The Pension Fund Panel met on Thursday 21 March 2024 to discuss the performance and administration of the Ealing Pension Fund. Key decisions included approving the 2024/25 budget and work plan, and noting updates on investment performance and the potential merger of the Lothbury Property Trust.

Pension Fund Administration Update

The panel received an update on the performance of the Local Pensions Partnership Administration (LPPA), the external contractor responsible for the pension administration contract. Overall Service Level Agreement (SLA) performance for the quarter ending 31 December 2023 was 97.6%, exceeding the 95% target. The panel was also asked to approve an increase in the annual cost of the pension administration contract for 2024/25. This increase is attributed to a rise in overall fund membership, inflationary pressures, additional work required due to McCloud and the Pensions Dashboard, and further investment in cyber security. The report noted that while most administrative targets were met, there were still some outstanding annual benefit statements to be produced.

Pension Fund Performance Monitor Update for Quarter ended 31 December 2023

The panel noted the value of the Fund Investments had increased to £1,574.5 million as at 31 December 2023, an increase of 5.8% from the previous quarter. The report detailed the performance of various fund managers, with Global Equities generally outperforming their benchmarks, while Property Funds and some Private Debt investments underperformed. The panel was informed about the ongoing situation with Lothbury Property Trust, which had issued a redemption notice for its entire investment. Discussions were also held regarding the implementation of the revised Strategic Asset Allocation, with a focus on increasing allocations to income assets and diversifying the Fund's private debt mix. A presentation was received from executives representing the HSBC Senior UK Direct Lending Fund II, and members were asked to approve an in-principle investment in this fund.

Pension Fund Budgetary Estimate and Work Plan 2024-25

The panel agreed the outline Work Plan for 2024/25, which includes priorities such as ensuring sound governance, promoting sustainable investments with a net-zero target of 2045, maximising returns within acceptable risk parameters, and working with the London Collective Investment Vehicle (LCIV). The panel also approved the Pension Fund revenue account budgetary estimate for 2024/25. The forecast indicates that the revenue account is expected to remain cash positive, with income exceeding expenditure by an estimated £34.069 million in 2024/25. The budget includes assumptions for employer and employee contributions, transfer values, and investment income, as well as anticipated expenditure on pensions, grants, and fund management.

Lothbury Property Trust Merger Discussions

A significant portion of the meeting was dedicated to updates on the potential merger of the Lothbury Property Trust (LPT) with Triton Property Fund. The panel was presented with the current position of LPT, including redemption requests and the fund's cash and property portfolio values. Heads of Terms for the merger had been agreed, with a proposed completion date of 30 June 2024. However, significant risks were highlighted, including the uncertainty of the final number of redeeming investors and the possibility that UBS, the potential acquirer, might not proceed with acquiring certain assets after due diligence. The potential costs associated with the merger were also detailed, with an estimated £925,000 in merger-related fees that could be abortive if the merger does not proceed. The panel was advised that if the merger extension vote was negative, a termination of the fund would be recommended.

Funding Update

An update on the Ealing Pension Fund's funding position as at 31 December 2023 was presented. The report indicated that while market conditions have led to an increase in expected future investment returns, creating potential funding improvements, there is also increased uncertainty. The funding level was reported as 92%. The report also touched upon life expectancy assumptions and the impact of higher interest rates on the cost of low-risk assets. The panel was informed that a more detailed review of funding would be undertaken in preparation for the 2025 actuarial valuation.

Other Matters

The panel also received updates on the McCloud remedy implementation, the Pensions Regulator's General Code of Practice, and other regulatory changes affecting pension schemes, including the abolition of the Lifetime Allowance and the ongoing work related to Pension Dashboards. Cyber security was also highlighted as an area requiring continued attention.

The next meeting of the Pension Fund Panel is scheduled for 23 July 2024.