The Pension Fund Panel met on Wednesday 23 September 2026 to discuss the performance of the shared pensions administration service, ongoing projects, governance and risk, and the annual report and statement of accounts. Key discussions included updates on pension administration performance, the implementation of the McCloud Remedy and Access & Fairness reforms, and the Fund's investment performance and strategy.

Pension Administration Performance Update

Tom Taylor, Head of Pensions Administration, provided an update on the Shared Pensions Administration Service, which manages approximately 39,000 members' pensions across Kingston and Sutton. He reported an increase in outstanding processes to 738, with 106 cases overdue by 31 days or more. This increase was attributed to the annual year-end return exercise, a temporary suspension of transfer processing due to changes in the SCAPE rate, and an increase in general queries related to the digital payslip initiative. Despite these pressures, Mr Taylor confirmed that priority cases, such as deaths and retirements, maintained a 100% performance target.

Councillor Mark Durrant raised concerns about the 31-day overdue threshold, noting that 45.3% of total cases were overdue. Mr Taylor explained that leavers were prioritised as P3 cases, with a legal deadline of three months, and that the overdue cases had since been cleared. He also highlighted that due to holidays and a seasonal spike in pension queries from school leavers, August had seen a temporary increase in workload.

Councillor Alison Holt inquired about the uptake of digital payslips, with 735 pensioners having signed up. Mr Taylor stated that this number had increased to 783 and outlined plans for an opt-out scheme for pensioners with email addresses on file, and a postal opt-in for those without.

Councillor Yvonne Tracey questioned why a recovery plan was not presented immediately, to which officers clarified that the plan had already been implemented. Councillor Sachin Tulyani sought clarification on the process tracker chart, and Mr Taylor explained that it represented the total number of open processes, not just overdue cases, and that seasonal effects were a known factor.

The Panel noted the updates provided.

Pension Administration Projects Update

Tom Taylor also presented an update on key projects within the Shared Pension Administration Service. He reported that the annual return exercise for employers was completed on time, with 100% of data received, validated, and loaded onto the system. Annual Benefit Statements (ABS) were issued to active and deferred members by the statutory deadline of 31 August 2026. For active members, 92.3% of statements were published, with the remainder relating to members with unprocessed leaver processes.

A breach of law was reported concerning the McCloud Remedy, as individual underpin calculations could not be included in the initial ABS due to industry-wide software delays. The Fund has reported this breach to The Pensions Regulator and is awaiting software releases to complete the recalculations. An updated project plan aims for completion by 31 January 2027.

The Access & Fairness reforms, aimed at improving equality and clarity in the scheme, were implemented in phases, with initial stages delivered on schedule. This project involves recalculating survivor benefits retrospectively to 2005 and removing the age 75 limit for death grants from 2014. The project is expected to conclude by January 2028.

Updates were also provided on the Pension Dashboard Programme, with the Fund preparing for its public launch in 2027/28, and Pension Savings Statements, which are issued annually to members whose pension growth exceeds the annual allowance.

The Panel noted the update.

Governance and Risk Update

Tom Taylor presented the Governance and Risk Update. He explained that the Risk Register had been streamlined, focusing on key risks. One red risk was identified concerning administration, specifically the reliance on compliant software for implementing legislation, which has led to breaches of law regarding the McCloud Remedy and Access & Fairness projects. This risk remains red until the necessary software upgrades are delivered and tested.

Several amber risks were discussed, including the financial liability and resource strain from retrospective legislative changes, the potential loss of experience on the Panel following local elections, the risk of cyber-attacks, the financial impact of climate change and biodiversity loss, adverse market movements, and the implementation of the Fit for the Future reforms.

Updates were provided on the pensions administration software, with the current contract expiring in August 2027, and a re-procurement exercise underway. It was noted that elected members and mayors became eligible for the LGPS on an opt-in basis from 11 May 2026, with 11 councillors having opted in so far.

The Panel noted the update.

Work Programme Update

Katherine Gray, Head of Pensions Investments and Treasury, presented the proposed work programme for the Pension Panel meetings for the year ahead. The programme included regular updates on pension administration performance, projects, governance and risk, investment performance, and the annual report and statement of accounts. It also scheduled specific training sessions on topics such as pensions governance, cyber risk, and responsible investment.

Councillor Yvonne Tracey questioned why the next Responsible Investment Stewardship report was not scheduled until March 2027 and requested an interim update in December. Catherine Gray explained that the stewardship report is an annual exercise and that the investment strategy statement was agreed in December 2025 and implemented in accordance with draft guidance.

Councillor Alison Holt requested that the AI piece be added to the work programme, which was noted. Councillor Mark Durrant inquired about the training modules, and Catherine Gray clarified that the online training was for general background knowledge, with dedicated in-person sessions planned for key items.

The Panel noted the proposed work programme.

Annual Report and Statement of Accounts 2025-26

Katherine Gray presented the draft Annual Report and Statement of Accounts for 2025-26. She highlighted that the net assets of the Pension Fund rose to £1.41 billion, with an investment return of 8.9%. The Fund remained cash flow negative, with investment income crucial to bridging the gap between contributions and benefit payments. Membership increased slightly to just under 20,000. The proportion of assets pooled through London CIV increased to 62.1%. The cost per member of administering the scheme continued to reduce. The audit of the accounts was progressing well, with no issues identified so far.

Councillor Caz Durant asked for a recap of what drove the 8.9% return and whether members would contribute less due to good returns. Katherine Gray explained that equity performance was the main driver and that employee contribution rates are set centrally by statute, with employer contribution rates adjusting based on the triennial valuation.

Councillor Durant also inquired about separating the pension scheme accounts from the council's accounts for audit purposes. Katherine Gray confirmed that proposals to separate the accounts were in place for future years, which would be beneficial for the pension fund.

Councillor Tracey asked where the annual report detailed the commitment to consider divesting from companies on the OHCRH database. Katherine Gray explained that the responsible investment policy sets the parameters, and the annual stewardship report details the implementation in practice.

Councillor Sachin Tulyani asked how the employer contribution rate of 16.5% compared to other local authorities in Greater London. Katherine Gray stated that Kingston was in a healthy funding position, ahead of the pack, and that the employer contribution rates were comparable to others when considering funding levels.

Councillor Holt expressed concern about the cash flow negative position and the potential reduction in employer contributions. Katherine Gray acknowledged the importance of cash flow and explained that the Fund had a stabilisation mechanism and other options, such as adjusting prudence levels, to manage volatility without impacting employer contribution rates.

Lesley Diston inquired about management fees, and Katherine Gray confirmed that they had reduced due to increased pooling with London CIV and expected this trend to continue, though a minimum fee would always apply.

The Panel noted the report and agreed to delegate authority to the Section 151 Officer, in consultation with the Chair, to approve the Annual Report and Statement of Accounts following completion of the audit.

Investment Performance Report

Katherine Gray presented the Investment Performance Report for the period ending 30 June 2026. The market value of the Fund's assets had increased to £1.51 billion, with a quarterly return of 7.6%, outperforming its benchmark. However, the one-year return of 13.7% was below the benchmark of 14.7%. Over three and five years, the Fund's returns were 10.8% and 6.4% respectively, underperforming their benchmarks.

Councillor Mark Durrant questioned why the Fund was not consistently hitting its benchmarks, particularly over three and five-year periods. Charlie Sheridan from London CIV acknowledged that some fund manager performance had not been up to standard and that they were working to improve this, citing the launch of the core equity fund as a step in that direction.

Councillor Alison Holt congratulated the team on their award nomination and expressed concern about the cash flow negative position, particularly with a move towards longer-term investments. Charlie Sheridan assured the Panel that London CIV would work collaboratively with the Fund to ensure sufficient liquidity.

Councillor Sachin Tulyani asked how the additional £10-15 million of investment income would be generated and requested an attribution table to understand performance drivers. Katherine Gray explained that income would be generated through private debt investments, index-linked gilts, and property rentals, with flexibility to take income if needed. She agreed to work with London CIV to produce an attribution table in future reports.

Councillor Tracey asked about the Fund's exposure to companies on the OHCHR and AFSC conflict screen listings, both before and after the transition to the LCIV Core Global Equity Fund. Charlie Sheridan confirmed this information could be provided via email. She also asked about the stage of Kingston's four-stage escalation framework for relevant holdings, engagement start dates, sought changes, and deadlines, which was also agreed to be provided in writing. Questions regarding Palestine-related engagements and the Investment Management Agreement's provisions on responsible investment were also deferred for written response.

The Panel noted the report.

Update on LGPS Fit for the Future Pension Reforms

Katherine Gray provided an update on the implementation of the government's LGPS Fit for the Future pension reforms. The reforms aim to boost investment in UK growth, improve saver outcomes, and tackle waste in the pension system. Key changes include strengthened governance arrangements, asset pooling, and a focus on local investment.

The legislation confirms that strategic decision-making remains with partner funds, while implementation is transferred to investment pools like London CIV. An Investment Management Agreement (IMA) was signed in May 2026, giving LCIV full control of investment implementation.

Governance changes include the appointment of a Senior LGPS Officer (SRO) by 31 December 2026, the appointment of an Independent Person by the same date, and stringent knowledge and training requirements for Panel members and officers. An Independent Governance Review will be commissioned by March 2028.

Councillor Yvonne Tracey inquired whether the new Independent Person would require expertise in responsible investment and human rights. Katherine Gray stated that while specific experience in these areas was not a statutory requirement, professional advisors would typically possess such knowledge. Marion George, the independent advisor, added that the focus of the reforms was on improving governance across all LGPS funds to the standard of the best, with a particular emphasis on training and scrutiny in meetings.

Councillor Alison Holt noted that the Fund had already implemented a responsible investment policy and appointed an independent advisor prior to the government's reforms.

The Panel noted the report.