The Pension Fund Panel met to discuss the triennial valuation of the fund, approving the draft Funding Strategy Statement and noting the proposed valuation assumptions. The panel also reviewed updates on pension administration performance and projects, including the successful clearance of a significant backlog of overdue cases. Additionally, the panel received an update on the work of the Pension Fund Task and Finish Group concerning investments in companies allegedly complicit in violations of international law and human rights in Palestine, agreeing to review the responsible investment policy and consider divestment options.

Triennial Valuation (Assumptions and Fund Results)

The Panel approved the draft Funding Strategy Statement and noted the initial results of the 31 March 2025 triennial valuation. The proposed valuation assumptions include adopting a prudence level of at least 85%, resulting in a future investment return assumption (discount rate) of at least 5.6% per annum. The CPI inflation assumption was set at 2.3% per annum, and longevity assumptions remain in line with the Fund Actuary's best estimate. The Panel was assured that the proposed assumptions remain appropriate for the 2025 valuation, despite potential impacts from post-31 March market volatility.

Councillor Richard Thorpe raised concerns about the conflation of discount rates for liabilities and asset assumptions, questioning the basis for discounting assets. Tom Taylor, Head of Pensions Administration, explained that using a risk-free rate would make the LGPS unaffordable, necessitating investment in riskier assets to generate higher returns. He expressed confidence in the prudent approach taken, citing historical LGPS returns. Lesley Diston from Kingston University asked about circumstances where immediate additional employer contributions might be sought for ill-health retirements. Tom Taylor clarified this would depend on the employer's long-term status and funding, with immediate recovery considered if an employer was not deemed long-term.

Councillor Farshid Sadr-Hashemi inquired about mechanisms to adjust pensions in response to abrupt market or geopolitical changes. Tom Taylor highlighted two mechanisms: the increased prudence within the assumptions (85% likelihood of achieving the discount rate) and the tri-annual valuation process itself, which allows for reviews of market and geopolitical situations.

The Panel agreed unanimously to approve the draft Funding Strategy Statement and note the initial whole fund results and proposed valuation assumptions.

Pension Administration Performance Update

Tom Taylor, Head of Pensions Administration, presented an update on the Shared Pensions Administration Service. A key achievement highlighted was the resolution of the backlog of cases overdue by three months or more, with no such cases outstanding. The focus will now shift to addressing cases overdue between 41 and 90 days.

The Pensions Ombudsman determination regarding a member complaint was not upheld, which was a positive outcome for the Fund. However, a breach of law was reported to the Pension Regulator concerning the McCloud Remedy.

Councillor Elizabeth Park asked about potential future problems. Tom Taylor noted the ongoing Access and Fairness consultation from the government as a potential unknown, with a possible Stage Two review. He also mentioned the Virgin Media case, where the government has announced intervention to prevent all members having to return to old final salary schemes.

Councillor Thorpe inquired about staffing levels and system issues. Tom Taylor explained that while current staffing levels are deemed suitable for the existing system, a procurement process for a new system is underway, with the current software expiring in August 2026. He confirmed discussions with other local authority pension funds through the London Pensions Officers Group to share best practices.

The Panel unanimously noted the update.

Pension Administration Projects Update

Tom Taylor provided an update on key projects, including the Annual Benefit Statements, which have been issued to all members by the statutory deadline. However, due to delays with the McCloud Remedy project, the statements for 2,110 affected members are not yet fully compliant and will be re-issued. An administrative error affecting six statements from Kingston University was identified and rectified.

The Pensions Dashboard project is on track for the 31 October 2025 deadline, with software procured and testing underway.

The McCloud Remedy project has missed its 31 August 2025 statutory deadline due to delays from the software provider, Civica. A revised plan targets completion by June 2026. The Fund has self-reported this breach to The Pensions Regulator.

Councillor Thorpe asked if these risks were reflected on the council's risk register. Tom Taylor confirmed they would be noted as service risks but not corporate risks. Councillor Farshid Sadr-Hashemi praised the work done on clearing backlogs and asked about the plan for the McCloud Remedy. Tom Taylor assured that a clear plan with dates and milestones is in place.

The Panel agreed unanimously to approve the Pensions Dashboard Matching Policy and note the update.

Governance and Risk Update

Tom Taylor presented the governance and risk update, highlighting the ongoing reliance on the software provider, Civica, for compliant software. This risk remains rated as 'red' due to ongoing issues. The Access and Fairness consultation response, broadly accepted by the Local Government Association (LGA), raised concerns about administrative workload and proposed a phased timeline. The Virgin Media update was noted as positive, with government intervention agreed. The State Pension Age review was also mentioned as having potential impact on the Fund. No additional administration charges were levied in the last quarter, and all previous charges have been recovered.

Councillor Majid Mafi asked about the percentage of pensioners taking their pensions at the appropriate age and the pension age for women and men. Tom Taylor undertook to provide this information. Councillor Thorpe inquired about cyber security assurances. Tom Taylor confirmed a robust process was in place, with a cyber scorecard review underway.

The Panel unanimously noted the governance and risk update.

Annual Report and Statement of Accounts 2024-25

Katherine Gray, Head of Pensions Investments and Treasury, presented the draft Annual Report and Statement of Accounts for 2024-25. The audit is in progress, with findings expected in December. Key highlights included stable membership numbers, benefits paid exceeding contribution income for the first time by £1 million, and cumulative fee savings of £1.5 million from investing through London CIV.

Councillor Farshid Sadr-Hashemi asked about cash flow management and the ability to sell funds to provide cash. Katherine Gray explained that a portion of the fund is kept in liquid assets, but the preference is to generate income rather than be a forced seller. Stanley Dixon from Mercer added that commitments to private markets also require capital to be available. Councillor Thorpe questioned a reference to TCFD¹ in the accounts. Katherine Gray confirmed she would double-check and amend if necessary. He also asked if a clean audit opinion was expected, to which Katherine Gray responded affirmatively.

The Panel unanimously agreed to approve the draft annual report and delegate authority to the Section 151 Officer and Chair to approve the final accounts post-audit.

Update on Pension Fund Task and Finish Group

Sue Cuerden, Executive Director of Corporate Services, introduced the report from the Task and Finish Group, established to review pension fund investments in companies allegedly complicit in violations of international law and human rights in Palestine. Councillor James Giles was permitted to speak on behalf of the divestment campaign petitioners.

Councillor Giles argued that the group's recommendations, focusing on engagement, were insufficient and failed to honour the council's motion for divestment. He proposed adopting a framework aligned with global best practice, such as the Norwegian sovereign wealth fund's divestment model.

Councillor Mark Beynon acknowledged the horrific situation in Israel and Gaza but highlighted the complexity of divestment and the importance of a robust responsible investment strategy. Victoria Morris from London CIV explained their approach, which prioritises engagement over divestment, and detailed their monitoring and engagement efforts with companies. She noted that divestment from pooled funds is complex and costly.

Councillor Thorpe questioned whether the recommendations would be reflected in the council's risk register. Sue Cuerden stated they would be noted as service risks but not corporate risks.

Following extensive debate, the Panel agreed unanimously to:

• Note the report and current exposure.
• Review the responsible investment policy, considering engagement versus divestment and expanding engagement priorities, with an update in February 2026.
• Note the four identified investments on the UN OHCHR list and seek further information on their corporate responsibility policies.
• Agree to consider options to divest from companies on the UN OHCHR list, acknowledging the cost implications of divesting from pooled funds, with Motorola being the only current segregated investment.
• Agree to publish an annual stewardship report detailing the implementation of the responsible investment policy, with the first report in February 2026.
• Agree to report back to the Corporate and Resources Committee on the outcome of the review and steps being taken.

Work Programme

Katherine Gray, Head of Pensions Investments and Treasury, presented the proposed work programme for the Pension Fund Panel meetings for the year ahead. Key items include updates on the budget position, audit findings, and the investment strategy review.

The Panel unanimously noted the draft work programme.

Pension Fund Investment Performance Report

Katherine Gray presented the investment performance report for the period ending 30 June 2025. The Fund's market value increased to £1.33 billion, with a quarterly return of 3.2%, outperforming its benchmark. Three and five-year returns were also positive, though below benchmark. The report detailed performance drivers, including the positive impact of equities and specific manager outperformance in Multi-Asset Credit, Absolute Return Bonds, and Diversified Growth.

Sandy Dixon from Mercer provided further detail on market background, noting strong overall performance and the Fund's healthy investment position. He highlighted the ongoing investment strategy review, particularly concerning the Absolute Return Bond mandate and the Diversified Growth Fund.

The Panel unanimously noted the report.

The meeting then moved into a private session to discuss exempt information related to the London CIV update. The meeting concluded at 12:46 pm.