Pension bosses in Glasgow have hit out at proposals to merge local authority funds across Scotland

As revealed in our sister paper The Herald on Sunday, unions are calling for Scotland’s 11 local council pension funds to be merged in to a giant single national body. 

If this change was carried out, the body would be left with assets greater than Scotland's annual budget.

However, Scotland’s biggest pension firm, Strathclyde, has suggested a merger just to enable infrastructure projects would be ‘perverse’, warning a national merger could break the link between councils and they funds in to which they pay.

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The move, which would create a fund of more than £42 billion for over 400,000 workers, could transform the way public projects are funded.

Unison, leading the charge, believes such a dramatic move would slash tens of millions of what it called hidden private costs and unlock job-creating investments.

The SNP is understood to have an open mind on whether to merge funds but is openly eager to entice more cash for new schools, roads, hospitals and homes from pension funds still largely locked in to UK and global financial markets.

Strathclyde, which is administered by SNP-run Glasgow City Council, has made a formal submission to the review. They claim the biggest risk of the project would be a "concentration of risk". 

In it, they wrote: "Merging investments is certain to involve a concentration of risk.

"A full merger of Scottish funds might have slightly increased probability of success. But size is no guarantee of success, and the impact of failure would be very significant.

"A full merger of Scottish funds could increase investment in infrastructure, but this would depend on the investment strategy of the merged fund and those managing it.

"However, merging the funds simply to achieve more investment in infrastructure, which is not a primary pension fund objective, would be a perverse decision.”

As part of this, Strathclyde stated it wants to keep council pensions in council control - even if in reality only 11 of Scotland’s 32 local authorities have administrative power over the funds.

It added: “At the extreme, merger into one fund would be likely to break the direct link between the scheme and local government by taking the fund out of local government control.”

Unison, in a formal statement, acknowledged that the funds - all of which have more money than they need to cover their liabilities - were already in good shape. But it said that meant this was a good time to reform.

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They also have the backing of some of the funds themselves with Lothian, the second biggest suggesting a merger could save £70m a year in fees.

Unison added: “Scale gives greater investment clout, tackles fee transparency, enables in-house expertise to invest in new areas like infrastructure and reduces duplication and cost.

“Change is always difficult and there are significant vested interests who will oppose change. Pensions are one of our members most important benefits and they need to be protected, not just today, but in the long-term.

"This may appear to be radical reform, but in the worldwide pensions sector, it will be seen as common sense.”