The Pension Board met on Thursday, 3 April 2025, to discuss the fund's financial performance, administration, and risk management. Key decisions included noting the quarterly investment update, which showed a positive overall fund value increase, and reviewing the pension administration update, which highlighted ongoing projects and performance indicators.

Pension Administration Update

Duncan Derbyshire, Pensions Manager, presented the pension administration update. He confirmed that recruitment for key positions, including Head of Payroll, Pensions and HRMI, and Pensions Operations Manager, was expected to be completed by June. Regarding the payroll provider Strictly Education, Derbyshire noted that the borough was less affected by its performance issues than other local authorities. He also confirmed that the contract with Hampshire would cease at the end of March, being replaced by the in-house Oracle system, which would integrate HR and payroll functions, offering greater control and easier access to information. The Board expressed hope that measures were in place to ensure a smooth data transfer process. Duncan Derbyshire agreed to provide Jagdeep Birdi with details regarding the payroll provision for schools during the system transfer. The report and its Key Performance Indicators were noted.

Quarterly Investment Update

Julia Stevens, Pension Fund Manager, provided an update on the fund's investments. She reported no unexpected movements in recent valuations and highlighted four property purchases made so far this year, including the Homebase property and rent reviews for the IO Centre in Barking and the Audi property. Stevens noted that the target for direct property investment of 20% of assets, currently valued at £1.9 million, had been impacted by the pandemic and property availability. The Investment Committee regularly reviews progress towards this target. The report and its appendices were noted.

The actuarial report indicated a funding level of 224% as of 31 December 2024, a significant increase from 199% at 31 March 2024. This strong funding position means the required future investment return to be 100% funded has decreased to 2.1%, with a likelihood of achieving this return exceeding 95%.

Cashflow Update

Julia Stevens presented the cashflow update for the Pension Fund's main NatWest bank account. She explained that rental income and pooled property capital repayments were contributing to a positive cash balance. While monthly pension payments and management expenses are outflows, investment income and asset redemptions are used to cover these. Property purchases are ongoing, with several opportunities in the pipeline. Contributions were higher than forecast due to increased employer payroll, and rental income exceeded expectations, partly due to successful lease renewals and the purchase of five properties during the year. Interest and other income increased due to historic investment claims. The transition to the new Oracle finance system was progressing, with officers receiving training to minimise disruption.

Risk Management

Julia Stevens introduced the risk management report. The Board noted the inclusion of the purchase of a temporary accommodation building for the Council on the risk register, detailing potential financial, operational, and legal challenges. Mitigation actions include collaboration with CBRE and the Council to model pricing structures and ensure legal certainty regarding asset segregation.

The Board discussed the Investment Committee's decision on 4 February to set the Council's contribution rate to nil for one year. They noted a letter from the Ministry of Housing, Communities and Local Government (MHCLG) regarding employer contribution rates and proposed changes to Regulation 64A, which would prevent employers from amending contribution rates to manage surpluses or deficits outside of a valuation process. While the Investment Committee's decision remained unchanged, a potential challenge from the government could revert the contribution rate to 15%. Jagdeep Birdi expressed concern about the financial risk to schools, given their funding levels and reserve rules, should a legal challenge arise. The Chair and Board emphasised the importance of clear communication to schools regarding any financial difficulties.

Other Items

Sohal Rawal raised a question about the Project Gallagher report on fund governance, asking if it would be referred to the Audit Committee. Pat Rowe commented on the risk assessment responsibilities of the Investment Committee, and it was noted that government plans for fund pooling might supersede some of the review's recommendations. The Chair requested clarification on the respective risk assessment remits of the Pension Board, Investment Committee, and Audit Committee.

Julia Stevens provided an update on CBRE Direct Property Investment, which included a market overview, details of recent and pipeline acquisitions, property management, and rental collection. A more detailed minute would be included in the exempt part B minutes.