The Pension Board met on Thursday 17 April 2025 to discuss the fund's business plan and budget for the upcoming years, alongside updates on administration performance and ongoing projects. Key decisions included the approval of the business plan for 2025-2028 and the budget for 2025-2026, and noting the progress on pension administration and project updates.

Business Plan 2025-2028 and Budget 2025-2026

The Board reviewed and approved the London Borough of Sutton Pension Fund's business plan for 2025-2028 and its budget for 2025-2026. The business plan outlines the fund's strategic objectives across administration, actuarial and funding, governance, financial and risk management, and investments. Key administration priorities for the upcoming year include the completion of the McCloud remedy and pension dashboard projects, alongside a continued focus on member empowerment and employer engagement. The actuarial and funding section highlights the commencement of the triennial valuation in Q1 2025/26. Governance will focus on compliance with The Pensions Regulator's (tPR) single code of practice and the procurement of new pensions administration software. Investments will see a review of the strategy following the triennial valuation results and continued work with the London Collective Investment Vehicle (LCIV) to pool investments.

The budget for 2025-2026 details total management expenses of approximately £6.4 million, with investment management expenses being the largest component. For the first time, fund manager fees have been included in the budget, reflecting their significant impact on overall expenditure. The budget also includes increased actuarial fees due to ongoing work related to employer transfers, and a significant rise in audit fees, which are centrally set and reflect increased testing requirements.

Pension Administration Performance Update

The Board received a positive update on pension administration performance, noting a significant reduction in outstanding cases from 1,826 to 1,447 over the quarter. The backlog of cases overdue by three months or more has fallen from 230 to 75, with a target to clear these by the end of July 2025. Service Level Agreement (SLA) performance has improved to approximately 85% over the quarter, an increase from 77% a year ago. The report highlighted that leavers and transfers remain the bulk of outstanding processes, but priority cases such as deaths and retirements continue to be managed effectively. The team is currently fully staffed, with a vacancy for a senior pensions officer being advertised. Temporary additional capacity and secondment arrangements have been extended to help clear the backlog.

Pension Administration Projects Update

Several key projects were discussed. The Pensions Dashboard project is on track, with the fund working on data cleansing and nearing the appointment of an Integrated Service Provider (ISP). The McCloud remedy project faces delays due to system upgrades from Civica, with the delivery now expected at the end of May, pushing the testing and implementation timeline closer to the statutory 31 August 2025 deadline. This has led to the risk of software provider failure being upgraded to 'red' on the risk register. The Guaranteed Minimum Pension (GMP) reconciliation project has concluded, with 361 pensioners' benefits adjusted, averaging a £26 annual correction. Annual tasks such as processing the pensions increase, issuing pensioner P60s, and year-end employer data returns are progressing as planned.

Governance and Risk Update

The Board reviewed the fund's risk register, noting one 'red' risk: the failure by the software provider to deliver compliant software, which has been exacerbated by delays in the McCloud remedy system upgrades. Several 'amber' risks were also discussed, including incomplete member data, the impact of regulatory changes, unfavourable trends in pay and price inflation, and the risk of cyber-attacks. A new 'amber' risk, 'Risk 28', has been added concerning the fund's ability to meet requirements from the government's fit for the future pension reforms consultation. The Employer Forum, held in January 2025, was well-attended and provided updates on the triennial valuation and other key LGPS matters. No additional administration charges have been levied against employers in the last quarter, indicating improved performance.

Board Training Plan

The Board approved its training plan for the year ahead, developed following a national knowledge assessment. The assessment revealed that while the Board scored well in areas like Pensions Governance and Investment Performance and Risk Management, there was a need for further development in Actuarial Methods, Standards and Practices. The plan includes modules on current issues such as the McCloud remedy and pension dashboards, as well as focused training on actuarial methods and pensions administration. The training will be delivered through LGPS Online Learning Academy (LOLA) and other formats.

Work Programme Update

The Board noted its proposed work programme for the upcoming meetings, which includes regular updates on administration performance, projects, governance, and investment performance, alongside specific items such as the triennial valuation and budget monitoring.

Pension Fund Accounts 2023/24 Audit Outcomes Report

The Board noted the annual auditor's report for the 2023/24 Pension Fund accounts, which confirmed that the audit is complete and an unmodified opinion will be issued. The report highlighted a control deficiency regarding the ineffective review of journals and inconsistency in the journal population, which is a council-wide issue. Recommendations have been made to strengthen controls and formalise the review process.

Review of Pension Committee Papers

The Board reviewed the finance and investment papers presented to the Pension Committee on 1 April 2025. The fund's market value stood at £989 million as of 31 December 2024, with a quarterly return of 3.8%, outperforming the benchmark. However, longer-term returns (three and five years) underperformed their respective benchmarks. The report noted that the fund's asset allocation was outside strategic ranges in several areas, particularly equities, and that a rebalancing action had been taken in January 2025 to address this. The funding level as at 31 December 2024 was 146%, a significant improvement since March 2022, largely due to rising interest rates reducing the value of liabilities. Updates from the London CIV indicated that 84.4% of the fund's investments are now pooled, and the LCIV's plans for the Fit for the Future consultation have been approved. The appointment of a new Chief Investment Officer, Jenny Buck, was also noted. Concerns were raised about the LCIV's investment performance, with only 22% of its funds outperforming their index in the quarter. A petition regarding disinvestment in occupied Palestinian territories is scheduled to be discussed by the Pension Committee in June.