The Committee which oversees the £5.8 billion Avon Pension Fund has been urged to reject a proposal to divest from aerospace and defence companies at its upcoming meeting on 12 December 2025.
A letter sent by UK Lawyers for Israel (UKLFI) to the Committee states they have a legal duty to focus on financial returns. This follows a survey which found that members of the pension fund are divided on the issue.
What’s at stake?
Avon Pension Fund administers a Local Government Pension Scheme providing pensions for retired staff of public authorities in Bristol and nearby areas. The public authority responsible for the Fund is Bath & North East Somerset Council, and its Avon Pension Fund Committee supervises the Fund.
Item 9 of this Committee’s agenda for the 12 December meeting is to decide whether the Fund should continue investing in aerospace and defence (A&D) companies.
In March 2025 the Committee voted in principle to remain invested in A&D, pending consultation with members.
A survey of the pension fund’s members conducted between 4 and 22 September 2025 — contacting 26,360 of the Fund’s members, with 2,500 responses (9.5%) — found the membership sharply divided: 47% preferred to continue investing in A&D, while 42% favoured divestment.
The survey also revealed demographic splits: older and male members tended to support continued investment; younger and female members more often supported divestment.
With the final decision to be made on 12 December, the result could set a precedent for other UK local government pension funds that are subject to divestment campaigns.
Fiduciary duties limit ethical divestment
Council officers have advised the Committee that fiduciary duties require investment decisions to be taken on the basis of financial considerations. Non-financial factors can be taken into account only if two tests are both met:
(1) there is good reason to think that scheme members would share the concern and
(2) the decision does not involve a risk of significant financial detriment to the fund.
As well as reporting the results of the survey of members of the fund, Council officers note the UK government proposals to shift key investment accountabilities from individual LGPS funds to pooled funds and to disapprove of bespoke arrangements.
In this context Council officers estimate that excluding A&D from investment would give rise to additional transition costs of around £480,000 and additional annual costs in the range of £720,000 to £1.2 million. This does not include any potential loss of return from the restriction of investment opportunities
UKLFI’s letter
UKLFI’s letter to the Committee’s Chair, Liberal Democrat Councillor Toby Simon, commends the advice given by the Council officers and adds one additional point.
The two tests for allowing non-financial factors to be taken into account in investment decisions were identified in paragraph 6.34 of the authoritative report of the Laws Commission on Fiduciary Duties of Investment Intermediaries, which has been cited with approval by the UK Supreme Court.
The Law Commission’s report goes on to discuss the position where pension scheme members disagree, concluding at paragraph 6.67: “in cases where the issue is clearly controversial, the courts may well expect trustees to focus on financial factors rather than becoming embroiled in disagreements between the members.”
UKLFI argues that this is precisely the position here, in that divestment from A&D is clearly controversial with members divided over the issue.
Jonathan Turner, Chief Executive of UKLFI, commented:
“The law is clear: where members disagree on an ethical issue, trustees must focus on financial considerations. Divesting from aerospace and defence companies would not meet the tests set by the Law Commission and recognised by the UK Supreme Court.”