Communcation is the key
One of the key issues that local-authority pension funds are looking at is how to improve communication with pension fund members.
“Communication is a very important issue and new technologies are playing a crucial role,” says Mike Woodall at the West Midlands pension fund, which has invested time and resources in improving its website to provide detailed information to scheme members.
“The internet is making it possible for scheme members to access information on a 24-hours/seven-days basis,” he says. “People are becoming more and more aware of the benefits of online information. Youngsters who are now reaching adulthood have been used to technology since they the first day they went to school and they don’t want to be writing and receiving letters all the time and accumulating papers. I think that this is something that some people within the pension fund industry are responding to wrongly.”
The London Pensions Fund Authority is also using new technology to improve communication with members and has developed a system that will enable it to link its 130,000 customers to the pension scheme records. It believes the new system, which will be integrated with its own website, represents an important step towards making use of the benefits of the internet in administering the pension scheme.
Ged Dale at the Greater Manchester pension fund agrees, but he also believes in the importance of the human touch: “Computing will inevitably feature more and more in an efficiently run pensions office. But we must never forget that these cannot replace a friendly voice and a friendly attitude.”
The internet is also playing a crucial role in developing shareholder activism and voting rights, another major concern for local authorities because of the criteria for corporate governance and socially responsible investment (SRI). Since July, pension funds in the UK have been required to include their approach to SRI in their statement of investment principles, which has led them to build policy alliances with other funds. The interest in sustainability issues is clearly increasing and pension funds want to have a more active role in developing social, ethical and environmental investment.
Large pension funds, members of the Local Authority Pension Fund Forum (LAPFF) have written to more than 50 leading retailers to question them about policies on labour standards in developing countries and in particular their use of child labour. The LAPFF, representing 20 local-authority funds, has launched a radical campaign to improve corporate governance and responsibility at UK companies, targeting executive share schemes that reward poor performance, as well as promoting single-year executive-service contracts and encouraging voting reform.
Local authorities are also showing concern about tax issues and in general believe the tax system for pension funds should be simplified and improved. Every local-authority pension fund is having to face up to the changes brought about by the new environment as they adapt by building a consensus among members and forming alliances with other funds.