The agenda for this meeting of the Pension Board includes a scheduled update on the key administration projects and performance of the Shared Pensions Administration Service, alongside an update on preparations for the 2025 Triennial Valuation. In addition to updates on governance, risk and the work programme, the Board will also be asked to review the papers for a meeting of the Pension Committee that took place earlier in December, and to note a report summarising government proposals on pension reforms.

Pensions Dashboard

The Board will receive an update on the National Pensions Dashboard, a government scheme that will allow UK pension savers to view all of their pensions online, including state pensions, through a central platform. The update for the Board includes a project plan that highlights the tasks involved for the London Borough of Sutton Pension Fund in meeting the government's deadline for LGPS funds to connect to the Dashboard ecosystem. This deadline has been set by the government as 31 October 2025.

To participate in the scheme, the Fund will be required to appoint an Integrated Service Provider, an organisation that will sit between the Fund and the dashboard. The agenda papers say:

The ISP sits between the Fund and the pensions dashboards and will create their own connections to the dashboards. They will take a regular cut of the Fund’s data, typically monthly, and make that available to the dashboards so that members can be matched, and the relevant data can be viewed.

Once an ISP has been appointed, the Fund will need to ensure that it can provide them with accurate data. The report pack explains the importance of having accurate data:

An important aspect of preparing for the implementation of dashboards is to have accurate data. This is important for several reasons: Member matching with the Dashboard will require accurate data. Inaccurate data may result in unmatched members. Officers may receive a high volume of queries from members if they are unable to see their data online, or the data that they see is inaccurate.

McCloud Remedy and GMP Reconciliation

The McCloud Remedy¹ relates to changes to public service pensions, which were introduced in 2015. These changes meant that younger members were placed on a less generous pension scheme than older members. The courts found that this change was discriminatory. All public service pension schemes are now working to remove this discrimination and to implement the remedy. The Board will also be asked to note an update on the progress being made in reconciling the Fund’s data on Guaranteed Minimum Pensions with data held by HMRC. Guaranteed Minimum Pensions were accrued by members of the LGPS when the scheme was “contracted out” of the State Earnings Related Pension Scheme (SERPS).

Pension Administration Performance

The Board will receive an update on the performance of the Shared Pensions Administration Service, which is run jointly by Sutton and Kingston Councils. The team has reported that they have completed a record number of processes in a month, exceeding their July performance of 830 by completing 872 in October.

Despite the increase in work completed in October, the number of outstanding processes increased from 1,751 to 1,826. The report pack says that this is:

due to an above average increase of leaver processes from 619 to 733. This increase is as a result of an increase of leavers following the end of the academic year.

The increase is having a significant impact on the performance of the service, including increasing the number of overdue processes. The report explains:

This will impact the Fund’s SLA performance, as Officers will be unable to complete the additional volume of leavers within the agreed timescales. As a short term solution, this will be mitigated by offering overtime to suitable staff, whilst being careful to manage the overall workload and expectations of the impacted staff.

Triennial Valuation Preparation

The Triennial Valuation² is a comprehensive financial assessment of the Pension Fund, which is undertaken once every three years. The next Triennial Valuation will take place as at 31 March 2025. The last valuation was undertaken as at 31 March 2022, at which time the Fund was 101% funded. The Board will receive an update on the preparations being made for the 2025 valuation. The agenda papers say:

The valuation assesses the health of the Fund in terms of the assets and liabilities (pension promises for scheme members) for the Fund and will determine the contribution rates payable by employers including the Council for the next 3 years commencing 1 April 2026 - 31 March 2029.

Risk Register

The Risk Register is a document that the Board uses to identify and assess the risks facing the Pension Fund. The update shows that there are no red (high) rated risks, and that the overall rating for the Risk Register has improved. The report pack says:

Both the Funding and Investments group and Governance group are rated green. This is summarised in the table below.

However, several amber rated risks remain on the register:

• Incomplete or inaccurate data
• Impact and cost of changes to LGPS Regulations
• Failure by software provider to deliver software compliant with LGPS regulations
• An unfavourable trend in CPI inflation
• A malicious cyber-attack

The report pack explains how officers are managing each of the amber risks. It also includes a separate update on the risks associated with ill-health retirement strain costs³. The report pack explains that the decision was taken to purchase insurance to cover these costs following the 2022 valuation, but the insurance policy is now no longer available. As a result the Fund is proposing to return to a more conventional funding arrangement, which will involve changes to the Funding Strategy Statement⁴. The new approach will be fully explained to scheme employers.

Review of Pension Committee Papers

The Board will also review a number of papers that were presented to the Pension Committee meeting on 10 December. The report provides an update on investments, including a summary of performance and asset allocation. It shows that at 30 September 2024 the market value⁵ of the Fund's assets was £954 million, an increase of £9 million since 30 June 2024. The report says that this is because of strong performance in equities, and that as a result the Fund is overweight in Growth assets⁶. The report also says that the Fund is underweight in Property investments. This is in part because the Fund has been winding down an investment in the LaSalle Investment Management Property Fund. The report pack says that the Fund will be:

undertaking a review of the Fund’s investment strategy following the next Triennial Valuation and as part of this, consideration will be given to the investment options within this asset class.

The report for the Board also provides an update on cashflows⁷, showing that the Fund is expected to move into a cash positive position for each of the next three years. The cashflow projections for the Fund show that income from employer contributions is expected to exceed outgoings to scheme members for the next three years. In addition, the Board will note a report on the London CIV⁸, summarising the latest developments at the pool and the investment position of the Sutton Fund. The report shows that at the end of September 2024, 77.1% of the Sutton Fund’s investments were managed by the CIV. The report also lists the new funds offered by the pool, including the LCIV Nature-based Solutions Fund and the LCIV Private Debt Fund II.
The report pack for the Board also includes a budget monitoring update, showing the actual and forecast income and expenditure for 2024/25.

Update on Pension Reforms and Government Consultation

The final item on the agenda provides a report summarising the government's proposals to reform the LGPS, as set out in the ‘fit for the future’ consultation. The report for the Board summarises the main changes being proposed, including the requirement for the CIV to implement the investment strategy set by the Fund. The report also explains that the government is proposing that:

all assets are transferred to the Pool by 31 March 2026.

Other proposals being considered by the government include requiring the Fund to set out its approach to local investment in its Investment Strategy Statement. The report pack explains:

The Fund will be required to work with Mayoral combined authorities, in the case of London the GLA, to identify suitable local investments.

The government is also proposing changes to governance, including the introduction of new requirements for training and the appointment of an independent adviser to the Pension Committee. The report explains that officers will be:

collaborating with Pension Funds across London on a response to the consultation in conjunction with the London CIV, and are also in dialogue with the London CIV on their plans to deliver the proposed pooling model and complete the transfer of assets to the pool.