'Serious weakness' in London funds, report finds

The report by the Pensions Institute has found “serious weakness” in the governance frameworks of London pension funds that it said could not be solved by training alone.

Professor David Blake, director of the Pensions Institute, and one of the report’s authors, said some councillors needed to first recognise their inexperience for the job.

He said: “These [councillors] who are doing this unpaid work for the good of the community should recognise where their weak points are, when it comes to this massively important financial burden of underfunded pension schemes.”

The lack of expertise is compounded by the democratic nature of the scheme management, the report found. At one scheme, all four councillor members of the governance committee were changed at one meeting.

“In this case, scale is a way of improving investment governance,” Blake added.

The report also criticises the Department for Communities and Local Government for the “lack of a strong governance framework and supervision”.

A DCLG spokesman said governance of these schemes is ultimately “a local matter for councillors”, but that the public service bill will introduce independent oversight of funds.

The current regulatory framework requires a funding strategy statement and statement of investment principles from funds.

"[These are set to] ensure transparency and that all investment decisions are taken on the basis of proper advice," said the spokesman.