Pension funds, quasi-trustees and statutory guidance

Abstract

Abstract In an important decision for public law, the Supreme Court has ruled that ministerial guidance, given to administering authorities to oversee investment of Local Government Pension Scheme (LGPS) funds on how to discharge their powers, is unlawful. All five judges accepted that administering authorities owe “quasi-trustee” duties to LGPS members (in the area of investment) and that, as the law stands, the Secretary of State’s powers are limited by these overriding duties. However, only three judges accepted that the Public Service Pensions Act 2013 did not allow central government policy to be “imposed” on LGPS funds. The two dissenting judges stated that the public interest component of the 2013 Act was significant, and, under certain circumstances, central government could legitimately seek to align LGPS fund investment with government policy. The consequence of the ruling is that the Government will not be able to interfere in the ethical investment decisions of LGPS and their members, and the principle from the Padfield case that a discretionary power granted in legislation can never be completely unfettered and must be exercised in accordance with the purpose of the legislation has been upheld.