The Pension Board of Harrow Council met on Thursday 12 December 2024 to discuss the administration of the pension fund, its financial health, and future work programmes. Key topics included updates on pension administration performance, the implications of new regulations from The Pensions Regulator (TPR), and a review of the fund's risk register.

Pensions Administration Update with Key Performances

A report was scheduled to provide the Board with information on the administration performance of the Pension Fund for the quarter ending 30 September 2024. This update was expected to detail the tasks completed and outstanding by the Harrow Pension Administration Team, which manages the day-to-day operations for members and employers of the Local Government Pension Scheme (LGPS) within the London Borough of Harrow Pension Fund. The report was also to cover any complaints received, updates on the Pension Ombudsman appeals, and the status of the Log of Breaches. Specific attention was to be given to the Guaranteed Minimum Pension (GMP) reconciliation project and the progress on Annual Benefit Statements (ABS), the McCloud remedy, the new payroll system, the Pension Dashboard, and the Member Self Service (MSS) portal. Life Certificates, an audit requirement to identify potential fraud and confirm pensioner existence, were also to be discussed.

The Pensions Regulator (TPR) Code of Practice

The Board was scheduled to receive an update on the new Pensions Regulator (TPR) Code of Practice, which came into effect on 28 March 2024. This code sets out TPR's expectations for maintaining an effective system of governance and internal controls for pension schemes. Although not all sections of the code apply directly to public service pension schemes like the LGPS, it replaces the previous Code of Practice 14. The report was expected to highlight specific areas of note for public service schemes, including modules on Cyber Controls and Scams. The Board was invited to review and comment on the report, with information on compliance with the General Code of Practice to be provided at future meetings.

Review of Pension Fund Risk Register

An updated Pension Fund Risk Register as of 30 June 2024 was scheduled for review. This register, first considered in March 2015, is maintained in accordance with best practice and aims to identify, evaluate, and record risks to the Pension Fund. The report was to detail the risks categorised into broad areas, including Regulatory, Governance, Funding (assets and liabilities, and investment strategy), Security, Operational, Cash Flow, Cyber Security, Accounting, and Conflict of Interest. The report was to highlight fifteen key risks rated as Amber or Red, which are considered to have the biggest impact on the Fund and require close attention. It was also to detail risks rated as Green, considered lower risks. Specific changes to the register were to be discussed, including modifications to the description of Risk 1 concerning Pension Dashboards and the addition of Cyber Security as a new risk category.

Review of Pension Fund Committee Items

This report was to summarise the matters considered by the Pension Fund Committee at its meeting on 21 November 2024. The Board was invited to review these items and provide any comments it wished to forward to the Committee. Key items discussed by the Committee included the Draft Pension Fund Annual Report and Accounts for 2023-24, a quarterly actuarial funding position update, and an update on the London CIV and Investment Pooling Arrangements. The Committee also considered exempt reports on the Triennial Valuation 2025 - Funding Review, quarterly investment monitoring, and an investment strategy update. The report was to highlight that the market value of investments had increased to £1.091 billion, though the Fund had underperformed its benchmark over the last 1, 3, 5, and 10 years.

Quarterly Actuarial Funding Position Update

The Board was scheduled to receive an interim update on the funding level of the London Borough of Harrow Pension Fund as at 30 September 2024. This report, based on projecting the results of the 31 March 2022 triennial valuation, was intended to show how the funding position had changed. The interim update indicated a funding level of 128% as of 30 September 2024, an improvement from the 96% recorded at the 2022 valuation. This improvement was primarily attributed to an increase in interest rates and their impact on Gilt yields, which had increased the discount rate applied to future liabilities. The report was to detail the required rate of return to achieve 100% funding and the likelihood of the investment strategy achieving this.

Pension Board Work Programme 2024-25

This report was to review the Pension Board's work to date and present a suggested work programme for the remainder of the 2024-25 Municipal Year. The Board meets quarterly, and this was its first meeting of the municipal year. The report was to list forthcoming meeting dates for both the Pension Board and the Pension Fund Committee. The proposed work programme included regular items such as Pensions Administration Performance monitoring, updates on the Pension Fund Dashboard, and summaries of Pension Fund Committee meetings. Specific items for the 2024-25 year included the review of the Pension Fund Risk Register, the Annual Report and Final Audited Pension Fund accounts, regulatory updates, and a review of fund policies.

Triennial Valuation 2025 – Funding Review

The Board was to be informed of the outcome of asset/liability modelling conducted to assess a funding and contribution strategy for Harrow Council, the largest employer in the Pension Fund, in preparation for the 2025 Triennial Valuation. The report was to explain that the LGPS is an open scheme, meaning liabilities include both current accrued benefits and future benefit accrual. The triennial valuation process sets employer contribution rates for the subsequent three years. The report noted an improved funding level of 128% as of 30 June 2024, leading to consideration of how this might impact employer contribution rates. The modelling indicated that a reduction in employer contribution rates for Harrow Council would be possible without jeopardising the employer's long-term funding position. Two potential contribution rate strategies were to be presented, both meeting the criteria of having at least a 70% chance of full funding in 20 years with an acceptable level of downside risk. The Board was to receive a presentation on this modelling from the Fund's actuary.