News and updates

On 3^rd March 2023 the Local Pension Committee approved Leicestershire County Council’s Pension Fund’s first Net Zero Climate Strategy.

The Strategy identifies that climate change is a material risk both to wider society and the £5.5 billion Pension Fund which must pay the pensions of over 100,000 scheme members on behalf of over 200 employers. Through the outcome of the Fund’s consultation, we saw our scheme members and employers’ support the proposed path to becoming carbon neutral, in a way that is managed prudently so that the Fund’s financial returns are kept at the right level.

The Strategy commits the Fund to becoming net zero by 2050, with an ambition for sooner in line with the Paris Agreement goals to limit global temperature well below 2°C, with the aim of achieving a 1.5°C limit. This is supported by the interim target to halve the carbon intensity of the Fund’s measurable investments by 2030. This will be supported through a number of targets and measures including:

• Decreasing the Fund’s exposure to fossil fuel reserves and increasing exposure to climate solutions, such as renewable energy, and technology related to the transition to net zero.
• Supporting real-world emissions reduction through an active engagement programme targeting companies contributing the most to the Fund’s climate metrics.

The Fund has already invested over £1 billion in funds that look to correlate climate change considerations with positive financial performance. These include:

• £872 million in LGPS Central’s All World Equity Climate Multi Factor fund. Which favours investment in companies that are taking a proactive approach to environmental factors.
• £55 million committed to global sustainably managed timberland with Stafford Capital. 65% of which is invested in planting new forests, 15% reforestation and 20% improved forest management. This will provide a source of sustainable low carbon timberland materials and generates verified carbon offsets. This new investment is in addition to the £139 million already held in timberland funds.
• £55 million committed to the Quinbrook Net Zero Power Fund. That invests in solar power with battery systems, both as part of the decarbonisation of the energy system, and as part of demand from data centres.

We are seeing these actions already directly impact the carbon metrics the Fund already measures. And, as of 31 March 2022 the carbon intensity of the equity portfolio has decreased by 26% since December 2019.

Despite the progress we have already made, the path is not entirely clear. The Fund’s approach will continue to be developed in light of changes nationally and internationally, recognising all governments, industries, companies, financial institutions, markets and individuals must act together with a common goal to shift towards a net-zero emissions world.in line with the Paris Agreement. The Fund’s approach must be managed carefully, and not lose sight of its primary purpose of ensuring the financial sustainability of the Fund for its members.

Further information on the Fund’s Net Zero Climate Strategy, implementation plan and investment approach can be found on this website’s investments information page.

The consultation on the draft Net Zero Climate Strategy (NZCS) will close on midnight 5^th February 2023. If you are a scheme member, employer or other stakeholder, please use this opportunity to submit your views.

The consultation acknowledges the pressing pace of action required to manage climate change, and the resultant risks to the Fund. This ensures pensions can be sustainably paid to more than 100,000 beneficiaries in the coming decades.

The Fund previously engaged on key targets and measures in the early development of the NZCS. We received over 1000 responses, which were overwhelmingly supportive of the Fund targeting Net Zero by 2050, with an ambition for sooner. Alongside other proposed primary and secondary targets, such as increasing investments in climate solutions like renewable energy and halving the carbon intensity of our equity portfolio by 2030.

The Fund’s ambition is in line with the goals of the Paris Agreement to drive down real-world carbon reductions. The NZCS aims to address the risk of climate change to the Fund by reducing its carbon emissions whilst maintaining investment returns.

Through engagement with its investment managers and underlying companies, supported by pool company LGPS Central, the Fund will invest in climate solutions that support a global Net Zero future. This is for, and on behalf of members, many of whom live across Leicester, Leicestershire and Rutland.

The Strategy looks to build upon significant progress the Fund has already made as a long-term responsible investor to date:

• As of 31^st March 2022 the carbon intensity of the Fund reduced by 26% since its benchmark 31^st December 2019 across measurable investment.
• Transitioned £800m+ to sustainable and low carbon investment strategies.
• Invested in timberland (forestry) since 2011. Our investments extend across 12 countries and covers the equivalent of 17%

(363 km²) of Leicestershire’s surface area. This sequesters more than 720,000 tonnes of carbon dioxide from the atmosphere each year*, equivalent to the annual emissions from 233,000 cars, or 62% of reported emissions within the City of Leicester in 2020**.

We’re seeking views on the draft Strategy which are linked below.

Pension Fund Net Zero Strategy PDF

Pensions Net Zero Summary Document PDF

Please submit your views to our online consultation.

The closing date is 5^th February 2023. The outcome will be presented to the Local Pension Committee on 3^rd March 2023

For more information or if you require a paper copy of the survey, please contact: Cat Tuohy, (cat.tuohy@leics.gov.uk) Responsible Investment Analyst, Leicestershire County Council.

* Based on above ground stemwood only.

** As reported by BEIS

Leicestershire County Council Pension Fund (the Fund) has launched its consultation to provide scheme members, employers and other stakeholders with an opportunity to review and provide their thoughts on the draft Net Zero Climate Strategy (NZCS) from 21^st November 2022 until 5^th February 2023.

The consultation acknowledges the pressing pace of action required to manage climate change, and the resultant risks to the Fund. This ensures pensions can be sustainably paid to more than 100,000 beneficiaries in the coming decades.

The Fund previously engaged on key targets and measures in the early development of the NZCS. We received over 1000 responses, which were overwhelmingly supportive of the Fund targeting Net Zero by 2050, with an ambition for sooner. Alongside other proposed primary and secondary targets, such as increasing investments in climate solutions like renewable energy and halving the carbon intensity of our equity portfolio by 2030.

The Fund’s ambition is in line with the goals of the Paris Agreement to drive down real-world carbon reductions. The NZCS aims to address the risk of climate change to the Fund by reducing its carbon emissions whilst maintaining investment returns.

Through engagement with its investment managers and underlying companies, supported by pool company LGPS Central, the Fund will invest in climate solutions that support a global Net Zero future. This is for, and on behalf of members, many of whom live across Leicester, Leicestershire and Rutland.

The Strategy looks to build upon significant progress the Fund has already made as a long-term responsible investor to date:

• As of 31^st March 2022 the carbon intensity of the Fund reduced by 26% since its benchmark 31^st December 2019 across measurable investment.
• Transitioned £800m+ to sustainable and low carbon investment strategies.
• Invested in timberland (forestry) since 2011. Our investments extend across 12 countries and covers the equivalent of 17%

(363 km²) of Leicestershire’s surface area. This sequesters more than 720,000 tonnes of carbon dioxide from the atmosphere each year*, equivalent to the annual emissions from 233,000 cars, or 62% of reported emissions within the City of Leicester in 2020**.

We’re seeking views on the draft Strategy which are linked below.

Pension Fund Net Zero Strategy PDF

Pensions Net Zero Summary Document PDF

Please submit your views to our online consultation.

The closing date is 5^th February 2023. The outcome will be presented to the Local Pension Committee on 3^rd March 2023

For more information or if you require a paper copy of the survey, please contact: Cat Tuohy (cat.tuohy@leics.gov.uk).

* Based on above ground stemwood only.

** As reported by BEIS

Important update regarding the Fund's investments

As the Russia – Ukraine conflict persists we thought it would be useful to provide an update about the Pension Fund’s position.

The Fund has a minimal exposure to Russian stocks or bonds. At the latest available position, we estimate this to be about 0.15% of total fund assets, or about £10 million.

This exposure is spread across a number of investments, with LGPS Central and Legal and General’s Passive World Emerging market fund holding the majority of the exposure.

The LGPS Central funds include the Global Equity Fund, the Global Emerging Market Equity Fund, the Multi Asset Credit Fund, and the Climate Multi Factor Fund. This week we have been talking to the managers at LGPS Central to understand the position of these four funds.

Three of the funds are run by active managers who are able to ‘choose’ their investments rather than mimic an index.

Most of the managers have sold before the conflict escalated or are planning to sell when possible, or do not have a position. However, the Russian stock exchange is currently closed. This obstruction is further compounded by the fact any such sales and proceeds may be currently blocked from leaving Russia. The Central Bank of Russia has imposed a temporary suspension on Russian banks executing withdrawal transactions of funds in all currencies held by foreign clients (both legal entities and individuals), to the accounts opened in foreign countries. The suspension covers residents of the countries who have issued sanctions against the Russian Federation.

Three of the managers are adopting a ‘wait and see’ approach and the Leicestershire County Council Pension Fund intends to work with LGPS Central to strongly encourage the move to zero exposure.

Investments which are based on passive indexes (Legal and General World Emerging markets and LGPS Central Climate Multi factor fund) are dependent on the index providers position on the constituents. FTSE Russell, who provide the indexes to our two passive funds, stated on 2nd March, “Russia will be deleted from all FTSE Russell Equity Indices effective from the open on Monday 7th March 2022”. The deletion of Russia from indexes will mean a small reweight across other countries and any holdings removed will be divested (when markets and regulations allow) at a significant loss versus their pre-conflict prices.

We have one other exposure of £1 million through Adam Street Partners. This is through a fund of funds product, which reduces our level of influence and together with the holding being in private markets, makes the holding less liquid. Adam Street Partners have confirmed that these holdings are not new, and they and their underlying funds have not made new investments in Russia for a number of years. The Fund will take the same stance, encouraging the removal of exposure to Russia.

Other Local Government Pension Scheme (LGPS) Funds that have communicated their exposure to Russia to the Local Government Chronicle (LGC) have similar or higher levels of exposure. You can read the article on the LGC website.

Greater Manchester Pension Fund (GMPF) report having around 0.2% connection to Russian holdings and Kent report having around 0.3%. Note that not all LGPS funds will have communicated their holdings to the LGC. However, it appears that the Leicestershire County Council Pension Fund is at the lower end of exposures.

Officers see the changes being made to be in line with wider policy and statements from other countries and pension funds and whilst the Leicestershire Fund has a small exposure, we are supportive of the changes being proposed.

In addtion, we must stress that your benefits are guaranteed by law and any impact on the pension fund will not affect the payment or value of your Local Government Pension benefits.

If you require any further information on this topic, please email pensioninvestments@leics.gov.uk.

Recent Problems Relating to Prudential Additional Voluntary Contributions and the Pension Fund’s Response

Each Local Government Pension Fund must offer their scheme members the opportunity to pay Additional Voluntary Contributions (AVCs). Leicestershire use Prudential plc and have partnered with them since 1996, but there has been a recent fall in their service standards, following the implementation of a new pensions administration system in November 2020. The new system, compounded by Covid lockdowns, has created delays in processing members pension benefits and investing members contributions.

The delays are causing some scheme members retirement benefits to be paid late, complaints are not being resolved in a timely fashion, and some members’ online Prudential accounts are not accurately reflecting the contributions they have paid.

The Prudential have recognised the issues and are actively working hard to resolve these. They wish to apologise to any scheme member that is being impacted by the current fall in their service standards.

The Prudential have assured Leicestershire Pension Fund Officers that all active scheme members AVCs paid will be invested correctly, and any late investments will be backdated to the date the contributions were received, so no member will be negatively financially impacted.

For members retiring, Prudential’s delays in disinvesting the AVCs causes a knock-on impact to the Leicestershire Fund. Unfortunately, without the value of the disinvested AVCs, the Leicestershire Pension Section cannot calculate a member’s LGPS retirement benefits, thereby delaying retirement options and payments. Given the serious nature of this issue the Leicestershire Fund has reported the situation to The Pensions Regulator.

The Chair of the Leicestershire Local Pension Board and Senior Officers at Leicestershire are aware of the issues and continue to closely monitor the Prudential’s service.

Leicestershire Pension Fund Officers continue to be actively engaged with the Prudential and have requested a clear improvement plan, to satisfactorily resolve this for our scheme members.

If you encounter problems, and the Prudential do not resolve these for you, please inform the Leicestershire Pensions Section at pensions@leics.gov.uk and we will try and help resolve these for you.

We are sorry for the problems you may be experiencing with your Prudential AVCs, and can assure you, Pension Fund Officers are working very closely with the Prudential to resolve this as quickly as possible.

There has been widespread media coverage following publication of a report from Platform and Friends of the Earth. The report highlights investment of local government pension funds in ‘fossil fuel’ companies and encourages divestment. Information was uploaded to the site UK Divest. The site allowed viewers to send templated letters to Councillors with respect to fossil fuel investments.

The Pension Fund’s response, which covers the background and a response to the three questions that form part of the templated emails being circulated, can be found on the Leicestershire County Council website.

Any questions regarding this can be emailed to the investments team via pensioninvestments@leics.gov.uk.

On the 12 February 2021 Government issued a direction disapplying the exit cap with immediate effect.

By disapplying the cap, this means the LGPS Regulations are “reintroduced” for current cases, and effectively back dates these to the 4 November 2020 (when Government first introduce the exit cap). This allows the Pension Fund to pay unreduced benefits for scheme members who retired on redundancy and efficiency grounds age 55 or over in this period (04/11/2020 to 12/02/2021), with payment of the full pension strain by the employer.

It is also important to note; the decision by Government to disapply the exit cap also includes the future potential changes that were planned for 2021.

However, also on the 12 February 2021, HM Treasury issued guidance stating; It is still vital that exit payments deliver value for the taxpayer and employers should always consider whether exit payments are fair and proportionate. HM Treasury will bring forward proposals at pace to tackle unjustified exit payments.

Because further changes are expected, the Pensions Section has had to look again at this process but for the time being, the online modeller for redundancy and efficiency estimates has been reintroduced for scheme members, allowing them to run their own estimates via the Member Self-Service Benefit Projectors.

The Pensions Section has produced a statement regarding the McCloud/Sargeant judgement:

McCloud/Sargeant Important Information April 2020 (PDF 144 KB)

In light of the current situation with Covid-19, please be reassured that your Local Government Pension will not be affected by falls in global stock markets. Pensions are long term investments and markets will always go up and down. The Local Government Pension Scheme (LGPS) is a defined benefit pension arrangement. Although we invest your contributions, investment performance does not affect your pension. We work out your pension using a set calculation which reflects how long you have been a contributing member of the scheme and your salary history, and the payment of your pension is guaranteed by law.

Whilst it is expected that the vast majority of members will not be affected, please note that we are currently awaiting national guidance regarding any pension related issues that may arise should your employer decide to put you ‘on furlough’. Once this is available, a further update will be published here.

In response to the current situation with Coronavirus (COVID-19), the Local Government Association has produced a set of FAQs for members of the LGPS (PDF 152 KB).

A change to the scheme rules has been made so survivor benefits payable to a same sex spouse or a civil partner are equal those paid to the widow of a male member.

Why has the change been made?

The change has been made as a result of a Supreme Court judgment (Walker v Innopsec) which found that Mr Walker’s male spouse was entitled to the same benefits that would have been paid if Mr Walker had left a widow in an opposite sex marriage.

Why does this apply to the LGPS?

The government believes that the implication of this judgment for all public service pensions schemes, including the LGPS, is that surviving civil partners or surviving same sex spouses should be provided with benefits equal to those that would be left to the widow of a male member.

When does the change take effect from?

The change is backdated to the date the civil partnerships and same sex marriages were introduced – this is 5 December 2005 for civil partnerships and 13 March 2014 for same sex marriages.

This means that where a member of the LGPS has died leaving a surviving civil partner or a same sex spouse, the survivor’s pension in payment will need to be reviewed and any additional amounts paid, where applicable. We are in the process of reviewing the impact of this change and will be contacting affected civil partners and same sex spouses in due course.

If you think this applies to your personal situation following the death of your civil partner and you have not heard from us, please contact us immediately.

The change will automatically be taken into account in survivor benefits paid to civil partners and same sex spouses in the future. .

This case was heard in the High Court on 18th January 2018. The outcome of the case effectively removes the requirement for a nomination form to be in place in order for cohabitees (who meet the other regulatory requirements) to be eligible for a partner’s pension in the LGPS. Previously the requirement to nominate a partner only existed for deaths between 1 April 2008 and 31 March 2014 for the LGPS in England and Wales as the necessity to nominate a co-habiting partner was removed for all deaths following the implementation of the new regulations on 1 April 2014.

If your co-habiting partner was a member of the Leicestershire County Council LGPS prior to their death, and their death took place between April 2008 and March 2014 it therefore might not have been possible to pay an ongoing pension entitlement under the legislation at the time, even if the qualifying conditions had been met because no nomination form had been completed.

If you think you could be affected and would like to discuss whether this ruling alters your own situation, please contact the Pensions Section to discuss the matter further.

With the ending of contracted out status in 2016, a leaflet has been produced for LGPs members about topping up their National Insurance contributions to increase their State Pension. Topping up the State Pension may be particularly appealing to former public sector workers who have either retired, and have not yet reached State Pension Age (SPA), or have reached their SPA since 6 April 2016.

Government legislation became effective from 1 April 2015 about pension freedoms, flexibility and choice. These ‘Freedom and Choice’ rules do not change the rules of the Local Government Pension Scheme (LGPS). The changes affect what are known as 'defined contribution schemes', such as a private personal pension plan. The LGPS is not one of these schemes. It is what is called 'a defined benefit scheme'. That is to say the rules and benefits of our scheme are set out in law already.

The Government changes brought greater flexibilities to personal pensions. However the LGPS already includes some of these measures in its own rules. Small pensions can sometimes be paid up front as a lump sum within certain limits. Also, scheme members can, should they wish to, draw reduced pension benefits should they elect to, if they retire after age 55.

The LGPS has produced a factsheet to help members understand how these freedoms either do or do not affect LGPS pensions.

Members and Deferred Members who have reached age 55 with an AVC Fund need to be aware of the options that are available to them when it comes to their AVC, both in respect of Freedom and Choice transfer rights, and also their options within the rules of the LGPS. A leaflet has been produced detailing those options to help members decide on the right course of action for their AVC, either now or in the future.

Pension Scams are on the increase in the UK. Scammers will try to entice you with a 'free pension review', 'one off investment opportunity' or 'legal loophole'. Find out the facts:

The Pensions Regulator: Don’t let a scammer enjoy your retirement

Financial Conduct Authority: How to avoid pension scams

A contributions calculator is available for you to use, which allows you to check the effect on your monthly pay should you join the LGPS. The net monthly effect may not be as much as you think. If you want to join the LGPS, simply write to your employer and instruct them to commence LGPS pension contributions from the next available pay date.