The Harrow Council Pension Fund Committee convened to review the fund's performance, discuss investment strategies, and address governance and risk management. Councillor David Ashton, Portfolio Holder for Finance & Highways, chaired the meeting, where members approved the Harrow Pension Fund Committee Work Plan for 2025-26 and noted reports on the fund's actuarial position, the London CIV's engagement and accountability, and the pension fund risk register. A key focus was on adapting to the government's evolving requirements for investment pooling and the implications for the fund's relationship with the London CIV.

Government's Changes to Investment Pooling

The committee discussed the implications of the government's response to the LGPS Fit for the Future consultation, which outlines significant changes to investment pooling arrangements.

Key points from the government's response included:

• Funds will continue to set their own investment strategies, choosing an allocation to a set of high-level asset classes.
• Funds will be required to delegate the implementation of their investment strategy to their pool, as well as taking their principal investment strategy advice from the pool.
• Decisions on investment style, including the level of active and passive management, will be an implementation decision taken by the pool.
• All assets, listed and unlisted, must also be transferred to the management of a fund's pool.

Colin Robertson, Independent Adviser, expressed strong concerns about the government's approach, stating that the government had:

basically overridden all of the views offered and it says how a percentage were in favour of the proposals and for the vast majority of the proposals they've gone with what they wanted in the first place despite the majority disagreeing with the proposal.

He also noted the reduced role for investment consultants like Mercer¹, and the increased power of the London CIV² in investment strategy, despite their lack of experience in this area. He summarised the situation as:

So everything now goes through the pool. You don't have an investment consultant anymore. Mercer won't be turning up, et cetera, et cetera. So there's a big change.

Councillor David Ashton suggested that members should contact their Member of Parliament to object to the changes.

Quarterly Actuarial Funding Position

The committee noted the estimated improved funding position of 133% as of 31 March 2025, compared to 96% at the last valuation in March 2022. This was recorded in the Quarterly Actuarial Funding Position Update.

The improvement was attributed to increases in interest rates and their impact on gilt yields³, which increased the discount rate applied to future liabilities. The rate of return on investments required to achieve 100% funding is now 5.0%, compared with 4.6% at the 2022 valuation, while the likelihood of achieving the necessary rate of return has increased from 68% to 88%.

Patrick O'Gallon, Interim Pensions and Treasury Manager, clarified that the improved funding level could lead to a reduction in employer contributions, potentially saving costs for employers. Sharon Daniels, Director of Finance, estimated this reduction to be around 3-4%.

Review of Pension Fund Risk Register

The committee reviewed the updated Pension Fund Risk Register, as detailed in the Review of Pension Fund Risk Register. James, from Hyman Robertson, explained that the risk register had been revamped to align with the council's risk register, clarifying the description, causes, consequences, and contingencies for each risk.

Several risks had been removed or downgraded due to a reassessment of their impact and probability. However, one member raised concerns about downgrading the risk related to the investment strategy, given the increasing role of the London CIV in setting the strategy. It was suggested that a new risk should be created to specifically address the potential risks associated with the London CIV's involvement.

London CIV Engagement and Accountability

The committee reviewed a report on the London CIV's engagement and accountability, as detailed in the LCIV Engagement and Accountability report. The report provided information on the governance structure at the London Collective Investment Vehicle (LCIV) and how clients/shareholders can engage with LCIV management to hold the pool to account.

James explained that Harrow Council, as both a shareholder and a client of the London CIV, has the ability to influence the London CIV through shareholder rights and the investment management agreement. However, he noted that the government's proposed changes could affect this influence. The report suggested that the informal route of raising concerns with the client relationship manager should be taken.

Pension Board Minutes

The committee noted the minutes of the Pension Board meeting held on 20 March 2025, as detailed in the Pension Board Minutes 20 March 2025.pdf.

One member raised concerns about 419 members who had not responded to life certificate requests, questioning whether this issue had been resolved. Patrick O'Gallon confirmed that these cases were still outstanding and that the council was following a process to confirm the status of these members.

Harrow Pension Fund Committee Work Plan 2025-26

The committee approved the Harrow Pension Fund Committee Work Plan 25-26. The work plan is driven by matters related to funding and investment, as well as governance issues related to compliance with the pension regulator's code of practice.