The Pension Board of Sutton Council 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 and budget, and noting the progress on significant projects like the McCloud remedy and the Pensions Dashboard.

Business Plan 2025-28 and Budget 2025-26

The Board reviewed and noted the London Borough of Sutton Pension Fund's business plan for 2025-28 and its budget for 2025-26. The business plan outlines key activities across administration, actuarial and funding, governance, financial and risk management, and investments. For administration, future plans include the conclusion of the McCloud remedy and Pensions Dashboard projects, alongside a 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. Investment plans include an investment strategy review following the triennial valuation results and continued work with the London Collective Investment Vehicle (LCIV) to pool investments.

The budget for 2025/26, totalling approximately £6.4 million in management expenses, includes a detailed breakdown of controllable costs and, for the first time, investment management expenses. The Board was informed that a six-month budget monitoring update would be provided in December 2025.

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. Officers are committed to clearing this backlog by 31 July 2025, with temporary additional capacity arrangements extended to facilitate this. Service Level Agreement (SLA) performance remains positive, particularly for tPR priority cases such as retirements, exceeding the previous 12-month average. No breaches of law incidents were reported, and there is one open Internal Dispute Resolution Procedure (IDRP) case under investigation.

Pension Administration Projects Update

Updates were provided on several key administration projects. The Pensions Dashboard project is progressing, with the Fund aiming to connect to the government dashboard by the 31 October 2025 deadline, and is in the process of appointing an Integrated Service Provider (ISP). The McCloud remedy project is facing delays due to system upgrades from Civica, with a revised delivery date of end of May 2025, which raises concerns about meeting the 31 August 2025 statutory deadline. The Fund is actively engaging with Civica and other administering authorities to address these delays. The Guaranteed Minimum Pension (GMP) reconciliation project has concluded, with 361 pensions adjusted, averaging a £26 annual correction per member. Annual tasks such as processing the pensions increase (1.7% for 2025), year-end data returns from employers, and issuing pensioner P60s are on track.

Governance and Risk Update

The Board reviewed the Fund's risk register, noting that administration risks are rated Amber overall, with one red-rated risk (Risk 27: Failure by software provider to deliver compliant software) and two amber risks. Funding and Investments, and Governance risks are rated Green. Risk 27 has been upgraded to red due to slow progress and poor communication regarding the McCloud Remedy software delivery. A new risk, Risk 28, has been added and rated Amber, reflecting uncertainty around the fit for the future pension reforms and the ability of the Fund and LCIV to meet new requirements. The Employer Forum, held in January 2025 with 33 employers attending, was well-received. 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 the National Knowledge Assessment. This assessment, conducted by Hymans Robertson, identified areas for development, particularly in Actuarial Methods, Standards and Practices for both the Board and Committee. The plan includes modules on current issues such as McCloud and Pensions Dashboards, alongside specific training on actuarial methods and pensions administration. Training will be delivered via Hymans' LGPS Online Learning Academy (LOLA), with adherence monitored by officers.

Work Programme Update

The Board noted its proposed work programme for the upcoming meetings. Key items include the Investment Strategy Review in October 2025, the six-month budget monitoring and the triennial valuation update in December 2025, and the Business Plan and Budget for 2026-27 in March 2026.

Pension Fund Accounts 2023/24 Audit Outcomes Report

The Board noted the Annual Auditors Report for the 2023/24 Pension Fund Accounts, which confirmed that KPMG has completed the audit and intends to issue an unmodified opinion. The report highlighted one significant control deficiency related to the ineffective review of journals and inconsistency in the journal population, which is a council-wide issue. Management has outlined a response to strengthen controls and implement system improvements. Other matters noted were relatively minor.

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, three and five-year returns underperformed their respective benchmarks. The Fund's asset allocation was noted to be outside strategic ranges in several areas, particularly equities, though recent rebalancing actions are bringing it closer to target. The funding level as at 31 December 2024 was 146%, showing a significant improvement since March 2022, largely due to rising interest rates reducing liability values. The London CIV update highlighted that 84.4% of the Fund's investments are pooled, and the LCIV has appointed a new Chief Investment Officer, Jenny Buck. Concerns were raised about the LCIV's investment manager performance, with only 22% outperforming their index in the quarter. A petition regarding investments in Occupied Palestinian Territories is scheduled to be discussed by the Pension Committee in June 2025.