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Councillors are elected to support their communities. But, when it comes to pension fund matters, their political i...
Councillors are elected to support their communities. But, when it comes to pension fund matters, their political instincts need to be kept in check.
On page six of this month's PT, Bexley LBC's Mike Ellsmore describes the potential impact of new, powerful executive members on the management of council pension funds.
He highlights socially responsible investment as one danger area - but there are others.
There are plenty of stories about councillors labouring under the misapprehension that pension funds can engineer regional economic miracles.
One treasurer at an LGC event a couple of years ago recounted the tale - sotto voce - of the band of councillors who suggested baling out a struggling local aeronautical firm using pension fund monies. Ordinarily, a quick reference to fiduciary duties is sufficient to kick most hare-brained schemes into touch.
But the vogue for considering greater exposure to venture capital - partially fuelled by central government and Myners - means treasurers need to be extra vigilant in this era of executive members.
While pensions are classified as a non-executive function under modernisation, political reality suggests powerful leaders and executive members will want their say.
And, being politicians, their suggestions could have a decidedly political flavour: 'Have we thought about setting up a Local Venture Capital Fund?' for example. We all know where that one's going.
Perhaps one solution would be to restrict the amount councils can invest in their local economies. While anything which adds to the burden of central regulation on councils must be viewed with great caution, this extra defence might help keep councillors on the straight and narrow.
But the chief task facing treasurers under modernisation is to ensure pensions committees maintain their independence from the executive function. Training for members may have a crucial role to play here. Confidence-building knowledge will help backbench members - who, by their very nature, are likely to be less forthright - face up to their executive colleagues.
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