The Pensions Committee of Hertfordshire Council met on Friday 18 September 2026 to discuss the fund's risk register, employer risk, governance, and investment strategy. Key discussions included the Pension Fund Risk Register, employer risk, governance overview, LPPA performance, changes to the constitution, the independent person appointment process, the draft investment strategy statement, a Border to Coast update, and the pension fund responsible investment report.

Pension Fund Risk Register Report

The committee reviewed the Hertfordshire Local Government Pension Scheme (LGPS) Risk Register and the Hertfordshire Fire Pension Scheme Risk Register for the quarter ending 30 June 2026. Two risks exceeded the tolerated risk threshold in the LGPS register: Ineffective investment decision-making (Risk C5), which related to the transition to Border to Coast and has since been resolved with the signing of the Investment Management Agreement, and Poor administration, including failure/delays in implementing regulatory changes (Risk E1). Risk E1's score was increased due to the unprecedented level of regulatory changes impacting the LGPS, the fund, Border to Coast, and LPPA. For the Fire Pension Scheme, Risk E1 also remained above the tolerated threshold due to similar administrative pressures from regulatory changes.

Councillor Tim Williams, Deputy Executive Member for Resources and Performance and Vice-Chair of the Pensions Committee, sought clarification on whether the increase in Risk E1 was due to a genuine risk or simply to reflect the volume of changes. Officers confirmed it was to reflect the unprecedented nature of the changes, ensuring it remained on the committee's radar. Councillor Richard Roberts, Leader of the Conservative Group, questioned the lack of reflection of external economic volatility in the risk register, suggesting it appeared internally focused. Taryn Ahlberg, Head of Pensions, stated the register was aligned with the Pension Regulator's General Code of Practice but agreed to review its expansion to better reflect external risks. Councillor Simon Rhodes, a new member of the committee, inquired about the external factors contributing to the unprecedented risk, which Taryn Ahlberg detailed as numerous regulatory changes including Access and Fairness, the McCloud remedy, Matthews, Fit for the Future, and escape rate changes. Councillor Adrian England, Executive Member for Sustainability, noted the long-term outlook of pension liabilities and the register's sensible view of near-term and long-term risks. Councillor Rachel Carter, Chair of the Health Scrutiny Committee, raised concerns about cyber attack risks, to which Alison confirmed that while it's a high-level risk, preparation involves training and a new cyber policy requiring mandatory training for board and committee members. Taryn Ahlberg added that guidance from the Pensions Regulator on Artificial Intelligence would be included in the risk register for the next quarter. The committee noted the report.

Employer Risk

The committee received an update on employer risk for the quarter ending 30 June 2026. The overall employer risk profile remained stable, with 90.4% of employers assessed as 'green' (low risk). However, the number of 'red' risk employers increased from 9 to 14. This increase was attributed to updated governance analysis, revised monitoring parameters, a debt-spreading agreement for one employer, repeated late submissions or contribution payments for another, and a combination of amber risks for a fifth. Of the 14 red employers, nine were considered true red risks requiring direct monitoring, while five were classified as red due to an amalgamation of amber and green risks.

The most significant event was the administration of a CST tier three employer with outstanding debt-spreading agreement payments. Legal advice confirmed the debt was a non-preferential unsecured claim and unrecoverable. This debt forms part of the fund's orphan pool, which remains strongly funded with an estimated surplus of approximately £38 million on an ongoing basis. The unrecovered amount was deemed immaterial.

Councillor John Graham, a member of the committee, congratulated officers on the low number of such losses historically but asked what lessons had been learned from this instance. Alison, an officer, explained the difficulty in monitoring employers' financial situations, noting that the fund learned about the administration through BBC News. Terry, another officer, added that while regulations now insist on guarantors for new employers, legacy employers cannot be forced to provide indemnity arrangements. Councillor Simon Rhodes asked which employer had gone into administration, and it was identified as Fusion Lifestyle, a leisure company. Tim Williams, Deputy Executive Member for Resources and Performance and Vice-Chair of the Pensions Committee, noted the increase in red risks and asked about lessons learned. Alison reiterated the challenges of early detection and the case-by-case monitoring approach. Taryn Ahlberg confirmed that officers regularly review company information and that covenant checks are carried out every three years. The committee commented on and noted the report.

Governance Overview

The committee received an update on the fund's governance matters, including regulatory developments and Hertfordshire Pension Fund-specific updates. Appendix A detailed the quarterly governance report, which included updates on compliance with Fit for the Future requirements (Appendix B), a governance yearly planner (Appendix C), and a timetable for policy reviews. The report also highlighted forward plans for committee meetings, updates on cyber security training, budget, treasury management, and compliance with the General Code of Practice. Appendix C contained the Governance Compliance Statement, which required committee approval and had been updated for 2026/27 with minor amendments, including the addition of Border to Coast Pension Partnership and the independent person appointment.

Councillor Kevin Horner, Deputy Executive Member for Adult Care Services, expressed concern about the lateness of guidance for policy updates, asking if any guidance had been received since the papers were written and if policies could be updated by October. Taryn Ahlberg confirmed that guidance from the LGA was still awaited but that where policies were imperative, they would be drafted and amended later. Councillor Richard Roberts questioned if the current fluid situation made the governance of the fund more challenging or if current arrangements were satisfactory. Taryn Ahlberg stated that governance arrangements were really good but acknowledged a few areas needing tightening before the independent governance review. Councillor Rachel Carter, Chair of the Health Scrutiny Committee, asked about confidence in resilience and business continuity planning, particularly concerning power failures or pandemics. Alison confirmed confidence in existing plans, which consider various scenarios, and that testing would be conducted. She also noted that the training strategy would be added to the governance report. Councillor Stuart Roberts commented on the low attendance at training sessions, urging members to take it more seriously. Taryn Ahlberg mentioned that training is recorded and available online. Barry, a member, highlighted that the Enlighten modules are bite-sized and encouraged new members to use them. Clive Heathley, Interim Director of Finance, reinforced the need for training due to unprecedented change in the pensions world. The committee noted and commented on the report and approved the revised Governance Compliance Statement by a show of hands.

Hertfordshire LGPS and FPS Q1 2026/27 LPPA Performance Report

The committee received the Q1 2026/27 performance report from Local Pensions Partnership Administration (LPPA) for both the Hertfordshire Local Government Pension Scheme (LGPS) and the Fire Pension Scheme (FPS). Chris, representing LPPA, presented the report, highlighting a refreshed design with a performance at a glance table and extended graphs for 15-month trend analysis.

Key performance indicators for casework showed 98.4% for local government and 98.8% for the fire scheme. Employer retirement notifications averaged 54.6% over the quarter, with 82.82% of payments made within 30 days, the highest quarterly figure in the past year. The quality and timeliness of data from employers had improved, leading to quicker payments for members.

Regarding the contact centre, the four-minute target was exceeded in Q1, attributed to a small number of high-demand periods. However, the median wait time was significantly lower at one minute 13 seconds, considered a better gauge of member experience. July and August figures showed a return to track with wait times of one minute 47 seconds and two minutes 11 seconds respectively.

Chris also touched upon the unprecedented amount of regulatory change, noting the pause of the Local Government Reorganisation (LGR) was a relief. He detailed the complexity of retrospective changes, such as those affecting survivor benefits and death grants, and the need for further guidance on monetary values. The SCAPE rate changes in the first quarter, though unplanned, were managed well, with a focus on member updates and pausing transfers temporarily. Annual benefit statements were successfully issued to 96% of active LGPS members and 97.5% of deferred FPS members. The Pensions Dashboard project is anticipated to go live in late 2027, with successful testing and matching criteria observed.

Councillor Matthew Hurst, a member of the committee, noted a sharp increase in late retirement notifications in June and asked for the reason. Chris explained this was an annual pattern, possibly linked to the end of the financial year and redundancy exercises. Councillor Tim Williams commended the report's rebound and asked about complaints regarding delays, which Chris addressed by explaining common themes and the importance of managing member expectations. Councillor John Graham inquired about the magnitude of data flow, requesting figures beyond percentages. Taryn Ahlberg provided that 11,332 casework cases were completed with six complaints, and the membership is around 123,000. Councillor Adrian England asked about differences in trends between the LGPS and fire service members, noting the fire scheme's complexity and higher member expectations. Chris stated that fire schemes are more complex with higher member expectations for quicker turnarounds. The committee noted and commented on the report.

Changes to the Constitution

Phillip Prasad, Investment & Pooling Manager, presented a report on changes required to the County Council's Constitution following the introduction of the Pension Schemes Act 2026 and the Local Government Pension Scheme (Amendment) (Governance) Regulations 2026. These changes strengthen governance requirements, including clearer structures, enhanced knowledge obligations, and the appointment of an LGPS Senior Officer and an Independent Person. The proposed amendments are primarily governance-focused, aiming to clarify the Pensions Committee's role, reflect new statutory positions, strengthen accountability, and improve transparency. A significant proposal is the creation of a dedicated Annex 31 within the Constitution for the Pensions Committee's Terms of Reference. These amendments will be reviewed by legal teams and advisors before being presented to the Standards Committee on 1 October 2026 and then to Full Council on 20 October 2026 for approval. The committee noted the report.

Independent Person Appointment Process

Taryn Ahlberg, Head of Pensions, provided an update on the appointment process for the Fund's Independent Person, a statutory requirement under LGPS governance reforms. Officers, with support from Marsh, have assessed the Fund's requirements and identified investment expertise as the most significant skills gap. The role specification will therefore emphasise investment knowledge alongside governance and administration experience. The first two phases of the appointment process are complete, with candidate search commencing in September and final interviews and appointment planned by the end of October. Councillor Richard Roberts inquired if senior local government and financial experience were being considered, to which Taryn Ahlberg confirmed that knowledge of the political landscape and how county councils operate was included in the role specification. The committee noted the statutory requirement, the work undertaken, the timetable, and approved the delegation of the appointment to the LGPS Senior Officer, subject to consultation.

Draft Investment Strategy Statement – Rebalancing and Local Investment

Phillip Prasad presented the draft Investment Strategy Statement (ISS), which is required under new regulations and must be published by 31 March 2027. The ISS is substantially complete, with two key decisions remaining: rebalancing ranges and local investment.

Regarding rebalancing ranges, the new regulations require pension funds to specify acceptable ranges around each strategic asset allocation target. These ranges allow Border to Coast flexibility in managing the portfolio efficiently while maintaining risk controls. The proposed ranges, developed with advice from Marsh and Border to Coast, were presented.

For local investment, the regulations mandate a target allocation. As Border to Coast's local investment capabilities are in early development, officers recommended a range of 0% to 5% across the Border to Coast region, with a preference for investments in Hertfordshire or those benefiting Hertfordshire. This approach provides flexibility while the pool develops its capabilities. Several longer-term questions regarding financial returns versus impact, local priorities, metrics, and governance need to be resolved.

The committee was informed that the full draft ISS would be presented at the October committee meeting, followed by consultation with scheme members and employers, and final approval in February 2027. Councillor Rachel Carter, Chair of the Health Scrutiny Committee, expressed encouragement for the emphasis on local investment but questioned the transparency and regulation of private credit investments. Jonathan Crowther, from Border to Coast, explained the rigorous due diligence processes undertaken by managers. Sandy Dixon, also from Border to Coast, elaborated on the team's expertise in selecting managers and diversifying investments. Councillor Richard Roberts highlighted the complexity of balancing local investment with fiduciary duty and the potential for increased costs and managerial intensity. He also raised concerns about the prescriptive nature of local investment targets and the need for consistent strategic leadership. Jonathan Crowther provided reassurance about Border to Coast's professional approach and the intention to professionalise local investment. Councillor Adrian England acknowledged the thought put into the ISS but questioned the broad rebalancing ranges. Jonathan Crowther explained that the ranges were set considering the liquidity of different asset classes. Councillor John Graham sought clarification on the two tables presented and the degree of policy specification versus individual party autonomy. Phillip Prasad clarified that the strategic asset allocation was agreed, and the ranges provided flexibility. The committee approved the rebalancing ranges and the local investment allocation range.

Border to Coast Update

Phillip Prasad provided an update on Border to Coast, noting that following a review of Sterling Investment Grade Credit (SIGC) arrangements, Border to Coast proposed consolidating partner fund credit holdings into the SIGC fund. This fund manages approximately £5.4 billion and has outperformed its benchmarks. Royal London Asset Management (RLAM), which manages part of Hertfordshire's credit allocation, remains a manager within the pooled fund. The proposal would transition Hertfordshire's RLAM mandate into the pooled fund, retaining RLAM's expertise while benefiting from scale, governance, and lower fees. Border to Coast estimates that restructuring costs would be recovered in less than a year through fee savings.

Recent activity included an additional allocation to credit, with £230 million transitioned in June and a further £170 million invested in July, bringing Hertfordshire's total investment in the Border to Coast Credit Fund to approximately £400 million. Drawdowns into private market commitments for private equity, UK real estate, and infrastructure mandates have also been completed. Appendix A was introduced to provide a clear view of transition progress, showing assets split between ACCESS, legacy mandates under Border to Coast oversight, and fully transitioned Border to Coast assets. As of 30 June 2026, approximately £229 million had transitioned to Border to Coast.

Councillor Richard Roberts raised concerns about the declining value of government bonds despite excellent yields. Jonathan Crowther explained that index-linked gilts provide inflation-linked returns with minimal default risk, and current real yields are at a 20-year high. Councillor John Graham inquired about the total amount transitioned to Border to Coast and the timeframe for moving all assets. Phillip Prasad clarified that £229 million was held by Border to Coast as of 30 June, with the majority still outside, but under Border to Coast's control via power of attorney. Sandy Dixon, from Border to Coast, explained that transitions are asset-class based to minimise costs and that investment grade credit was a good example of a transition with a payback period of less than a year. The committee noted the report.

Pension Fund Responsible Investment Report

Robbie Sinnott presented the Pension Fund Responsible Investment Report, focusing on decarbonisation progress as of 31 March 2026. The report highlighted that climate risk poses a financial risk to the fund, which has a net-zero target of 2050 or sooner. The report monitors progress against this target annually. It was noted that the targets are ambitions rather than binding. The analysis covers approximately 60% of the fund's assets, primarily listed equities, as data for private markets is limited.

For listed equities, the fund is currently on track with its decarbonisation pathway, having reduced its carbon footprint by 32% from the 2020 baseline. This progress is attributed to portfolio changes, including divestments from UK equity and a move towards climate-aware funds, as well as Dodge & Cox reducing their absolute emissions. However, the report cautioned that a significant portion of the reduction is due to asset growth (denominator effect) and manager changes, rather than solely active decarbonisation efforts. The listed equity portfolio is noted as being 36% more carbon-efficient than the MSCI ACWI benchmark.

For corporate bonds, the portfolio is currently behind the decarbonisation pathway, with an increase in carbon footprint over the previous 12 months. The report acknowledged the difficulty in accurately measuring Scope 3 emissions and the ongoing work to improve data availability and methodologies.

Councillor Adrian England questioned the relaxed nature of the decarbonisation pathway and asked about its origin and review process. Robbie Sinnott explained that the pathway reflected the fund's earlier start in decarbonisation and that future influence would be through engagement with the pool and policy updates. Councillor Rachel Carter inquired about the percentage of investments covered by the analysis and the carbon footprint of AI investments. Robbie Sinnott confirmed that approximately 60% of assets were covered, with Scope 1 and 2 emissions analysed, but Scope 3 emissions remain a challenge. He also explained how data centre emissions for AI would be classified under Scope 2 or 3 depending on leasing arrangements. Councillor Richard Roberts asked if the ethical investment situation extended beyond decarbonisation, referencing a previous council debate on divestment from Israel. Taryn Ahlberg confirmed that the Responsible Investment (RI) policy had been approved in July 2026 following a member survey and consultation. Councillor Simon Rhodes sought clarification on data centre emissions reporting. Robbie Sinnott explained the complexities of Scope 3 reporting and the need for companies to improve their reporting. Councillor Stuart Roberts highlighted the distinction between the fund's policy and Border to Coast's policy, emphasizing the need for influence rather than direct ownership. The committee noted the report.

The meeting then moved to Part II business, which was closed to the press and public.