"SCOTLAND'S public-sector workers are unwittingly pouring hundreds of millions of pounds through their pensions into funding cigarette manufacturers and companies dealing in arms. More than £220 million is tied up in tobacco firms – including those behind Marlboro, Benson & Hedges and Lucky Strike – despite guidelines that recommend ethical and social factors must be taken into account by councils administering the funds. The Scottish Government requires the Local Government Pension Scheme (LGPS) to "take ethical and social considerations into account when making investment decisions".
The Herald's Leader column asks: "How will they feel about the report in The Herald today revealing that they are unwittingly investing more than £220m in tobacco firms?"
The answer is not impressed but not entirely surprised. Governance of the Scottish LGPS is probably the worst of any funded pension scheme in Scotland. While there has been some improvement in recent years there is only limited scheme member representation. Decisions are taken almost entirely by councillors. There is also no provision in the legislation that members serving on these committees have to make investment decisions in the best interests of beneficiaries or address potential conflict of interests with the councils that make up the fund. UNISON believes that the current arrangements sit outside the requirements of European law, particularly Directive 2003/41/EC, known as the IORP Directive. I covered these issues in more detail in a blog post last year.
The Scottish LGPS will be the subject of significant renegotiation in the coming months as a consequence of the UK Public Service Pensions Bill. One of the recommendations in the Hutton Report on public service pensions that UNISON Scotland welcomed, was the call for stronger member involvement in the governance of pensions. This is something high on our list of priorities to resolve in the current review.
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