Almost 97,000 people who have contributed to the North Yorkshire and York local government pension scheme could see up to £5m of the fund wiped out unless those managing it are able to recover investments they have made in Russia.
However, council bosses have emphasised that whether or not the investments in Russian companies can be retrieved when trading eventually resumes on Moscow’s stock exchange the £5bn pension fund is in a particularly strong position.
The North Yorkshire and York Pension fund represents a tiny fraction of the £5bn in shares British investors have trapped in Moscow’s stock market, which has remained closed since sweeping sanctions were launched against Russia in response to its invasion of Ukraine.
Officers overseeing the pension scheme said while it had no direct investments in Russia, some of the external fund managers the fund used had discretion to invest where they could generate the greatest returns for the former and current local authority employees and numerous other public, education and voluntary sector staff in the scheme.
They confirmed while the pension scheme had no holdings in states such as North Korea or Iran, some 0.1 per cent of the investments were in Russia and due to China’s economic strength it was almost impossible to avoid having a significant amount of holdings on the Shanghai exchange if the pension fund was to grow.
The last decade has seen a turnaround in the fortunes of the North Yorkshire Pension Fund which has been described by council officers as “miraculous”, going from a funding level of just 35 per cent to 129 per cent, with a £1bn surplus.
Officers said even with the loss of the Russian holdings the funding level would remain well above 128 per cent funding level.
Despite this, opposition councillors have questioned why those managing the pension fund did not withdraw the Russian investments as the prospect of war mounted over several weeks.
Leader of the opposition on the county council, Councillor Stuart Parsons, said it had been clear Russia was an unsuitable place to invest in since its invasion of Crimea in 2014, and those concerns had been heightened by Russia’s actions such as the Salisbury novichok posoinings.
He said many of the 97,000 people invested in the fund would recoil in horror at the thought of their contributions bolstering the Russian economy and regime.
While the pension fund’s managers already invest within parameters, it is understood some bosses overseeing the fund will examine whether it is possible to further restrict where and how the pension fund can be used in future.
Councillor John Weighell, who led the county council for 14 years and now chairs the Pension Fund Committee, said fund managers were instructed to go over and above ethical criteria, with a commitment to “responsible investments”.
He added the pension fund had a responsibility to generate returns for its contributors so councillors would never direct experts it employed about individual investments.
Asked why the Russian investments had not been withdrawn before the invasion, Coun Weighell said the Russian action had not been foreseeable as there had not been such a conflict in Europe for many decades.
A spokesman for the North Yorkshire Pension Fund said it was working with fund managers and its investment advisers to determine the most appropriate action in the longer term.
He said: “We are saddened by and strongly condemn the invasion of Ukraine by Russia. Given the current circumstances we have immediately suspended making any further investments in Russia, and continue to review our existing investments including our approach to exiting in due course as and when markets permit.”