Investor rules for council pension funds ‘to strain vital services’

Public services could be strained by new City rules which will downgrade the investment status of local authority pension funds, council chiefs have warned.

The Financial Conduct Authority is set to scrap the professional investor status for 89 council pension schemes in January.

This will put them on par with armchair investors but there are mounting fears the switch will damage their ability to invest.

Haringey Council leader Claire Kober, who chairs the Local Government Association resources board, warned “councils risk increased costs”. She added losses “could easily run into the billions” and would be “very bad news for public services”.

A string of investment mistakes by local authorities, including those stung by the Icelandic banking scandal, forced the EU to create Mifid II rules, which downgrade councils to retail investor status.

The new rules have caught up more-sophisticated council pension schemes, which control billions on the stock market.

The FCA is consulting on plans to allow council pension funds to “opt up” to professional investor status and will publish its response in June.