The Pension Board of Sutton Council met on Thursday 17 July 2025 to discuss the performance of pension administration, ongoing projects, and governance and risk updates. Key decisions included noting the significant progress in reducing the backlog of pension administration cases and approving the board's training plan.

Pension Administration Performance Update

The board received a positive update on pension administration performance, noting a significant reduction in outstanding cases. The number of outstanding processes had fallen from 1,447 to 1,028 since the previous meeting, with a particular success in reducing cases overdue by three months or more from 75 to 11. Officers are committed to clearing the remaining backlog by 31 July 2025. Service level agreement (SLA) performance remains positive, particularly for priority cases such as retirements, with improvements expected as the backlog is cleared. A temporary staffing structure has been in place since May 2024 to manage the backlog, and a permanent structure is being developed for implementation by the end of July 2025. The report also noted that no breaches of law had been reported, and there were no open Internal Dispute Resolution Procedure (IDRP) cases. However, a complaint from the Pensions Ombudsman concerning a discretionary decision on a death grant payment made in 2023 was being addressed.

Pension Administration Projects Update

The board was updated on several key administration projects. The annual return exercise, which requires employers to submit pay data for their staff, was successfully completed on time for the first time since 2020, with all 85 expected returns received and validated. The national Pensions Dashboard project is progressing, with the digital architecture live and consumer testing scheduled for Summer 2025. The fund is nearing the completion of appointing an Integrated Service Provider (ISP) to connect its data to the dashboard, with a staging date of 31 October 2025.

Significant progress has been made on the McCloud Remedy project, which addresses age discrimination in the Local Government Pension Scheme (LGPS). While 78.1% of data files have been received from employers, only 24.4% have been validated and 5% loaded onto the system. The main challenges remain software deliveries from the provider, Civica, and officer resource capacity. Essential software upgrades were received on 24 June 2025, and user acceptance testing is underway. Despite these efforts, there is a strong likelihood that the fund will not be fully compliant with the 31 August 2025 deadline, which would necessitate reporting a breach to the Pension Regulator. The report highlighted that the fund is not alone in facing these challenges, with many LGPS funds experiencing similar issues with Civica.

The board also noted that the Annual Benefit Statements (ABS) will be produced once the annual cost of living increase is applied, with a deadline of 31 August 2025. The Triennial Valuation data has been loaded onto the Hyman's valuation portal, with results expected by the end of August and to be presented at the next board meeting.

Governance and Risk Update

The board reviewed the fund's risk register, noting that the overall rating for administration risks remains amber, with one red risk and two amber risks. The red risk pertains to the failure of software provider Civica to deliver software compliant with LGPS regulations, specifically for the McCloud Remedy. This risk, assessed as unchanged, could lead to non-payment or incorrect payment of member benefits. Officers are actively addressing these issues with Civica and the Civica Client User Group.

The report also detailed five amber risks, including incomplete or inaccurate member data, the impact and cost of changes to LGPS regulations, unfavourable trends in pay and price inflation affecting employer contributions, failure to protect key information from cyber-attacks, and uncertainty surrounding the fit for the future pension reforms consultation and their impact on the fund and the London Collective Investment Vehicle (LCIV).

A new consultation on Access and Fairness within the LGPS was highlighted, aiming to address gender and age discrimination, particularly concerning survivor benefits and pensionable leave. The LGA's draft response is in favour of the proposals, but expresses concerns about the administrative burden, especially in light of the McCloud Remedy and software delivery delays.

Finally, the report noted that no additional administration charges have been levied against employers in the last quarter, indicating the effectiveness of the fund's policy to ensure underperforming employers bear additional costs.

Work Programme Update

The board noted the proposed work programme for upcoming meetings. Key items for the October 2025 meeting include updates on current issues such as Pensions Dashboards, the Annual Report & Accounts 2024-25, and the Pension Committee Update, which will include the Triennial Valuation results. The December 2025 meeting will cover the Budget Monitoring, 2024-25 Pension Fund Accounts Audit Findings, and a Responsible Investment Update. The March 2026 meeting will focus on the Triennial Valuation and Funding Strategy Statement.

Review of Pension Committee Papers

The board reviewed the papers from the Pension Committee meeting held on 24 June 2025. The quarterly investment performance report showed the fund underperformed its benchmark over the quarter (-1.0%) and over one year (-1.4%), although three and five-year returns were positive but still underperformed benchmarks. The underperformance was attributed to equities and infrastructure mandates, specifically the LCIV Sustainable Equity Fund and LCIV Renewable Infrastructure Fund.

Asset allocations were noted to be outside strategic ranges in equities, property, private debt, impact, and cash. The fund is moving closer to strategic ranges following actions taken after the last committee and board meetings, with a projected drawdown of impact and renewable infrastructure funds expected by Q1 2028. The funding level as at 31 March 2025 was estimated at a healthy 143%, with assets at £945m and liabilities at £662m, showing a significant surplus. Cashflow projections indicate the fund remains cashflow positive over the next three years, but with a narrow margin.

Updates from the London CIV included confirmation that the government will proceed with its Fit for the future consultation proposals with minor tweaks, and that all assets will be managed by the pool by 31 March 2026. The LCIV has requested additional capital from shareholders, including £70,312 from Sutton, due to asset growth.

A petition regarding investments in occupied Palestinian territories was considered. The Pension Fund Committee reviewed investments and identified £6.5m (0.67% of the fund) exposed to companies on the American Friends Service Committee divestment list, all held in LCIV pooled funds. The committee agreed to review the Fund's Responsible Investment Policy as part of the Triennial Valuation and Investment Strategy Review, and to provide annual reporting on stewardship activity, with the first report due in December 2025.

Councillor Sunita Gordon expressed frustration with the persistent underperformance against benchmarks, while acknowledging the long-term position was broadly in line with actuarial requirements. Vicky Goddard, Director of Finance, assured that the LCIV is aware of the underperformance and is closely monitoring fund managers.

Councillor Gordon also raised concerns about the handling of the petition regarding occupied Palestinian territories, noting that Kingston had taken a different approach. Tom, who also attended the Kingston meeting, clarified that while the terminology differed, the work undertaken by both councils was essentially the same, focusing on reviewing investments and forming task and finish groups.

The board also discussed the asset allocation, with Councillor John Reeve noting that only one of the eight asset classes was within its strategic range, and four remained outside. He requested a clearer timetable for bringing all allocations within range, potentially linked to the revised investment strategy following the valuation.

The board noted the report.