Senior MPs and councillors are discussing ways to ensure Local Government Pension Scheme trustees take a more active role in monitoring investments, following last year's banking scandals. US-based lawyers specialising in shareholder activism visited Parliament on 14 May to discuss how pension scheme trustees – who are often councillors or scheme members – could monitor investments by their multibillion-pound retirement funds. Council pension experts are concerned about the declining financial health of local government pension schemes during the recession, and their funds' scrutiny of potentially-risky investments following the collapse of Iceland's banks last year. The parliamentary meeting followed news that two LGPS funds – Merseyside and North Yorkshire – were now unlikely to be lead plaintiffs in a US-based class action lawsuit against the Royal Bank of Scotland and its senior managers, including former chief executive, Sir Fred Goodwin. However, the two LGPS schemes will continue to support the class action and are still seeking compensation from RBS, claiming the bank – which was part-nationalised by the UK Government last year – misled investors over its financial health. Tom Hubbs, senior partner at US-based lawyers Labaton Sucharow, told The MJ that MPs and councillors showed ‘heavy' interest in empowering LGPS trustees to actively monitor future investments. ‘There was an active dialogue and a consensus that scheme trustees had to become active and do more with regard to the investments in their schemes. We believe the best way to do that is through a monitoring process which alerts trustees to any potential issues with the scheme,' he said. Actuarial valuations of the £100bn LGPS, due out later this year, are expected to reveal funding levels for some schemes could be as low as 55% of scheme liabilities, which is likely to raise questions about the long-term sustainability of the LGPS. The Commons' local government select committee will shortly publish its assessment of council investments following its inquiry into the Icelandic banking crisis. Councils have around £940m frozen in Icelandic accounts, but have been told they can expect to get 80% of it back.
