UK roundup: 'Unlawful' Swansea, Rothesay Life, Massachusetts Mutual
UK – The Welsh council of Swansea has been criticised for the "unlawful" transfer of assets owned by its local authority pension funds to its own bank account.
Following an audit by the Wales Audit Office (WAO) and PwC, the Council was found to have transferred £20m (€23m) from a bank account owned by the pension fund to one owned by the authority.
WAO said the transaction happened while the Council transferred funds to a new bank account.
"The new bank required that no account, and the total pooled funds, be in overdraft by a specified amount," it said.
"Therefore, officers determined that cash had to be transferred from the pension fund into the authority accounts to prevent this limit being exceeded."
The statement by the audit office said the £20m was repaid to the pension fund by August, but that Swansea Council had "no legislative authority" to permit the use of the fund's assets in such a way.
"Therefore, the transaction is unlawful and has to be recorded as such in the accounts," it concluded.
Separately, the audit also found that while the council and fund should have been pooling surplus cash holdings as a joint investment, this had not been occurring despite the council's paying its fund interest on holdings as if a joint vehicle had been in place.
"The interest that has been paid to the pension fund should not have been and is also deemed to have been unlawful," it said.
A spokesman for Swansea Council died that the transaction was illegal and said: "It was a technical accounting transfer by a member of staff in good faith which occurred because the Council was changing banks.
"Officers believed they had the authority to do it based on government guidance," he added, saying the guidance had been issued by the Department for Communities and Local Government.
"There was no loss to the public purse and we've agreed steps with our auditors to prevent this happening again."
In other news, Rothesay Life has attracted life insurer Massachusetts Mutual as a debt investor, with the US company contributing £100m.
Rothesay said the perpetual subordinated debt replaced existing loans extended to the company and emphasised that it remained wholly owned by Goldman Sachs.
M Timothy Corbett, CIO at MassMutual, said the investment was compatible with its search for long-term returns.
"Demand for risk management from UK defined benefit pension schemes offers significant growth opportunities, and our investment in Rothesay Life supports our view that the company is well positioned to capitalise on this opportunity," he said.
Chief executive Addy Loudiadis said she was delighted by the "vote of confidence" the mutual's investment represented.