The Pension Committee of Gloucestershire Council met on Thursday 11 June 2026 to review the Gloucestershire Pension Fund's governance, operations, funding, and investment performance. The meeting agenda included updates on the audit plan, financial statements, and the ongoing transition to LGPS Central, alongside a review of the Fund's risk register and climate transition analytics. Discussions also covered the draft Investment Strategy Statement and Investment Policy, reflecting new regulatory requirements and member feedback.

Audit Plan 2025-26

The committee was scheduled to review the External Audit Plan for the financial year ending 31 March 2026, prepared by KPMG. This plan outlines the audit approach, timeframe, and associated fees. Key areas of focus for the audit included the valuation of investments, management override of controls, and the completeness and accuracy of contributions. The audit fee was set at £94,968, with materiality set at £35.9m. Formal audit findings were expected to be reported in September 2026.

Pension Fund Draft Financial Statements 2025-26

The committee was asked to note the draft financial statements for the Gloucestershire Pension Fund for the year ending 31 March 2026. These statements indicated an overall increase in the Fund's value by £371.9m, reaching £3,962.4m, with an investment gain of 10.4% over the year. Management expenses had increased by 5.4% to £34.734m, largely due to investment management costs associated with the closure of the Brunel Pension Partnership and the establishment of governance with LGPS Central.

Gloucestershire Pension Fund Update – Governance & Operations

This agenda item provided an update on governance and operational matters. Key points included:

• Pension Schemes Bill: The Bill received Royal Assent on 29 April 2026, aiming to accelerate LGPS asset pooling, enhance governance, stimulate UK investment, and improve member outcomes.
• LGPS Regulations: Updates were provided on the LGPS (Miscellaneous Amendments) (Member Benefits) Regulations 2026, effective from 1 April 2026, and the LGPS (Amendment) (Elected Member Pensions) Regulations 2026, effective from 11 May 2026, which make councillors and mayors eligible to join the LGPS. New LGPS (Pooling, Management and Investment of Funds) Regulations 2026 and LGPS (Amendment) (Governance) Regulations 2026 were laid on 21 May 2026, taking effect from 30 June 2026, with revised implementation timelines and clarifications on FCA authorisation requirements.
• LGPS Central: Details were provided on the Fund's admission to LGPS Central as a shareholder and client, including the documentation framework and sign-off process. The transition of assets from Brunel Pension Partnership to LGPS Central was reported as substantially complete.
• Risk Register: The committee was to review the risk register, noting that Risk 1 (Governance arrangements) remained above target due to new committee members requiring training, while Risk 7 (Pooling transition) and Risk 17 (Brunel exit costs) had moved back to target following the transition to LGPS Central.
• Fit for the Future Governance Implementation: An update was provided on the implementation of the Fit for the Future reforms, outlining key workstreams for appointing a Senior LGPS Officer and Independent Person, updating governance policies, enhancing the Knowledge and Skills Framework, and preparing for an Independent Governance Review.
• Key Performance Indicators (KPIs): Performance against KPIs remained strong, with the Fund consistently above the 90% threshold on a rolling 12-month basis. However, transfers out fell slightly short of the quarterly target. Case volumes were noted as steady but with an upward long-term trend.
• Business Plan and Budget Outturn 2025-26: An overspend of £1.453m (24%) was forecast against the 2025-26 operating budget, primarily due to Brunel wind-up costs and transition costs to LGPS Central.
• Business Plan 2026/27: Key projects for the upcoming year include asset pool transition, governance reforms, benefit regulatory changes, cyber security, and the rollout of the i-Connect employer portal. An increase in staff costs was approved to support the Pensions Team expansion.

Gloucestershire Pension Fund Update – Funding & Investment

This report provided an update on the Fund's funding position, investment performance, and responsible investment activities.

• Funding: The estimated funding level at 31 March 2026 was 145%, with assets of £3.98bn against liabilities of £2.75bn. This represented a surplus of £1.23bn. The Fund's funding level was noted as being in the top quartile of LGPS funds.
• Investment Performance: Over the quarter to 31 March 2026, the Fund's market value decreased by £67.753m to £3,957.742m. The 12-month return was 10.0%, underperforming the strategic benchmark by 2.9%. Over three years, the annualised return was 8.5%, lagging the benchmark by 1.6%. The report highlighted that the underperformance was largely driven by the Brunel active equity portfolios.
• Market Commentary: The first quarter of 2026 saw market volatility due to geopolitical tensions, impacting equities and bonds. Energy prices rose, contributing to inflation concerns.
• Investment Activities: The Fund saw calls into private markets totalling approximately £9.0m. The strategic asset allocation remained outside target ranges, with a heavier weighting in equities and cash/short-dated bonds held via the Blackrock liquidity sleeve.
• Transition from Brunel to LGPS Central: The management of various investments, including equities, fixed income, and private markets, was transferred to LGPS Central from 1 April 2026. The report detailed the transition types, dates, and costs for specific portfolios.
• Responsible Investment: Updates were provided on LAPFF engagement activities, the submission of the 2026 Stewardship Code report, and Brunel's final Climate Change Progress Report for 2025. The report highlighted strong progress on portfolio decarbonisation, with listed equities ahead of target and corporate bonds on track. However, progress on alignment and stewardship was noted as slower.
• Independent Advisor's Report: John Arthur's report provided further analysis on Fund performance, underlying managers, and long-term capital market assumptions.

Annual Review of Analytics for Climate Transition

This report presented an update on the Fund's progress towards its net zero commitments.

• Decarbonisation Progress: Listed equities had reduced their carbon footprint by 68% from the 2020 baseline, exceeding the 2030 target of 60%. Corporate bonds had reduced their carbon footprint by 49% from the 2021 baseline, on track for the 2030 target of 50%.
• Allocation to Sustainable Assets: The Fund had achieved its target of allocating 30% to sustainable and low-carbon investments by 2025, with approximately 31% of the portfolio meeting this definition.
• Alignment, Stewardship and Engagement: Progress in these areas was noted as slower, with around 53% of financed emissions in material sectors aligned or subject to engagement, against a target of 90% by 2027.
• Private Markets: Data availability had improved, allowing for initial analysis, though further work was needed before formal targets could be set.
• Analytical Approach: The analysis incorporated EVIC-adjusted carbon footprinting to better isolate operational decarbonisation. This indicated that real-world emissions reductions were more modest than headline figures suggested.
• Next Steps: These included continuing to monitor progress against existing targets, considering formalising 2035 targets, exploring climate solutions and natural capital allocations, strengthening engagement activities, and working with LGPS Central on these initiatives.

Draft Investment Strategy Statement & Investment Policy Review

The committee received an update on the review and development of the Fund's Investment Strategy Statement (ISS) and Investment Policy.

• Revised Timetable: Due to the expected publication of statutory guidance on LGPS pooling and governance reforms at the end of June 2026, the timeline for finalising the ISS and Investment Policy has been extended to December 2026.
• Draft ISS: A working draft ISS was presented for information, reflecting initial outputs from an investment beliefs workshop. This document is subject to further development following the receipt of final regulations and guidance.
• Consultation Process: The revised timetable includes review by the Pension Board in July 2026, Committee approval for consultation in September 2026, a formal stakeholder consultation in Autumn 2026, and final approval by the Committee in December 2026.
• Responsible Investment Member Survey: The summary of the survey results indicated strong member support for responsible and sustainable investment, with a preference for active engagement over divestment. Climate change was identified as the primary priority. However, awareness of the Fund's existing RI Policy was low, highlighting a need for improved communication.
• Local Investment: Members generally preferred local investment within Gloucestershire and neighbouring counties.
• Aerospace and Defence Sector: Views were divided on financial returns, but there was strong support for enhanced engagement to reduce harm to civilians.
• Sustainable and Low Carbon Investment: Nearly six in ten respondents believed such investments were important.
• Net Zero 2045 Target: Most respondents supported the Fund's net zero ambitions, with debate focused on the pace of implementation.
• Fossil Fuel Investment: Sentiment towards fossil fuel investments was predominantly negative.

Gloucestershire Pension Fund Funding & Investment Performance Benchmarking

This report presented findings from the benchmarking analysis of the Fund's 2025 actuarial valuation.

• Funding Position: The Fund's funding level at 31 March 2025 was 152%, with a surplus of £1.2 billion, ranking it in the top quartile of LGPS funds. This represented a significant improvement from the 2022 valuation.
• Employer Contribution Rates: The average employer contribution rate decreased from 27.4% of pay in 2022 to 19.3% in 2025, resulting in estimated employer savings of £110 million over three years.
• Key Drivers: The improvement in funding was attributed to higher assumed future investment returns (rising from 1.5% above CPI to 3.9% above CPI) and positive investment performance (4.1% p.a. over the period, compared to an LGPS average of 3.3% p.a.).
• National Context: The Fund's position reflected wider LGPS trends, with national funding levels improving to 122% and average employer contributions falling to 16.0%.
• Regulatory Compliance: The analysis indicated strong compliance with solvency and long-term cost efficiency requirements, with no anticipated issues for the Government Actuary's Department Section 13 review.
• Investment Performance Benchmarking: A provisional summary indicated the Fund outperformed the LGPS universe average across one, three, five, and ten-year periods, with particularly strong relative performance over the last three years. The final detailed PIRC report was awaited.