Avon pension fund to stay in defence, share member views with new pool

Avon Pension Fund, the £6bn (€6.8bn) local authority pension fund for parts of southwest England, will remain invested in the aerospace and defence sector but inform its future pooling partner of “the strength of stakeholder views”.

On Friday, members of the Avon Pension Fund Committee voted 8-2 in favour of a previous ‘in principle’ decision, taken in March, to remain invested in the aerospace and defence sector.

The question arose after the local government pension scheme (LGPS) fund had, since December 2024, received multiple petitions requesting it divest from companies supplying Israel.

At its meeting in March, the pension fund committee decided it could “compliantly address the issue” by deciding whether the fund should continue investing in the aerospace and defence sector.

Avon has some £18m invested in aerospace and defence companies through pooled funds currently managed by Brunel Pension Partnership, with an exclusion policy banning companies failing a controversial weapons manufacturing test and failing to make sure they are not complicit in human rights abuses (UN Global Compact Principle 2).

“We note the strength of stakeholder views and agree to communicate them to our new investment pool, Local Pension Partnership Investments”

Toby Simon, chair of the Avon Pension Fund Committee

Avon’s final decision was pending an assessment of member views, which the pension fund solicited through an e-mail survey, and further consideration of the legal position.

According to the pension fund, the legal advice it obtained was that a decision to exclude aerospace and defence companies from its investments should be considered a social and ethical matter rather than a financial one and that two conditions would therefore need to be met: that divestment would not pose a significant risk of financial detriment and there was good reason to think a high proportion of members would support the decision.

The member survey showed opinions were divided.

‘The right decision’

The pension committee’s final decision was also informed by the fact that Avon will move the assets currently held through Brunel to another investment pool, Local Pension Partnership, by April next year.

This is in connection with government reforms that shift key investment accountabilities from LGPS funds to their investment pools. Under these ‘Fit for the Future’ proposals, individual pension funds will be allowed to define investment preferences, which could cover exclusions, but the decision about whether and how to implement them will rest with the pools.

The Avon pension scheme committee was told it should therefore be aware that any decision to exclude aerospace and defence companies “may not be implemented in practice”.

Toby Simon, chair of the Avon Pension Fund Committee, said the committee had taken its time reaching a decision because it recognised “this is a difficult and sensitive issue”, with committee members having “showed their empathy with the many different and sometimes strongly-held views of stakeholders”.

He said the committee recognised that some stakeholders would be disappointed with the final decision, “but the committee believes it is the right decision given the further work undertaken”.

“We note the strength of stakeholder views and agree to communicate them to our new investment pool, Local Pension Partnership Investments, which we will join in April, to inform their investment policies,” he added.

“The fund takes all member views seriously and, in reaching a decision, the committee has balanced those views with its wider fiduciary duty, legal advice, financial considerations, and the wider regulatory context with the evolution of pooling.”

At the Avon pension fund committee’s September meeting, there were some complaints from members of the public about the methodology of the online survey, which the pension fund has defended.

The advisory board for the LGPS in England & Wales has called for clarity from the government with regard to claims that local pension funds have an obligation to take steps to divest from companies enabling violations of international law by Israel in its war and occupation of Gaza and the West Bank.

“The board is not well placed to determine whether a line has been crossed in the recent conflict, or the status of the ongoing legal and diplomatic processes being pursued through United Nations bodies and the International Criminal Court,” it said in a letter to the local government minister in October.

“As the minister responsible for the [LGPS], with the support of the full diplomatic and legal resources of the British State, we feel that this is something we would reasonably expect you to advise us on the position of UK government policy.”

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