The Pension Board met on Tuesday 09 July 2024 to discuss pension administration performance, project updates, governance and risk, and investment strategy. The board noted updates on these key areas, with a particular focus on reducing backlogs in pension administration and improving investment performance.

Pension Administration Performance Update

The board received an update on the performance of the Shared Pensions Administration Service, noting a reduction in outstanding processes from 1,965 to 1,834. Rachel Howard, Assistant Director of Finance, reported that this figure had fallen further to 1,769 by the end of June, the lowest it has been in over a year. The majority of the backlog relates to transfers in or out, and government factor changes. A new work allocation process has been introduced to prioritise high-priority cases and meet deadlines, which has been positively received by the team.

Councillor Jackie Davies raised a question about 44 leaver cases that were over 12 months old. Rachel Howard explained that these typically involve waiting for information from third parties or resolving discrepancies in historical dates. The board also discussed the absence of data in the SLA legal deadline tracker due to a software issue, with assurances that legal requirements are being met and that efforts are underway to resolve the software problem.

The team is currently facing challenges with staff vacancies, including two senior pensions officer roles and a head of service position. Recruitment is ongoing, but attracting experienced pension administration staff remains a challenge. The board was assured that the team is working effectively despite these pressures.

Pension Administration Projects Update

An update was provided on key projects within the Shared Pensions Administration Service. The deadline for employers to submit their annual data returns was 10 May 2024, with 56 out of 58 received by the time of the report. Penalties will be levied for late submissions. The annual pensions increase of 6.7% has been applied from 8 April 2024.

Work is progressing on the pensions dashboard, with a confirmed staging date of 31 October 2025 for public sector pension schemes. The McCloud remedy legislation is in place, and a standalone calculator has been developed and implemented to ensure compliance with new legislation for retirement calculations.

Looking ahead, the team will focus on issuing annual benefit statements by 31 August and preparing for the triennial valuation in 2025. The report also detailed changes to the Lifetime Allowance (LTA) and the introduction of new allowances for lump sums and death benefits, with the Data and Systems team working to ensure compliance.

The number of employers within the fund has grown significantly over the past decade, largely due to the academisation of schools and the outsourcing of services, which has increased administrative complexity.

Governance and Risk Update

The board reviewed the Fund's risk register, noting that while some risk scores have been reassessed, there have been no overall changes in the RAG status of any risks. A key risk discussed was ill-health retirement and the associated pension strain costs. The fund is exploring options to fund these costs through employer contribution rates rather than direct costs, with proposed wording to amend the funding strategy statement to be consulted with scheme employers. A decision on this will be made at the next annual meeting in the autumn.

Councillor Davies raised concerns about cybersecurity. Rachel Howard confirmed that the fund's systems are subject to the same cybersecurity checks as other council departments, and that fund managers and software providers also have their own arrangements. While acknowledging that absolute confidence is impossible due to evolving threats, she expressed confidence in the measures being taken. The IT provision is shared across Kingston and Sutton councils, with consistent systems and processes in place.

The consultation on the draft pension administration strategy received three responses from employers, raising points about administration charges, compensation for fund failures, and the reasonableness of timescales for data provision and AVC setup. Amendments have been made to the draft strategy, which was presented to the Pension Fund Panel for approval.

The fund has taken over the administration of admissions and cessations internally, with positive progress reported. Employer training sessions are being held, with the next focusing on non-voluntary member retirement events. An employer newsletter is also being developed. The Government Actuary's Department has completed its cost control assessment for the LGPS, recommending no changes to scheme benefits. The Pensions Regulator's General Code of Practice has come into force, and the fund is reviewing its practices in light of this.

Update from the Pensions Panel Meeting

The board received a summary of the investment strategy and performance papers presented to the Royal Borough of Kingston upon Thames Pension Fund Panel in June 2024. The market value of the fund's assets at 31 March 2024 was £1.25 billion, with a positive return of 5.6% over the quarter, outperforming the benchmark by 1.0%. The one-year performance was 13.2%, placing Kingston eighth out of 63 local authority pension funds in the PERC universe, and third over five years.

The estimated funding level as at 31 March 2024 had improved to 150%, resulting in a surplus of £410 million. This improvement is attributed to a significant reduction in liability values, largely due to an increase in the discount rate linked to interest rates.

The London CIV (Collective Investment Vehicle) has achieved its target of bringing an additional £1.6 billion onto its platform, leading to negotiated fee savings of approximately £182,000 per annum for the fund and other London boroughs.

Review of the Work Programme

The proposed work programme for the Pension Board meetings for the 2024-25 financial year was presented. This includes regular updates on pension administration, governance and risk, and investment performance, as well as specific training modules and the triennial valuation preparation for 2025. The board discussed the format and content of the online training modules, with feedback suggesting a need for updates and more interactive elements. A responsible investment training session is scheduled for 10 September.

Other Business

Andrian Mayers, Head of Pensions Investments, was thanked for his contributions as he moves to a new role at the London CIV. The meeting concluded with thanks to the officers and board members.