Seven councils ‘revolt’ against £100m top-up payment for West Midlands Pension Fund
The West Midlands Pension Fund (WMPF) have asked the councils to pay an extra £100m this year because of the fund’s £2.8bn deficit.
The fund has more than 287,000 members working for about 520 employers. Local councils have seen their budgets cut heavily in recent years. Birmingham, which has been asked to contribute £65m of the £100m, has had to reduce its spending by £500m during the past six years and expects to have to cut another £250m by 2020. “The hard-pressed citizens and taxpayers in Birmingham should not be asked to find £65m a year to bail out investment fund managers,” said John Clancy, Labour council leader.
The WMPF spent £69.8m on managers in 2015/16, down from £81m the year before. It is budgeting £72.8m for 2016/17. The WMPF has returned 5.6 per cent annually during the past decade, beating the benchmark of 5 per cent. The retail price index has risen by an average of 3 per cent annually. Labour councillors for Birmingham, Solihull, Coventry, Wolverhampton, Dudley, Sandwell and Walsall are trustees of the WMPF but are poised to reject its professional advisers’ request for the £100m “top-up” fee.The WMPF noted that it had cut running investment costs by £11m in 2015/16 to £69.8m, 0.6 per cent of assets.
WMPF plans to pool resources with eight other funds to create the LGPS Central, which will have £65bn in assets. It should save £200m in annual costs by 2034.
Chris Burrow, Pensions Champion for Coventry City UNISON, said
‘Employer contributions to the pension scheme are deferred pay. They are not an optional part of membership of the scheme. They are part of the employees’ contractual terms and conditions. Central government underfunding of councils should not be used by the employer as an excuse for undermining the pension scheme. All pension schemes have been put under pressure this year due to low investment returns caused by recent instability in the financial markets. The schemes make investments for long-term returns, and short-term fluctuations do not provide evidence of pension funds underperforming or being unsustainable.
If the employers were concerned about the efficiency of the schemes, they could have identified these savings in running costs and influenced the pension schemes to act earlier if they had been so minded. UNISON’s success in getting members represented on pension boards has allowed greater transparency in the schemes’ running costs. Identifying ways of reducing these costs doesn’t absolve the employers’ from their responsibility of paying their employees’.