The Pension Fund Committee of Lancashire Council met on Friday 19 September 2025 to discuss the Fund's annual report, responsible investment activities, and the draft funding strategy statement. The committee confirmed the minutes of the previous meeting held on 20 June 2025 as an accurate record.

Responsible Investment Report

The committee received an update on the responsible investment activities undertaken by Local Pensions Partnership Investments Limited (LPPI) on behalf of the Fund. The report highlighted that 'brown' exposure (investments in fossil fuels) had decreased from 2.13% to 1.98% of the portfolio, while 'green' exposure (investments in businesses contributing to a lower carbon economy) had slightly decreased from 3.94% to 3.86%. This decrease in green exposure was attributed to a reduction in 'Green Bonds' within the Fixed Income asset class due to portfolio churn. LPPI also submitted a response to the Net Zero Asset Managers initiative review consultation and published their second suite of TCFD reports. The committee was also informed about the updated 2026 Stewardship Code published by the Financial Reporting Council (FRC), with LPPI intending to comment on the new definition of stewardship.

Draft Funding Strategy Statement Review

The committee reviewed the draft Funding Strategy Statement (FSS) for the Lancashire County Pension Fund, which is a requirement under The Local Government Pension Scheme Regulations 2013. The FSS outlines the strategy for meeting the Fund's pension liabilities and sets out policies on employer contributions, risk management, and admission/termination of employers. Key proposed changes for the 2025 valuation include an increase in the 'real discount rate' (assumed investment return above inflation) for both past and future service, a higher 'funding buffer' (the portion of surplus retained in the Fund for stability) from 10% to 20%, and an extended surplus recovery/spread period from 16 to 20 years. These changes aim to increase prudence and promote contribution rate stability, while also leading to a material reduction in the overall employer contribution rate. The FSS also incorporates updated demographic assumptions reflecting the latest Fund experience and national trends, and introduces an option for certain employers to set aside a surplus as a reserve for redundancy strain costs. The employer risk policy proposes reducing the gap in funding assumptions between 'Category A' (taxpayer-backed) and 'Category B' (non-taxpayer-backed) employers, reflecting a reduction in risk posed by Category B employers. The termination policy for Category B employers is also being updated to reference Government bonds for assessing exit debt, providing greater protection to the Fund. A discussion took place regarding the proposed buffer level, with a proposal to consult on both 10% and 20% buffer levels and make a final decision in December.

Urgent Business Decision Relating to McCloud Regulatory Decision

The committee noted a decision taken under the Urgent Business Procedure by the Executive Director of Resources on 20 August 2025. This decision related to the non-inclusion of the McCloud Remedy underpin value in the 2024/25 Annual Benefit Statements (ABSs) for a small group of scheme members. The McCloud Remedy is a correction to address age discrimination found in the 2014/15 public sector pension reforms. The discretion to exclude this value was exercised because the deadline for issuing ABSs (31 August 2025) preceded the next committee meeting, and regulatory guidance, system limitations, and data issues prevented its inclusion for all eligible members within the timeframe. Fund officers also decided that there was no requirement to submit a breach of law report to The Pensions Regulator, as the discretion was exercised reasonably and within legislative conditions. LPPA confirmed that eligible members who received a standard ABS will be provided with a McCloud-relevant ABS in 2025/26.

Pension Fund Annual Report 2024/25

The committee was presented with the draft Pension Fund Annual Report for 2024/25. The report details the Fund's activities and financials for the year, including membership increases of 3.9%, an asset value increase to £12.0bn, and estimated fee savings of £22.4m due to pooling arrangements. It also covers governance, administration, investments, responsible investment, and finance, emphasizing the Fund's objective of paying members' pensions as they fall due. The report highlighted progress on the 'Fit for the Future' reforms, the 2025 Valuation project, and a review of the Fund's communications strategy.

Lancashire County Pension Fund - Governance Compliance Statement

The committee was asked to approve revisions to the Fund's Governance Compliance Statement. These revisions, recommended by the Local Pension Board, reflect updates to the Fund's Training Policy and the introduction of the LGPS Online Learning Academy (LOLA). The statement outlines the Fund's governance arrangements and ensures transparency and accountability, adhering to guidance from the Secretary of State. The revised statement will be hyperlinked in the 2024/25 Annual Report and published in full on the Fund's website.

Pension Related Training for Committee Members

The committee noted the training undertaken by members since the last meeting, including sessions on LOLA modules, the LPPI Investment Conference, and a LCPF Valuation workshop. The report detailed participation in various online and external training opportunities designed to enhance knowledge and understanding of pension-related matters, in line with regulatory requirements.