The Croydon Pension Board met on Wednesday, 17 January 2024, to review the performance of the Pensions Administration Team, discuss the fund's risk register and breaches log, and consider progress on governance reviews and investment strategies. Key decisions included noting the Key Performance Indicators for the Pensions Administration Team, approving the Pension Fund Risk Register, and reviewing the progress on implementing findings from a governance review.

Croydon Pensions Administration Team Key Performance Indicators

The Board reviewed the Key Performance Indicators (KPIs) for the Croydon Pensions Administration Team for the period September to November 2023. The Pensions Manager reported that the team had successfully met the statutory deadline for issuing pension savings statements for those exceeding the annual allowance for 2022/23. However, the team's KPIs for processing leavers were below expectations, as this category accounted for 50% of their workload but had not been allocated a proportional amount of resources. Issues were also highlighted regarding delays caused by employers changing payroll providers, leading to disputes over the provision of necessary legal information. The Board noted the report, acknowledging the challenges faced by the team, including those common across Local Government Pension Scheme (LGPS) funds, such as increased workload and the need for additional resources.

Review of Risk Register

The Board considered the Pension Fund Risk Register, which was updated to reflect changes in employer cessation risks and the admission policy for academies and other employers. The Acting Head of Pensions and Treasury explained that a passthrough strategy for admitted bodies now shared more risk with the Council, thereby reducing the risk to the fund. Covenant reviews of other employers were ongoing and expected to be completed by the end of January. Updates were also made regarding funding assets and liabilities, with officers consulting the actuary on funding updates. Cyber security and resourcing were added as new risks to the register. The Board noted the contents of the register, with a discussion clarifying that the passthrough strategy increased risk for employers while lowering it for the fund.

Review of Breaches Log

The Acting Head of Pensions and Treasury presented the Pension Fund Breaches Log, noting that the 2019/20 audited accounts were expected to be signed off in February 2024. The 2022/23 accounts had been added to the log as a breach, and discussions were ongoing with the Council's HR department regarding the employer discretions policy. The late repayment of refunds was also noted as a breach, which was currently unavoidable pending legislative changes to remove the five-year payment requirement. The Board was asked to consider the log and comment, with officers confirming they would liaise further with HR regarding the employer discretions policy.

Progress on Implementing Findings of Governance Review

The Board received an update on the progress of implementing recommendations from a governance review conducted by AON. The Acting Head of Pensions and Treasury reported that most outstanding actions had been completed. Notably, constitution changes regarding board member expenses were agreed by the Council in December 2023, allowing for allowances to be paid to members not remunerated by their employer. The Chair's allowance was set at £5,000, with other members receiving £1,000, subject to CPI escalation. The team planned to benchmark their practices against The Pensions Regulator's (TPR) code. The Board noted the progress made in addressing the recommendations from both the AON review and the SAB Good Governance Review Phase 3 Report.

Local Government Pension Scheme: Next Steps on Investments

The report detailed the government's response to a consultation on investment proposals for the LGPS, stemming from the Edinburgh Reforms. The government intended to accelerate and expand investment pooling, increase investment in levelling up initiatives and private equity, and set a deadline of 31 March 2025 for the transfer of listed assets to pools. The Acting Head of Pensions and Treasury expressed concerns about the potential governance issues arising from accelerated pooling and noted that while the fund already had an allocation to private equity, officers would work with investment advisors to identify assets that could be defined as levelling up assets. The Board noted the report, with a discussion highlighting that while member benefits are legislatively guaranteed, the funding for these benefits relies on investment returns, and a failure in investments could lead to increased contributions.

The Audit Findings Report for the London Borough of Croydon Pension Fund for the year ended 31 March 2020

The Board was asked to note the Audit Findings Report for the year ended 31 March 2020, prepared by Grant Thornton UK LLP. The report indicated that no significant adjustments impacting the net assets of the fund were identified, although minor adjustments to disclosures were made. An unqualified audit opinion was anticipated, with an Emphasis of Matter paragraph highlighting a material uncertainty regarding the valuation of investments in direct property due to the inherent uncertainty over asset valuations at 31 March 2020. The Board noted the contents of the report.

Croydon Training Activity and Plan 2024/25

The Board was asked to comment on the proposed joint Pension Committee and Pension Board training plan for 2024/25, prepared by AON. The plan incorporates areas identified as needing improvement from the National Knowledge Assessment, where Croydon's scores were below 50% in Pensions Accounting and Audit Standards, Investment Performance and Risk Management, and Pensions Governance for the Board, and significantly lower for the Committee. Hot topics for 2024/25 include Equality, Diversity and Inclusion, Conflict of Interest, LGPS Pooling updates, TCFD/Carbon Footprinting, Cost Management, Pensions Dashboards, TPR General Code requirements, Business Planning, and Scams/Fraud. A recommendation was made to hold an in-person session to improve engagement with the LOLA Online Training Platform. The Board was asked to review the plan and provide comments.

Review of Board Training

This report provided an overview of training undertaken by Pension Board members in 2023/24 up to 31 December 2023. It highlighted that two Board members had completed or started modules on the Hymans online training platform (LOLA), with a recommendation for members to complete these modules annually. Additional training had been undertaken by Board members on Cyber Security, LGA Fundamentals, and the PLSA LA Forum. The Board was asked to note the contents of the training logs.

Local Government Pension Scheme Advisory Board / The Pensions Regulator Update

The Board received an update on matters being considered by the LGPS Advisory Board (SAB) and The Pensions Regulator (TPR). Key points included SAB's statement on fund surpluses, their response to the DLUHC consultation on investment issues (accelerating pooling, increasing investment in levelling up and private equity), and the publication of the 2022 Scheme Valuation Report, which showed an improved average funding level. Updates were also provided on the McCloud remedy, audit issues within the LGPS, changes to the SAB's cost management process, and TPR's guidance on Equality, Diversity, and Inclusion. The Board noted the contents of the report.