The Teesside Pension Fund Committee met on Wednesday 17 June 2026 to discuss a range of issues concerning the fund's investments and administration. Key topics included updates on LGPS current issues, investment activity, the performance of Border to Coast, the independent investment advisor's report, and the pension administration report. The committee also reviewed the draft external audit plan and the fund's risk register.

LGPS Current Issues

The committee received an update on the evolving Local Government Pension Scheme (LGPS) landscape, particularly concerning the 'Fit for the Future' reforms stemming from the Pensions Act 2026. These reforms formalise the requirement for administering authorities to work through a single pool, with responsibilities shifting between funds and their pool companies. Under the new framework, while funds will continue to set investment strategy, the pool company, Border to Coast, will assume statutory responsibility for decisions below this level, including portfolio construction, manager selection, and stewardship. The Investment Strategy Statement (ISS) must now adhere to a prescribed format, incorporating high-level objectives for returns, risk, liquidity, responsible investment, and local investment, and be based on principal strategic advice from Border to Coast.

In parallel, wider governance requirements are being introduced for administering authorities, such as the appointment of a Senior LGPS Officer, an Independent Person, enhanced training, and regular Independent Governance Reviews. These changes, while remaining the responsibility of the individual funds, shape the operational environment for the new pooling model.

Councillor Jim Beall declared a non-pecuniary interest as a member of the Tees Valley Combined Authority (TVCA) Overview and Scrutiny Committee. He noted that Appendix 3 of the report mentioned ongoing discussions with TVCA regarding the fund's local investment strategy, stating he was unaware of these discussions and requested a dedicated report for further information. The Head of Pensions Governance and Investments clarified that while the Fund is required to liaise with TVCA under the Pension Schemes Act, final decisions on local investment now rest with Border to Coast. A pilot programme is underway to explore the three-way relationship, and members were assured that political risks were being considered. The committee noted this information.

Investment Activity Report

The committee received a report detailing the investment and treasury activity undertaken by the Pension Fund for the quarter ending 31 March 2026. It was noted that the fund continues to favour growth assets over protection assets, with no investments currently held in bonds. The cash level at the end of March 2026 stood at 7.42%, within the agreed maximum of 20%. Investments in alternatives, such as infrastructure and private equity, were highlighted as offering diversification. The report detailed transactions for January to March 2026, showing net purchases of £2.9 million. The fund's total investment value was £6,141 million as at 31 March 2026. The report also confirmed that the fund's Strategic Asset Allocation remained within tolerance levels. The committee noted the information provided, and it was advised that representatives from FW Capital would attend the September meeting to provide an update on the fund's investment.

Border to Coast Presentation

Rachel Elwell, CEO of Border to Coast, presented an update on the organisation's investment performance. The presentation covered Teesside Pension Fund's listed pooled investments, portfolio performance net of fees, comments on performance, fund exposure to defence and tobacco, UK real estate fund performance, purchases and sales, private equity, infrastructure, and climate opportunities summaries.

Members raised concerns about the fund's exposure to tobacco and defence investments, which had been discussed at previous meetings. It was confirmed that these concerns had been raised through the Border to Coast Joint Committee, but there had been insufficient support from other participating funds to include tobacco and defence companies on an exclusions list or to pursue the matter further. The committee noted the information provided.

Investment Advisor Report

William Bourne, the Independent Investment Adviser, provided a market commentary and portfolio recommendations. Despite a challenging geopolitical and economic backdrop, including the conflict involving Iran, higher energy prices, rising inflation, and increasing government borrowing costs, global equity markets, particularly the S&P 500, had shown resilience. This was attributed to better-than-expected corporate earnings, especially in the technology sector, demand for AI services, profits from higher energy prices, and monetary support from the US Treasury. While recessionary concerns had eased, economic growth in Western economies remained modest.

The outlook was described as uncertain due to persistent inflation, rising bond yields, and worsening government finances, particularly in the US. The appointment of Kevin Warsh as the new Federal Reserve chair added further uncertainty regarding future monetary policy. Bond yields had risen as expectations of interest rate cuts diminished, though significant further increases were not anticipated due to the impact on government borrowing costs. In this context, index-linked gilts were highlighted as potentially attractive due to their real yields exceeding the fund's real discount rate, offering protection against high inflation.

Mr. Bourne maintained the view that equity markets might be approaching a significant turning point, though governments and central banks would likely attempt to curb further rises in bond yields. With investment implementation largely managed by Border to Coast, the committee's focus should shift to holding the pool accountable, especially concerning the performance of its main equity funds. The committee noted the information provided.

Pension Administration Report

A representative from Tyne and Wear Pension Fund (TWPF) presented the Pensions Administration Report for the quarter ending March 2026. The report detailed the administration services provided to the Teesside Pension Fund, including pensions processing, performance against statutory requirements and key performance indicators (KPIs), member electronic communications, service delivery, employer performance, dashboards, and industry developments.

Members were informed that performance against the national LGPS Scheme Advisory Board's (SAB) Performance Indicators showed underperformance in several areas against an internal target of 80%. The primary reasons cited for this underperformance included ongoing issues with inherited data, the progression of 'out of date' cases, and planned system downtime for integration and upgrades related to the McCloud remedy. Additional staff had been recruited to address data issues. Year-end data submission had progressed positively, with the majority of member data received, though significant follow-up work remained.

A member raised concerns about the inherited data issues, emphasising the need for thorough due diligence. The Head of Pensions Governance and Investments confirmed that performance was being closely monitored and that arrangements were in place to support improvement. The committee noted the information provided.

Draft External Audit Plan

The committee received the Draft Audit Strategy Memorandum for the external audit of the Pension Fund for the year ending March 2026, to be conducted by Forvis Mazars. The audit firm would complete the audit and issue their opinion by the statutory deadline of 31 January 2027. The report outlined the audit scope, approach, timelines, risks, materiality levels, and fees, as set by Public Sector Audit Appointments (PSAA). The potential separation of Pension Fund audits from the administering authority, Middlesbrough Council, was discussed, with practicalities suggesting this would likely occur for the financial year ending 31 March 2027. This separation was expected to reduce the complexity of the Council's financial statements and prevent delays to the Pension Fund's audit certification. The Pension Fund External Audit Plan would also be presented to the Audit Committee. The committee noted the information provided.

Risk Register Review

The Head of Pensions Governance and Investments presented the Pension Fund Risk Register, highlighting four modified risks: TPF004 Political Risk (Investments), TPF019 Governance Skills Shortage, TPF020 Inadequate Border to Coast Oversight, and TPF037 Compliance Failures. The likelihood of these risks had increased due to factors such as potential political changes, increased governance requirements following the Pensions Act 2026, and the growing complexity of the relationship with Border to Coast. The committee was given the opportunity to suggest further amendments or new risks. The committee noted the information provided.

The meeting concluded with the exclusion of press and public for an exempt presentation by Rachel Elwell, CEO of Border to Coast, covering its history, future plans, legacy asset management, and local investment.

Decisions Made:

• The minutes of the previous meeting on 7 May 2026 were approved.
• The committee noted the information provided regarding LGPS Current Issues, Investment Activity, Border to Coast Presentation, Investment Advisor Report, Pension Administration Report, Draft External Audit Plan, and the Risk Register.
• Press and public were excluded for an exempt presentation by the CEO of Border to Coast.