The Surrey Local Pension Board was scheduled to receive reports on changes to the governance of the Surrey Pension Fund, the compliance of the fund with the Pensions Regulator’s General Code of Practice, an update on the planned 2025 actuarial valuation, and an update on the work of the Surrey Pension Team.

Improving the governance of the Surrey Pension Fund

The Board was scheduled to be given an update on the changes recently made to the governance of the Surrey Pension Fund. The Pension Fund Committee at its meeting of 13 September 2024, and the full Council at its meeting on 8 October 2024, approved changes to the Pension Fund Committee’s terms of reference, and to Surrey County Council’s scheme of delegations, to address what a report to the Committee described as:

the potential for conflicts of interest e.g. SCC is both the Administering Authority and an employer within the scheme. SCC could therefore exert undue influence which may not be in the best interests of all the 360+ other employers in the scheme.

The report Improving the Governance of the Surrey Pension Fund stated that officers were exploring a number of options for the future of the Fund, including the development of a Surrey Pension Fund Conflict of Interest Policy, a Roles and Responsibilities Matrix, and closer examination of the relationship between Surrey County Council and the Fund in order to ensure value for money, and allow the fund to:

achieve its vision

The report to the Pension Fund Committee of 13 September 2024 Improving the Governance of the Surrey Pension Fund argued that the current pressures on resources at Surrey County Council should not prevent the Surrey Pension Fund from being properly resourced, stating that:

as laid out by the Scheme Advisory Board (SAB), Administering Authorities must ensure that sufficient resources are maintained to meet the statutory obligations placed on them to manage the scheme. Where sufficient resources are not provided, there are a number of potentially negative outcomes including:

i) Censure by the Pensions Regulator (TPR) for non-compliance with the requirements of the Public Service Pensions Act 2013 and other primary legislation.

ii) Findings against SCC by the Pensions Ombudsman.

The Pension Regulator's General Code of Practice

The Board was scheduled to receive an update on the compliance of the fund with the Pensions Regulator’s new General Code of Practice, which merged ten existing codes of practice into a single framework that applies to all UK pension schemes. A self-assessment of the Fund against the new code, using a “checker tool” provided by the fund’s actuary, Hymans Robertson, was scheduled to be discussed by the Board. The assessment found that eleven of the fourteen chapters of the code relevant to the Local Government Pension Scheme had so far been assessed, with five of them fully compliant. The self-assessment identified the need for further work on the Administration (Scheme Administration) and The Governing Body (Risk Management) chapters of the code, and for work to be undertaken to assess the IT & Cyber, Funding & Investment and Advisors and Service Providers chapters.

Actuarial Update 2025 Valuation Planning

The Board was scheduled to receive a report Actuarial Update 2025 Valuation Planning from Hymans Robertson setting out their timetable for the 2025 actuarial valuation of the Fund, from which the contribution rates for all employers in the fund, and the accompanying Funding & Investment Strategy, will be determined. The process is scheduled to culminate in a final valuation report being signed off by 31 March 2026.

Surrey Pension Team Overview - Quarter 2

The Board was scheduled to receive the Surrey Pension Team Overview - Quarter 2, which included information about the size and performance of the Surrey Pension Fund. The report noted that the value of the fund had risen to £6 billion, and that the funding ratio stood at 143%. This was attributed to a recent increase in the discount rate used in the valuation of the fund’s liabilities, and a corresponding increase in the value of the Fund’s assets. However, the report also noted that some investments managed on behalf of the fund had recently underperformed against their benchmarks.

Change Management Update

The Board was scheduled to receive a report on the work of the Change Management team for Quarter 2 of 2024/25, covering the period from July to September 2024. The report Change Management Update noted that Surrey Pension Team had won an award at the Pensions for Purpose awards for its adoption of the Impact Investing Principles, that it was working on its Digital Transformation strategy, that it had launched a series of video interviews, and that it was planning to improve its ‘Trainee Programme’.

Service Delivery Overview

The Board was scheduled to receive a report Service Delivery Overview on the work of the Service Delivery team for Quarter 2 of 2024/25. The report noted that overall performance levels within the Service Delivery Team were 92%, an increase of 7% on the previous quarter. It identified improvements in performance on tasks relating to transfers, refunds, deferred benefits, retirement, ill health, survivors’ pensions, death benefits, and balance of payments.

The report noted that fourteen complaints about the service had been received during the quarter. Three stage-one and one stage-two appeals made under the fund’s Internal Dispute Resolution Procedure were described in the report. The report described a Pensions Ombudsman appeal from a member attempting to take flexible retirement. One breach of the Surrey Pension Fund Breach of Law Policy was described.

The report stated that the Service Delivery Team was continuing its work on the Guaranteed Minimum Pension project. It noted that the indicative number of pensioners affected by the McCloud remedy was 2,500, and that the indicative number of members who might qualify for an underpin was 1,654, with 486 members potentially qualifying for a final underpin.

The report said that 94% of active members and 99.95% of deferred members had been issued with an Annual Benefit Statement. It stated that the service was continuing to roll out the iConnect employer contribution portal, and that 248 out of 370 employers, representing 81% of active members, had been onboarded to the service by 30 June 2024. The report stated that work on the reduction of legacy cases was continuing, and that 86% of cases had been completed by 30 September 2024, with the remaining cases expected to be dealt with by 31 December 2024.

The report described the new arrangement for the verification of overseas pensioners, which had been outsourced to Crown Agents Bank. It said that the process would be fully digital, and would use biometric facial recognition technology to confirm the identity of the scheme’s 612 overseas pensioners.

Summary of the Pension Fund Committee meeting of 13 September 2024

The Board was scheduled to receive a summary of the discussions held at the Pension Fund Committee’s meeting of 13 September 2024. The summary Summary of the Pension Fund Committee Meeting of 13 September 2024 stated that the Committee had been pleased with the progress made in reducing legacy cases, and that it had discussed the Stewardship Code, which the Surrey Pension Fund has now signed. It said that the Committee had discussed investment beliefs, fiduciary duty and investment strategy, and that it had agreed that the Chair of the Committee should be delegated the power to approve the final version of the 2023/24 Pension Fund Annual Report.

The summary noted that the Committee had received a report confirming that the funding ratio of the fund was 143%, and that the fund had £6 billion of assets under management. It said that the Committee had been told that, despite the increase in the size of the fund, it had recently underperformed against its benchmark.

The summary reported that a member of the Committee had raised concerns about the underperformance of the Border to Coast Pensions Partnership Global Equity Alpha Fund, and that a member of the Committee had raised concerns about the length of time that it was taking to resolve data quality issues with the MySurrey Unit 4 system, asking:

when a response from the Chief Investment Officer at BCPP is expected?

Surrey Pension Fund Internal Audit Progress Report - Quarter 2 (01/07/24 - 30/09/24)

The Board was scheduled to receive an update on the work that had been carried out by internal audit in Quarter 2 of 2024/25. The report Surrey Pension Fund Internal Audit Progress Report – Quarter 2 (01/07/24 – 30/09/24) included a summary of a review of Surrey County Council’s Payroll Pension Enrolment process, which provided an opinion of ‘Minimal Assurance’. The review found that because of ongoing issues with the MySurrey system there were significant delays in the automatic enrolment of eligible employees, that some enrolled employees were experiencing issues with their contributions not being collected, and that new employees had not been provided with information about their pension benefits. It said that:

On behalf of affected members, the Council made payments to the Fund to cover missed contributions for the period of May 2023 to March 2024. A recovery process for employees to repay these funds to the Council commenced in June 2024. However, the Payroll Team have recently challenged the quality of data analysis that was used in these calculations and are working to rectify this;

The report stated that the issues identified in the review had been shared with the MySurrey Stabilisation Board and that a follow up audit was scheduled to take place later in the financial year.

Surrey Pension Fund - External Audit Update

The Board was scheduled to be updated on the progress being made with the external audit of the Surrey Pension Fund’s 2023/24 accounts, which is being undertaken by Ernst & Young. The report Surrey Pension Fund - External Audit Update said that the date for the final sign-off of the accounts had been deferred until January 2025, due to the volume of audit evidence still to be provided.

LGPS - Background papers

The Board was scheduled to receive a report on recent developments affecting the Local Government Pension Scheme. The report LGPS – Background papers described a number of developments, including the announcement of a government pensions review, further updates on the McCloud Remedy, the implementation of pensions dashboards, and updates from the Scheme Advisory Board. The report stated that the Chancellor had announced a landmark review of pensions, saying that it would look at how to “unlock the investment potential of the £360 billion LGPS” and “tackle the £2 billion that is being spent on fees”.

Glossary, Actions Tracker & Forward Programme of Work

The Board was scheduled to receive an update on the actions that had been taken in response to recommendations made at previous meetings of the Board, to consider a programme of work for the Board, and to be provided with a glossary of terms. The report Glossary, Actions Tracker & Forward Programme of Work said that one action from a previous meeting of the Board had now been completed. This related to a request made at the meeting on 26 July 2024 for the response to a letter from the then Minister for DLUHC to be circulated to members of the Board and Committee.

The report included a forward plan for the Board, which listed the dates and topics for discussion at future meetings of the Board.

The report provided a forty-three page glossary of pension-related terms and abbreviations.

Supplementary Agenda - Item 15

The Board was scheduled to receive a report 24 SPF Surrey Pension Fund Progress Report 08.11.2024 that was added to the agenda late. The report said that the MySurrey project was now expected to be completed by March 2025. It said that:

The Board will note in the Risk Register, that Risks 16D and 16J are now showing as being complete. However, the knock-on effect on both Accounting & Governance and Service Delivery remains a risk, and further work will need to be done over the coming months to fully understand the impact on the legacy position.

The report described the problems with the MySurrey system, saying that:

In order to mitigate risks, ensure adequate financial reporting and complete the statutory accounts for 2023/24 and 2024/25, it was necessary to develop some manual spreadsheets to track and monitor financial transactions that are being posted to the ledger in Unit 4. This is a cumbersome and time-consuming exercise for the staff involved. However, it has ensured that all receipts from investment income and payments to pensioners have been appropriately accounted for. The Pension Fund accounts have now been prepared and published. However, there has been a knock-on effect in the production of the Pension Fund’s statutory accounts as these are integral to the wider SCC Accounts and audit.

A similar position occurred with the administration of pensions, where the Surrey Pension Team had to implement a temporary, interim process of manually processing and tracking all new starters and leavers, along with any other change events that are provided by SCC Payroll on a monthly basis. As of 31 March 2024 this had impacted the processing of approximately 1500 member benefits for that financial year, with a further 1100 between April and October 2024. These numbers are in addition to the existing backlog of work.

The report said that the Fund had recently been notified of several cases referred to the Pensions Ombudsman that related to “the delay in calculating and paying benefits to members.”

The report noted that the Board had previously:

asked to be provided with a quarterly snapshot of the Fund’s dashboard

It provided that information for October 2024.

Minutes from the previous meeting: 26 July 2024

The Board was scheduled to agree the minutes of the previous meeting, which was held on Thursday 26 July 2024.

Declarations of interest

The Board was scheduled to note any declarations of interest.

Questions and petitions

The Board was scheduled to note any questions and petitions.

Glossary, action tracker & forward programme of works

The Board was scheduled to consider and comment on its recommendations tracker and work plan, which is described above.

Summary of the Pension Fund Committee meeting of 13 September 2024

The Board was scheduled to receive a report on the meeting of the Pension Fund Committee, which is described above.

Improving the governance of the Surrey Pension Fund update

The Board was scheduled to receive a report on the changes to the governance of the Surrey Pension Fund, which is described above.

Surrey Pension Team overview - Quarter 2

The Board was scheduled to receive a report on the work of the Surrey Pension Team, which is described above.

Change Management update

The Board was scheduled to receive an update on the work of the Change Management team, which is described above.

Service Delivery overview

The Board was scheduled to receive an overview of the work of the Service Delivery team, which is described above.

Risk Register update 2024/25 Quarter 2

The Board was scheduled to consider the changes made to the Risk Register during Quarter 2 of 2024/25. The report Risk Register update 2024/25 Quarter 2 described the changes that had been made to the way that risks are gathered, recorded and scored. It noted that the risk relating to the MySurrey system had been broken down into 10 separate risks:

This has been helpful in scoring and highlighting the specific issues affecting the service and the work that is going on to address these issues and manage risks.

The report included a risk register that described sixteen risks facing the Surrey Pension Team.

The Pensions Regulator General Code of Practice

The Board was scheduled to receive a report on the compliance of the Fund with the Pensions Regulator’s General Code of Practice, which is described above.

Actuarial update 2025 valuation planning

The Board was scheduled to receive an update on the planned 2025 actuarial valuation, which is described above.

Surrey Pension Fund Internal Audit progress report - Quarter 2 (01/07/24 - 30/09/24)

The Board was scheduled to receive an update on the work of Internal Audit, which is described above.

Surrey Pension Fund - External Audit update

The Board was scheduled to receive an update on the work of the external auditors, which is described above.

LGPS - Background papers

The Board was scheduled to receive a report on recent developments affecting the Local Government Pension Scheme, which is described above.

Date of the next meeting

The Board was scheduled to note that the next meeting was to be held on 21 February 2025.