The Pension Fund Committee met on Tuesday 23 June 2026 to discuss a range of important matters concerning the fund's administration, governance, and investments.

Pensions Administration Update

The committee received an update on pensions administration activity for January to March 2026. Demand for services remains high, with customer satisfaction levels excellent, exceeding 95%. However, the team is facing operational pressures due to system constraints, resource limitations, and new regulatory requirements. While core services like retirements and estimates are performing well, transfers and inter-fund cases are below target. A significant backlog has been created by a system blackout period, which is expected to impact future performance indicators. Scheme-specific data quality has also dropped due to delays linked to the McLeod system update. Two major future workload drivers were identified: the ongoing McLeod implementation, which is currently requiring manual processing, and new regulations from April 2026 concerning survivor pensions and death grants, which will necessitate large-scale retrospective case reviews.

Questions were raised about the absence of the RAG status KPI results from the report, which was acknowledged as an oversight and will be reinstated. There was also an inquiry regarding the eligibility of district councils to apply for pension schemes, with confirmation that all councillors are now eligible to opt into the Local Government Pension Scheme (LGPS). The blackout period, which commenced on 9 February, was explained as a necessary measure for the McLeod data load, with a plan in place to address the resulting casework backlog. This issue is not unique to Kent and is being faced by LGPS funds nationally. The McLeod implementation is progressing, with data loading expected to be completed by 30 June and the system switchover planned for 1 July, aiming for business as usual by 1 August. The team is managing the increased workload through overtime and a recruitment drive for pension assistants, while also focusing on staff well-being initiatives.

Fund Governance

The committee reviewed the fund governance paper, which summarised key activities since March. The outturn for 2025-2026 is predicting a net overspend of approximately £10 million, primarily due to higher investment management costs. New legislation impacting LGPS governance will come into effect on 30 June 2026, requiring an independent person for the committee to be in place by 31 December. It was recommended that responsibility for devising the appointment process for this independent person be delegated to the Head of Pensions and Treasury in consultation with the Chair. The fund's policies are being updated to reflect branding, with a full review planned once new administrative, governance, and investment guidance is released. Resourcing challenges persist, particularly in the Pensions Administration section, with further recruitment planned. An internal audit on debt recovery management found substantial findings with good prospects for improvement, identifying two low-risk issues related to review schedules and reporting.

The committee was asked to note the report and delegate responsibility to the Head of Pensions and Treasury to lead the selection process for the independent person for the Pension Fund Committee, in consultation with the Chair. Concerns were raised regarding the inclusion of a nominated member from the opposition and the independent person receiving copies of audit reports. These comments were noted and will be recorded in the minutes and action log.

Employer Governance Matters

An update was provided on employer activity for the three months ending 31 March 2026. The total number of employers in the fund increased from 465 to 469. Contribution income for the quarter was £89.9 million, with an average of 99.6% of contributions received on time by value and 96.6% by employer. Several new employer admissions and exiting employer arrangements were agreed under delegated authority. The report also noted the completed triennial valuation as at 31 March 2025 and the finalised Funding Strategy Statement. The committee was asked to note this report.

Investments Update

The committee received an update on investments, including performance for the quarter ending March 2026. The fund experienced relatively flat performance in the quarter, but achieved a strong return of 11.5% over the year, outperforming its benchmark. This was driven by strong returns from equities and emerging market equities, as well as contributions from fixed income and alternative investments.

The committee was asked to note the work undertaken on the review of the Fund's Strategic Asset Allocation and approve the approach taken. They were also asked to approve the recommendation to make initial commitments of £200 million each to Border to Coast's private equity and infrastructure propositions and delegate implementation to the Head of Pensions and Treasury.

Updates were also provided on the regulatory landscape and pooling progress. The Pensions Bill has been passed, and regulations are expected to come into force on 30 June 2026. The deadline for preparing the investment strategy statement has been moved to 31 March 2027. The inter-authority agreement for the ACCESS pool has been agreed, and the investment management agreement with Border to Coast is imminent, with Border to Coast expected to take oversight of all assets from August onwards.

The investment strategy review is underway, with members participating in training sessions on asset classes and alternative investment strategies. A timeline was outlined for the development and approval of the new investment strategy statement, with a draft to be presented in September, followed by consultation in the autumn and finalisation in December.

Mercer presented high-level proposals for the investment strategy, including increasing the allocation to index-linked gilts and infrastructure, removing equity protection, and considering an allocation to private credit or multi-asset credit. Concerns were raised about the potential risks associated with private credit investments, particularly in light of the Greensill situation. Training on private debt is scheduled for July to address these concerns. The committee also discussed the removal of equity protection in conjunction with a reduction in physical equity allocation, noting that simpler hedging methods could be considered. Questions were also raised about transition costs associated with moving to Border to Coast and the interpretation of risk versus return graphs. The committee was informed that the choice of infrastructure investments would be made by Border to Coast, and that water industry investments were not ruled out.

The meeting concluded with the committee agreeing to exclude the press and public for the following business, which involved the likely disclosure of exempt information.