The Lancashire County Council Pension Fund Committee met to discuss responsible investment, review the draft funding strategy statement, and address an urgent matter regarding the McCloud remedy¹ and reporting requirements. The committee also reviewed pension-related training for its members and the Pension Fund Annual Report 2024/25.

Draft Funding Strategy Statement Review

The committee considered the draft Funding Strategy Statement (FSS) and a summary of its main changes, ahead of a formal consultation with scheme employers and other interested parties. The FSS sets out the policies and assumptions that the Fund Actuary will use to determine how each employer's pension liabilities will be met.

Key discussion points included:

• Funding Target: The long-term objective is to maintain a 100% solvency level.
• Long Term Cost Efficiency: Employer contributions should balance budgetary pressures with the need to avoid excessive debt burdens on future generations.
• Risk Management: The FSS identifies funding-specific and employer covenant risks and outlines mitigation measures.
• Actuarial Assumptions: The actuarial method to be used in the calculation of the solvency funding target is the Projected Unit method.
• Employer Pooling and Risk Sharing Arrangements: The report discussed arrangements for multi-academy trusts and admitted bodies.
• Investment Strategy: The funding strategy is developed alongside the investment strategy.
• Employer Contributions: The report detailed how employer contributions are calculated, including primary and secondary rates.
• Payment of Contributions: The report noted options for employers, including phasing increases and prepaying contributions.
• Notifiable Events: The report highlighted the importance of employers notifying the Fund of any corporate activity or changes that could materially impact the covenant.

The committee was asked to provide comments on the draft FSS, which will be used to inform the consultation process. The final version of the FSS will be presented for approval at the March 2026 meeting.

Responsible Investments Report

The committee reviewed a report from Local Pensions Partnership Investments Limited (LPPI) on responsible investment activities undertaken on behalf of the fund. The report included a dashboard summary of activity covering 1 April to 30 June 2025.

Key discussion points included:

• 2026 Stewardship Code: The Financial Reporting Council (FRC) published an updated code, aiming to support long-term sustainable value creation while reducing the reporting burden for signatories. LPPI expressed concerns that a new definition within the code may be too broad.
• Climate Metrics: The report provided an insight into the 'Green' and 'Brown' categorised assets within the fund's portfolio.
  • 'Brown' exposure (investments in traditional energy) decreased from 2.13% to 1.98% of the portfolio.
  • 'Green' exposure (investments in businesses contributing to a lower carbon economy) also decreased from 3.94% to 3.86% of the portfolio.
• Shareholder Engagement: LPPI appointed Robeco² as its engagement services partner. In Q2 2025, Robeco led 249 engagement cases, involving 400 individual engagement activities.
• Shareholder Voting: LPPI voted at 391 company meetings, covering 4,598 resolutions.
• Real World Outcomes: The report featured examples of assets delivering positive social outcomes, including investments in elderly care homes and digital infrastructure.

Urgent Business Decision Relating to McCloud Regulatory Decision and Reporting to the Pension Regulator

The committee noted a decision taken by the Executive Director of Resources, using the urgent business procedure, to exclude the McCloud remedy underpin value from certain scheme members' 2024/25 annual benefit statements (ABS). The committee also noted the decision of fund officers that there was no requirement to submit a breach of law report to The Pensions Regulator.

The McCloud remedy addresses age discrimination found in the 2015 changes to public sector pension schemes. The Local Government Pension Scheme (Information) Regulations 2024 allow administering authorities to exclude the McCloud underpin value from 2024/25 ABSs if it is considered reasonable in all the circumstances.

The Executive Director of Resources exercised this discretion because of a lack of regulatory guidance, limitations in system functionality, and the absence of certain data. Fund officers determined that these reasons did not constitute a failure to meet statutory requirements for adequate internal controls or good record-keeping, and therefore a breach of law report was not required.

Pension Related Training for Committee Members

The committee received an update on training undertaken by committee members since the last meeting in June 2025. This included LOLA³ module completion, attendance at the LPPI Investment Conference, and participation in a valuation workshop.

Pension Fund Annual Report 2024/25

The committee was asked to approve the draft Lancashire County Pension Fund Annual Report and Accounts for 2024/25, subject to the inclusion of the external audit opinion and any minor changes. The report details the activity and financials for the year, including membership, investment asset value, funding level, and fee savings.