This meeting was about monitoring and receiving updates on the administration of the City of Westminster Pension Fund, its financial status, the progress of projects being undertaken to improve the management and administration of the Fund, and for the final approval of the Pension Fund Annual Report and Accounts for 2023/24. The most significant agenda items for the public were about administration, projects and finance, with the annual report being the final item.

Pension Administration

The meeting included a report about the performance of Hampshire Pension Services (HPS), who are contracted to administer the Fund. The report notes that HPS completed all of its monthly tasks within the agreed timescales, highlighting that HPS are fulfilling their service obligations. The Board were to receive an update about the increasing number of Fund members accessing their pension information via the online members’ portal. The report shows that portal use increased from 44.09% in May 2024 to 46.36% in September 2024. Also scheduled to be discussed in this report were the outcomes of the data benchmarking exercise, the findings of which will be used to improve member data quality. The report pack says:

15 employers have been identified as having major data quality issues (red rating) this is where employers have 5% or more queries on their active membership numbers.

These employers included those using Strictly Education and Prospects/HR Connect as their payroll providers. Schools that use these organisations as their payroll providers were to be contacted by the Fund to advise them that they had failed the data quality benchmark and asked to complete a data validation exercise. Under the Pensions Administration Strategy (PAS), the Fund is entitled to fine an employer £1000 where data quality issues have existed for 3 years in a row. The report says that 7 employers may be liable for such a fine. The Housing Ombudsman service improved their performance and moved from red to green. The report also says that all Annual Benefit Statements for deferred members had been produced, as had all but 4 of the active members’ statements. The report pack also includes a proposal to appoint a new provider of Additional Voluntary Contributions (AVCs).¹ Additional Voluntary Contributions are additional contributions that scheme members can choose to make to increase the value of their pension benefits at retirement. The report says that the Fund’s current AVC provider AEGON does not offer a shared cost AVC arrangement, but notes that many other Local Government employers now offer such arrangements, which allow members and employers to make National Insurance savings. The report suggests that the Pension Board should appoint a new AVC provider to allow the Council to offer shared cost AVCs to its employees.

Guaranteed Minimum Pension (GMP) Project & Website

The meeting included a report about the various projects and governance activities that are being undertaken by the Pensions and Payroll Team. It says that, as part of the Guaranteed Minimum Pension (GMP) project, the Fund had agreed with HPS a query/complaints process, which was to be used to track and manage queries from scheme members. The report says that there had already been several queries, 3 of which had been dealt with under the Internal Dispute Resolution Procedure (IDRP).² The Internal Dispute Resolution Procedure (IDRP) is a legal process by which members of occupational pension schemes can attempt to resolve disputes about their pension benefits without resorting to the courts.

The report also says that the manual cases under the GMP project are expected to be reviewed in November 2024. These cases relate to 241 members, who were removed from the bulk GMP rectification process undertaken by the Fund in 2023 because their cases are more complex and require more detailed scrutiny.

The report also updates the Board on the Pension Website Project, noting that a new website has been delayed.

The report pack says:

Although disappointed to ask for another extension, I am very satisfied with the work done so far.

The delay was attributed to a lack of resource to help design and create the content for the new site. As a result, the project was to be extended until 31 March 2025 at an additional cost of £3000. The report states that they will be presenting a full demo of the new website at the next board meeting in Spring 2025. The report thanks Hymans Robertson for extending the hosting of the current website and allowing the Fund to use some of their website content for the new website.

Fund Financial Management

This report details the Fund’s top 5 financial risks. It notes that, although they have been updated to reflect Chartered Institute of Public Finance and Accountancy (CIPFA) guidance on risk categories, the top 5 risks have remained the same since the last meeting because global investment markets remain volatile, in large part due to the continuation of the war between Russia and Ukraine, and now also the conflict between Israel and Gaza.

The report pack says:

Outlook deteriorates in advanced economies because of heightened uncertainty and setbacks to growth and confidence, with volatility in oil and commodity prices, as well as the weakening of the pound.

It also says that the implementation of recommendations by the Taskforce on Climate-Related Financial Disclosures (TCFD) have been delayed following the election of a new government in July 2024.

The report also provides an updated cash flow forecast for the next 3 years, noting that the balance on the Pension Fund’s main bank account as at 30 June 2024 was £3 million.

Performance of the Council’s Pension Fund

The report pack contains the performance of the Pension Fund’s investments for the quarter to 30 June 2024, alongside an update on the London Collective Investment Vehicle (LCIV).³ The London CIV is a pooled fund where local authority pension funds in London can invest their money to benefit from lower costs, or to access investments that are otherwise unavailable to them. The report notes that the value of the Fund's investments increased by £24 million to £2.032 billion over the quarter and says that the Fund returned 1.4% after fees, but this was 1.0% less than its benchmark. This underperformance was attributed to the LCIV Global Equity Quality Fund and the LCIV Global Alpha Paris Aligned Growth Fund, with both portfolios underperforming the wider global equity market because they have relatively little invested in technology stocks. The report also says that the Fund’s infrastructure investments performed less well than expected because they are benchmarked against cash, which has performed relatively well due to high interest rates. The report says that at the last Pension Fund Committee meeting, held on 17 October 2024, the Committee decided to rebalance the investment portfolio, which included:

• Liquidating 3.0% (approximately £60 million) of the Fund’s Global Equities holdings within the LGIM⁴ Future World Passive Fund.
• Topping up the LCIV Multi Asset Credit Fund to bring it back into line with the target allocation, which was to be done using cash held at custody.
• Topping up the Pantheon and Quinbrook infrastructure mandates by committing money to the most recent vintages of these funds. Legal & General Investment Management

The report states that as interest rates fall, it is hoped that this will benefit the commercial long lease property asset class.

The report concludes by stating that the estimated funding level for the Westminster Pension Fund has increased to 169% as at 30 June 2024 (it was 163% at 31 March 2024).

Pension Fund Annual Report and Statement of Accounts 2023/24

The Board was to receive the Westminster Pension Fund Annual Report and Statement of Accounts for the year ended 31 March 2024. The Pension Fund Committee had already approved the Annual Report at its meeting on 17 October 2024. The report notes that there were no significant findings in the Audit Findings Report, and summarises some of the key points in the Annual Report, including:

• An overview of the financial and investment performance of the fund, including the fact that the net assets of the fund were £2.014 billion as at 31 March 2024. The report notes that the Fund returned 13.3% over the 2023/24 financial year, but underperformed its benchmark by 1.6% after fees. This underperformance is again attributed to the Long Lease Property Fund.
• A summary of the scheme administration for the year, noting that the relationship with HPS remains positive. It says that the monthly KPIs were all at 100%, and that the quality of the data held by HPS about the members of the scheme has improved considerably. The Common Data Score improved to 85% from 72% and the Scheme Specific Data Score improved to 92% from 87%.
• A summary of asset pooling, saying that the Fund had invested £1.368 billion in the LCIV, representing 68% of its assets.