pension Scheme (LGPS), focusing on access and protections. The council's proposed response to the consultation was presented.

Key areas of discussion included:

• Access for Councillors: The consultation proposed allowing councillors to opt back into the LGPS for their council income, a provision that had been removed in 2014. The committee supported this, provided it remains optional.
• Academies: The consultation addressed the implications for academies within the LGPS framework.
• New Fair Deal: This section concerns bodies set up following the contracting out of council services, and how staff transferred to these bodies can be protected within the LGPS.
• Public Sector Equality Duty: This relates to ensuring the scheme operates fairly and without discrimination.

Councillor Ed Pitt Ford raised a question about whether allowing councillors to re-enter the LGPS would remove their free choice and if it would encourage those who had previously opted out to return. Phil, an officer, explained that the proposal is for those who are still eligible for LGPS service, particularly where staff have moved to sub-optimal defined contribution arrangements after their services were contracted out. The eligibility criteria, such as at least 80% of work being for local government, were highlighted. Councillor Tim Mitchell expressed support for bringing more individuals back into the pension scheme, viewing it as a positive step for accessibility.

The committee was satisfied with the council's proposed response to the consultation and indicated no issues with the suggested responses.

LCIV Global Equity Quality Fund Update and Disinvestment

The committee received an update on the LCIV Global Equity Quality Fund and discussed the outcomes of disinvesting from the LCIV Global Alpha Growth Paris Aligned Fund.

Officers recommended a transition to passive investment strategies, citing that active management can tend towards average market performance. The independent advisor, Echef Maldon, had approved this recommendation. The committee considered two main passive index trackers: the LGPS Central's recommended passive index trackers and BlackRock's FG tracker.

A key discussion point was the potential overlap in stocks between different funds and the implications for fees. Councillor Jude questioned the tracking error associated with the BlackRock fund, which was noted as being higher due to its concentrated nature but still within a comfortable range for a passive fund.

The committee also debated the merits of a 50/50 split between a hedged and unhedged fund versus investing solely in an unhedged fund, such as BlackRock's. The potential for currency hedging to provide a defensive element in falling markets was discussed, with a recommendation to hedge between 25% and 50% of exposure. The fee savings associated with passive management were acknowledged as material.

Ultimately, the committee expressed a preference for a 50/50 split between the two passive options, aiming to avoid favouring one manager over another and to balance the benefits of hedging and unhedging. The decision was made to proceed with this approach, with the understanding that the transition costs would be managed, potentially through the use of a transition manager to maximise in-specie transfers.

The committee also noted that the previous manager, Morgan Stanley, had been underperforming, and while investigations were ongoing, the move to passive funds was seen as a way to gain market exposure at a lower cost and with greater certainty.