Ali offered £3.1m lifeline to help reduce cuts to services

CROYDON IN CRISIS: One Labour councillor has provided an idea which could help to reduce some of the drastic cuts in the Town Hall budget. But so far, they’ve not received a reply. By WALTER CRONXITE, political editor

Number-crunching: a buoyant pension fund could help save services

It’s a little known fact that one area in which Croydon’s cash-strapped council has demonstrated considerable financial excellence over the past five years is the civic pension fund.

The fund, which is used to pay the pensions of former council employees, has almost doubled in value, from £863.2million in March 2016 to £1.6billion by June this year.

According to an official report from the Government Actuary’s Department, Croydon’s pension fund has performed better than many similar local authority funds, having previously been a very poorly funded scheme, trailing most other authorities.

The government actuaries, by nature very cautious souls, say that Croydon had reached 98per cent fully funded by 2019. The fund has made further significant gains since then  and is now considered to be over-funded.

The council pension fund has been so successful, in fact, that it could even offer the Town Hall’s beleaguered leadership, Hamida Ali and finance chiefs Stuart King and Callton Young, a multi-million-pound helping hand, without any Maxwellian sharp practices, and enable them to reduce the extent of some of the £38million budget cuts proposed for next year, and beyond.

According to correspondence obtained by Inside Croydon, the chair of the council’s pensions committee last month made an offer to reduce the council’s contributions to the fund.

No reply: council leader Hamida Ali received the letter on Oct 6

And a senior council source familiar with the council’s financial plans has told Inside Croydon that this could amount to a reduction in contributions next year of as much as £3.1million.

The pensions committee chair, Waddon councillor Andrew Pelling, suggested the reduced annual contributions in a letter to Hamida Ali dated October 6. Yet despite the urgency of the budget situation, by this week, Pelling had yet to receive a reply.

“It has been drawn to my attention that the council is currently facing particular financial challenges,” Pelling wrote, somewhat coyly for someone who has been a Labour councillor since 2014, “and when the fund is doing so well it is time for the fund to repay the generosity of the council in the past by assisting the council in its time of need.”

Pelling added, “I trust monies realised will allow the council to consider ways to protect services to those most in need.”

And by way of assurance to any concerned council pensioners, he wrote, “Any adjustments, if agreed, will have no impact on payments made to members of the fund.”

The council currently pays 26.2per cent of pay towards employees’ pensions. That extraordinarily high rate became necessary when Croydon had a poorly performing and underfunded pension fund.

The pension lifeline: Pelling’s letter to the council leader, copied to finance chiefs Stuart King and Callton Young, sent last month. There’s been no response

Under Pelling’s suggestion, cutting that pay rate by a small percentage would not damage the fund’s standing, while saving the council a fair few bob in its time of dire need.

Pelling – a pariah in the Labour group as far as former leader Tony Newman was concerned – was made chair of the pension committee in May 2016. Since then it has increased in value by £737.8million, or 85 per cent.

Unusually for a Labour councillor, as well as being a former Tory MP, Pelling is also an ex-investment banker.

He is in his third stint as the pension chair after having been sacked by Newman not once, but twice: once for opposing a borough-wide ban on black music in the town’s clubs, and for a second time in 2019 after he proposed, successfully, that his Constituency Labour Party, Croydon South, should support a move to having a directly elected mayor.

Newman’s removal of Pelling from the pension committee on the second occasion was criticised in a report from external pension fund governance consultants Aon Hewitt to yesterday’s pension board meeting.

As with most tasks about the Town Hall, Newman’s approach was to use appointments as rewards for loyal behaviour, rather than always choosing the right person for a job. And woe betide anyone who got on the wrong side of him.

Aon Hewitt warned  that similar Newman strops could cost the council pension fund millions of pounds. “Whilst some degree of change amongst committee membership is inevitable, particularly given the local election cycle,” they say in their report, “given the wider issues at the council with the Section 114 notice (albeit that has now been withdrawn) and loss of many senior officers, ensuring as much continuity as possible in relation to the management of the fund should be a priority.”

Following Newman’s resignation as leader, council the chair of the pension committee is now decided by an election among the Labour group, which Pelling won earlier this year.

Investment banker: Andrew Pelling twice sacked by Tony Newman from the pension committee

Aon Hewitt say, “The changes at the committee included the replacement of the chair during 2020 by a new member on the committee, although we understand that Cllr Pelling has been re-installed as chair from May 2021 and Cllr Kabir [Pelling’s 2020 replacement appointed by Newman] is no longer on the committee.”

In his letter to Hamida Ali, Pelling explains the fund’s success, stating that the above-average gain “has been achieved through asset diversification, timely asset allocation changes ahead of market trends, successful [foreign exchange] hedging and uplift in financial performance arising from [ethical and sustainable] driven investments.”

It is by no means certain that Pelling will be able to carry the rest of the pensions committee to agree to a reduction in payments from the cash-strapped council. Inside Croydon is aware of committee members who will oppose any reduction. Others are not impressed by the offer of a generous cash bailout being taken for granted and not receiving any response from the council leadership.

In his letter, Pelling does warn that changes can only happen if supported by the actuary. Pelling, who has in the past complained of Croydon Labour’s bullying culture, also says that pension committee members should not be nobbled saying “members must be free to make such a decision individually without interference”.

Pelling’s letter also offers the prospect of further reductions in money coming from the council, even as early as this financial year, if the fund undergoes an immediate revaluation.

Yet a month since that offer was made to Ali, no response has been received.

As a Katharine Street source, though not one on the pensions committee, said tonight, “It’s not as if the council isn’t bust and doesn’t need a few extra quid or anything, is it?

“Hamida, together with Stuart King and Callton Young, are proposing cuts to Council Tax benefits next year totalling £5.7million. The pension offer could reduce the impact of those cuts to maybe 10,000 Croydon households. Surely that’s the kind of move that at least deserves the common courtesy of a reply?”

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News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email
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2 Responses to Ali offered £3.1m lifeline to help reduce cuts to services

  1. Ian Kierans says:

    I would not be opposed to any offer to reduce the Council contribution, in fact it is a very good idea. However it has hurdles to overcome and not just a couple of committee members. One would note that all regulations are being met, (Pension regulators, Actuarial and any covenants etc,) and that stakeholder interests are also not being disadvantaged and are fully met.
    However this may be a short term decrease in contributions and not long term.

    This would however delay those savage cuts and ameliorate the impacts overall on residents. This delay could perhaps give time for a more permanent solution to be found – like a Government that actually funded Councils properly and an Executive that did not p**s it up the wall (I love Inside Croydon in how it has educated my vocabulary to be flexibly high and low)

    However can anyone trust this Council to actually use the money to delay cuts? Would there need to be measures in place to ring fence this contribution holiday so that those cuts are not made? Would not other areas like debt not just swallow it all up and would the council have a legal duty to pay off these non resident debts first?

    Irrespective of those points – it is common courtesy to actually respond to the offer. Just another human attribute sadly lacking?

  2. John Harvey says:

    Interesting to note that adjoining Tandridge (with no Labour councillors) has a large hole in its pension funding

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