The government is planning to reinstate guidance warning the Local Government Pension Scheme (LGPS) against pursuing investment policies that contradict British foreign and defence policy.
Local government minister Rishi Sunak confirmed the move in a parliamentary written answer, reacting to a Court of Appeal ruling in June that rendered the guidance lawful.
The guidance had previously been found unlawful by the High Court after legal action from the Palestine Solidarity Campaign, which wanted the LGPS to be allowed to pressure Israel through its investment policies. Since the Court of Appeal ruling the campaign has sought the right to appeal at the Supreme Court.
Mr Sunak said: “Following the government’s success at the Court of Appeal, pending the conclusion of any further legal proceedings, I intend to reinstate the guidance provided to [LGPS] administering authorities requiring that they should not pursue investment policies that are contrary to UK foreign policy or UK defence policy.”
The guidance issued in September 2016, originally stated that “using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries [is] inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the government”.
Following the Court of Appeal ruling, Jamie Potter, a partner at law firm Bindmans, which is acting for the Palestine Solidarity Campaign, warned the judgment “could allow the government of the day to impose their own political agenda” on the LGPS, even when contrary to scheme members’ wishes.
“This affects not only those that do not wish to see their money invested in companies working in the occupied territories in Palestine or those that form part of the UK defence industry, but also those members that feel strongly about the environment or other social issues such as payday lenders,” he added.
In other remarks, Mr Sunak announced the LGPS rules would not be updated in light of the coming EU directive on the activities and supervision of institutions for occupational retirement provision (IORP II), which takes effect on 13 January. The directive’s main aim was to improve pension scheme governance, targeting risk management, internal audit and actuarial work.
“We do not feel it is necessary to change the rules of the [LGPS] to give effect to it, as we consider that its investment rules and governance requirements already comply with the directive’s objectives,” Mr Sunak said.