Key Takeaways
- Derbyshire and Staffordshire pension funds, both controlled by Reform UK councillors, have voted to leave the Local Authority Pension Fund Forum (LAPFF).
- Derbyshire’s Pensions and Investments Committee approved withdrawal 6‑4; Staffordshire’s Pension Fund Panel voted 3‑1 to recommend exit, with a final decision pending on 25 September.
- LAPFF, founded in 1990, represents £425 billion of LGPS assets and provides corporate‑engagement, policy‑access, and stewardship services to its members.
- Reform UK’s opposition to ESG and net‑zero investing motivated the funds’ decision, despite internal advisers warning that withdrawal could undermine fiduciary duties and increase costs.
- If LGPS Central must start paying LAPFF fees after member exits, the cost will be passed on to remaining funds, currently about £12,500 per year for Derbyshire and Staffordshire.
- The departures add complexity for LGPS Central, which recently absorbed funds from the winding‑down Brunel Pension Partnership while other Midlands funds adopt stronger responsible‑investment strategies.
Background on the Withdrawal Votes
On Wednesday, the Derbyshire Pensions and Investments Committee met and, by a margin of 6‑4, voted to end the fund’s membership in LAPFF. The following day, Staffordshire’s Pension Fund Panel voted 3‑1 to recommend that its fund committee also withdraw, with a formal decision scheduled for 25 September. Both committees are primarily made up of elected councillors who act in a quasi‑trustee role for the Local Government Pension Scheme (LGPS) assets under their oversight.
Derbyshire’s Internal Advisory Position
Despite the vote, Derbyshire’s fund head, Dawn Kinley, had advised against leaving LAPFF. In her report she emphasized that the forum’s advantages—such as enhanced corporate engagement, direct access to policymakers, and support for meeting statutory responsible‑investment obligations—outweighed any drawbacks. Kinley noted that the fund, as one of LAPFF’s seven founding members, benefits from a long‑standing collaborative network that would be difficult to replicate independently.
Staffordshire’s Assessment of LAPFF Value
The Staffordshire panel’s accompanying report acknowledged that LAPFF’s work on conflict‑affected and high‑risk areas remains valuable, especially amid heightened scrutiny of LGPS investments in such zones. However, the report also cautioned that administering authorities carry trustee‑like fiduciary duties to scheme members, requiring impartiality and prohibiting the prioritisation of the authority’s political views over beneficiaries’ best interests. The panel stopped short of prescribing a definitive course, leaving the ultimate choice to the fund committee.
LAPFF’s Role and Scope
Established in 1990, LAPFF now aggregates £425 billion (≈ $574 billion; €495 billion) of local‑authority pension assets across the UK. The forum conducts engagement on a broad spectrum of issues, including executive remuneration, investments in conflict zones, and the Just Transition to a low‑carbon economy. All six LGPS pools—including LGPS Central, which manages the combined assets of Derbyshire (£7.7 bn), Staffordshire (£8.5 bn) and Nottinghamshire (£7.2 bn)—are members, alongside 85 other funds.
Reform UK’s Influence on Pension Policy
The right‑wing populist Reform UK party has been outspoken in its resistance to environmental, social, and governance (ESG) considerations and net‑zero investment targets within the LGPS. In Derbyshire, six of the ten committee members belong to Reform UK, while Staffordshire’s panel and its forthcoming fund committee also hold a Reform majority. This political alignment helps explain why both funds moved to exit LAPFF despite internal cautions about potential downsides.
Implications for LGPS Central
LGPS Central could face operational headaches as a result of the withdrawals. The pool recently integrated member funds from the Brunel Pension Partnership, which is in the process of winding down. If Derbyshire and Staffordshire cease paying their LAPFF subscriptions, LGPS Central may be required to cover the forum’s fees directly—a cost that would then be redistributed to the remaining member funds. Currently, Derbyshire and Staffordshire each contribute roughly £12,500 annually to LAPFF.
Contrasting Trends in the Midlands
While Reform‑controlled funds are pulling back from LAPFF, other Midlands LGPS participants are moving in the opposite direction. Newer members such as Oxfordshire and Wiltshire have adopted advanced responsible‑investment and climate‑change strategies, demonstrating a growing divergence in approach across the region. This split may create tension within LGPS Central, which must accommodate both ESG‑progressive and ESG‑skeptical funds under a single governance framework.
Membership Benefits Highlighted by Kinley
Dawn Kinley outlined several concrete benefits of LAPFF membership for Derbyshire’s fund: it supports the fund’s corporate‑engagement activities, provides a channel for direct dialogue with politicians and policymakers, and assists in fulfilling the LGPS’s statutory stewardship and responsible‑investment responsibilities. She also noted that LGPS Central presently enjoys free LAPFF access because all its constituent funds are members; should any member leave, the resulting fee would be apportioned among the remaining participants.
Potential Downsides Recognised by Advisers
Kinley conceded that not every LAPFF engagement initiative enjoys unanimous support among its members, and the forum’s overall approach might occasionally clash with the strategic direction set by an LGPS fund’s administering authority. The Staffordshire report echoed this concern, warning that authorities must avoid letting partisan preferences override their fiduciary obligation to act solely in the interest of pension scheme members. Neither LAPFF nor LGPS Central responded to requests for comment on the unfolding situation.
Conclusion and Outlook
The impending exits of Derbyshire and Staffordshire from LAPFF underscore a broader politicisation of LGPS investment governance, driven by Reform UK’s scepticism toward ESG and net‑zero frameworks. While the funds cite cost‑saving and ideological alignment as motivations, internal advisers warn that withdrawal could impair engagement effectiveness, increase financial burdens on LGPS Central, and challenge the fiduciary imperative to prioritise beneficiaries over political agendas. How LGPS Central navigates these competing pressures will likely shape the future of responsible investing across the UK’s local‑authority pension landscape.