The Pensions Committee of Hertfordshire Council met on Friday 23 October 2026 to discuss a range of policy updates, financial modelling, and investment performance.

Strategy and Policy Update

The committee received an update on the review and development of several key policies. Alison Sharp presented the report, outlining revisions to the Communication Policy, Discretions Policy, and Conflicts of Interest Policy. The Communication Policy has been streamlined for clarity and accessibility. The Discretions Policy has been updated to provide greater clarity on decision-making processes and remove outdated references. The Conflicts of Interest Policy has been updated to reflect the inclusion of the LGPS Senior Officer, the independent person, and Border to Coast Pension Partnership, and will be subject to further review following the publication of guidance from the Fit for Future regulations.

Two new policies were also introduced: a Training Strategy, developed in anticipation of forthcoming guidance from the Scheme Advisory Board and in line with Fit for Future regulations, and a Data Improvement Strategy, introduced in line with the Pension Regulator's General Code of Practice. The Training Strategy aims to ensure that committee and board members, along with other key individuals involved in fund governance, maintain the necessary knowledge and understanding for their roles. The Data Improvement Strategy establishes a framework for monitoring and improving data quality, with progress to be reported quarterly by LPPA.

The committee was asked to approve the revised Communication, Discretions, and Conflicts of Interest policies, and to approve the new Training and Data Improvement strategies. They were also requested to approve the adoption of these policies for the Fire Pension Schemes, with necessary amendments to reflect scheme-specific requirements.

Pension Fund Cashflow Modelling

Phil and Barry presented a report on pension fund cashflow modelling, highlighting that the fund is becoming more mature. This means that benefit payments are beginning to exceed contribution income, a normal stage in a pension fund's lifecycle that does not indicate immediate funding concerns. Following the strong funding position achieved at the 2025 valuation, employer contribution rates were reduced, leading to lower future contribution income than previously anticipated. As benefit payments continue to grow, the fund's net money position becomes increasingly negative.

The base scenario modelling indicated that the fund remains cashflow positive throughout the projection period, with annual positive cash flow estimated at approximately £38.5 million per annum. However, a crucial distinction was made: the actuary's assumptions show all investment income being received in cash, whereas in reality, most investment income is automatically reinvested. This means the fund is already operating in a practical cash flow negative position and manages this through planned cash arrangements.

Officers are continuing to monitor cash flow regularly and, in discussion with Border to Coast, are establishing an additional monthly redemption facility of approximately £3 million per month to support liquidity management if required.

Draft Investment Strategy Statement

Phil presented the draft Investment Strategy Statement (ISS), which had been completed using the prior ISS agreed in July 2026. This updated the strategic asset allocation to the new nine-bucket format and incorporated approved rebalancing and local investment ranges from the previous month's meeting. The draft ISS, attached at Appendix A, remains unchanged from the Fund's Responsible Investment Policy, agreed in July 2026 following engagement with the Pensions Committee, Pension Board, and scheme membership, and is attached for reference as Appendix B.

Subject to committee approval, the draft ISS will be issued for consultation with scheme employers and representatives of scheme members before a final version is presented to the committee in February 2027 for approval and publication ahead of the statutory deadline of 31 March 2027.

Draft Pension Fund Statement of Accounts

Taryn presented the draft Pension Fund Statement of Accounts for 2025/26. The draft accounts were published on time and are currently being audited by KPMG. The fund remains in a strong position, with net assets increasing to approximately £7.1 billion during the year, supported by investment returns of 10.5% and a funding level of 112% at the last actuarial valuation. A small increase in asset values has been identified since the publication of the draft accounts and is being reviewed with the auditors before being reflected in the final accounts. There are no significant issues to report at this stage, subject to the completion of the audit. The final audited accounts and annual report will be shared with the committee on 4 December and presented to the Audit Committee on 9 December for signing off. A training session on the fund accounts and annual report had taken place earlier in the week and had been uploaded to Enlighten.

Border to Coast Governance

Taryn provided an overview of the governance arrangements for Border to Coast, clarifying how these fit alongside the governance responsibilities that remain with the Hertfordshire Pension Fund. The key message was that while investment assets are increasingly pooled through Border to Coast, the committee remains responsible for setting the fund's investment strategy, funding strategy, responsible investment policies, and ensuring pension liabilities can be met over the long term. The pool is responsible for implementing management and stewardship activities.

Hertfordshire exercises oversight of the pool through representation on the Joint Committee, participation in officer groups, and its role as an equal shareholder in the company. The report updated members on shareholder activity, noting that Hertfordshire voted in favour of all resolutions at the AGM in July 2026. Looking ahead, key shareholder matters expected during 2027 include consideration of Border to Coast's next implementation plan and a wider governance review.

Investment Performance and Funding Update as at 30 June 2026

Phil and Jonathan presented the investment performance report. Despite short-term benchmark underperformance, the fund returned 5.3% during the quarter compared to the benchmark return of 6.5%, resulting in an underperformance of 1.2% for the quarter. Assets increased to approximately £7.4 billion as of June 2026. While the fund underperformed over the one, three, and five-year periods, it continues to outperform its benchmark over the ten-year period, demonstrating strong long-term investment outcomes. Quarterly performance remained above the fund's actual discount rates of 5%, supporting the long-term funding position. The fund's estimated funding level improved further to 118%, representing a surplus of approximately £1.13 billion, up from 112% at the 2025 Valuation.

Jonathan provided a detailed review of market conditions and performance drivers, noting the impact of geopolitical events and the AI phenomenon on equity markets. He also discussed the strategic asset allocation changes made during the quarter, moving assets from equities to bonds.

The committee was asked to note the investment performance report.

The committee also received an update on the funding position of the fund as at 30 June 2026. The approximate updated funding level showed a surplus of £1.132 billion, representing a funding level of 118.0%, an improvement from 112.2% at the 31 March 2025 valuation.

Other Part I Business

There was no other Part I business to discuss.

Dates of Future Meetings

The dates for future meetings were noted: 4 December 2026, 26 February 2027, and 11 June 2027, with an informal meeting on 19 March 2027.

The meeting then moved to Part II business, excluding the press and public.

Attendees:

• Councillor Ian Albert (Chair Pensions Committee)
• Councillor Rachel Carter (Chair of the Health Scrutiny Committee)
• Councillor Adrian England (Executive member for Sustainability)
• Councillor Calvin Horner (Deputy Executive member for Adult Care Services)
• Councillor Matthew Hurst
• Councillor Simon Rhodes
• Councillor Richard Roberts (substituting for Councillor John Graham)
• Councillor Stuart Roberts
• Councillor Tim Williams (Deputy Executive Member for Resources and Performance; Vice-Chair Pensions Committee)
• Duncan Jones (Representative of Hertfordshire District / Borough Councils)
• Prabhakar Kaza (Representative of Hertfordshire District / Borough Councils)
• Andrew Williams MBE

Officers Present:

• Alison Sharp (Pensions Governance Manager)
• Phil Prasad (Investment & Pooling Manager)
• Taryn Ahlberg (Head of Pensions)
• Robert Winterton (Finance Manager - Pensions)
• Barry McKay (Director, Howden)
• Jonathan Crowther (Marsh)

Decisions Made:

• Strategy and Policy Update: The committee approved the revised Communication Policy, Discretions Policy, and Conflicts of Interest Policy. They also approved the new Training Strategy and Data Improvement Strategy. The adoption of these policies for the Fire Pension Schemes was also approved.
• Draft Investment Strategy Statement: The committee approved the draft ISS for circulation to scheme employers and representatives of scheme members for consultation.
• Pension Fund Statement of Accounts: The committee noted the content of the report and attached Appendix A regarding the draft Pension Fund Statement of Accounts.
• Border to Coast Governance: The committee noted the governance arrangements operating within Border to Coast Pensions Partnership, how Hertfordshire Pension Fund participates and exercises oversight, the continuing responsibilities of the committee, the voting decisions cast at the Border to Coast AGM, and upcoming shareholder matters.
• Investment Performance and Funding Update: The committee noted the investment performance report and the funding update as at 30 June 2026.

Topics Discussed:

Strategy and Policy Update

The committee reviewed updated policies on communications, discretions, and conflicts of interest. New strategies for training and data improvement were also presented. These updates are in response to regulatory requirements and best practice expectations. The revised policies aim to streamline processes, enhance clarity, and ensure effective governance and data quality within the pension fund. The committee approved these changes and their adoption for the Fire Pension Schemes.

Pension Fund Cashflow Modelling

The committee received a report on cashflow modelling, which indicated that the pension fund is maturing, leading to benefit payments potentially exceeding contribution income. While the base scenario projects a cashflow positive position due to investment income, the fund is increasingly reliant on this income. Alternative scenarios, particularly those involving reduced payroll and increased benefit payments, suggest periods of negative net cashflow. Officers are working with Border to Coast to establish a monthly redemption facility to manage liquidity.

Draft Investment Strategy Statement

The committee reviewed the draft Investment Strategy Statement (ISS), which incorporates recent approvals regarding rebalancing ranges and local investment. This statement is crucial for complying with new LGPS pooling regulations and will be subject to consultation with scheme employers and members before final approval. The Fund's Responsible Investment Policy remains unchanged.

Draft Pension Fund Statement of Accounts

The committee was updated on the draft Pension Fund Statement of Accounts for 2025/26. The net assets available to fund benefits were reported at £7.086 billion, with a slight increase identified since the draft accounts' publication. The audit by KPMG is ongoing, with final accounts to be presented in December.

Border to Coast Governance

An overview of the governance arrangements within Border to Coast Pensions Partnership was provided, clarifying its interaction with Hertfordshire Pension Fund's governance framework. The report detailed the roles of various bodies, including the Joint Committee, officer groups, and the Border to Coast Board. The outcomes of the AGM shareholder voting were presented, and future shareholder matters, including the consideration of the 2027-30 implementation plan and a governance review, were highlighted.

Investment Performance and Funding Update

The committee received a report on the Pension Fund's investment performance for the quarter ending 30 June 2026. The overall performance was 5.3%, underperforming the benchmark of 6.5%. However, this performance was above the discount rate assumption of 5%. The approximate updated funding level as at 30 June 2026 was 118.0%, indicating a surplus of £1.132 billion. The report detailed the performance of individual investment managers, noting those that outperformed and underperformed against their benchmarks.

Dates of Future Meetings

The dates for future meetings were confirmed as 4 December 2026, 26 February 2027, and 11 June 2027, with an informal meeting scheduled for 19 March 2027.