The Pension Board of Kingston Council met on Wednesday 15 October 2D25 to discuss pension administration performance, projects, and governance. Key decisions included noting updates on administration performance, approving a revised project plan for the McCloud Remedy, and reviewing the fund's risk register.

Pension Administration Performance Update

Tom Taylor, Head of Pensions Administration, presented an update on the key administration activities of the shared pensions administration service. He reported that the overall number of outstanding cases had fallen from 830 to 801 over the quarter. Crucially, the backlog of cases classified as overdue by three months or more had been cleared, resulting in zero outstanding cases of this nature. Mr Taylor also confirmed that a previously open Internal Dispute Resolution Procedure (IDRP) case had been responded to in full, and an ombudsman determination had been made in the fund's favour.

Councillor Jackie Davies raised a question regarding the aging of tasks, noting that while the overall number of outstanding cases had fallen, there appeared to be more cases with an older aging profile at the end of August. Mr Taylor explained that this was partly due to the timing of the reporting period, with August and September being the busiest times of the year due to the end of the academic year and staff holidays. He assured the board that priority is always given to P1 cases, such as deaths and retirements, and that the slippage in the one to 40-day window was expected to be rectified by October.

Pauline Lyseight-Jones thanked the team for the positive report and noted the significant achievement of clearing the historic backlog of cases overdue by three months or more. Sam Burgess also commended the team for this achievement.

Pension Administration Projects Update

Tom Taylor provided an update on key projects, including the annual benefit statements, the pensions dashboard, and the McCloud Remedy. He confirmed that all annual benefit statements had been issued on time by the 31 August deadline. However, he noted two caveats:

Firstly, regarding the McCloud Remedy, statements for 2,110 members in scope were not fully compliant as individual underpin calculations had not been included due to delays in the software solution from Civica. The Fund has reported this breach of law to the Pension Regulator and submitted a project plan with a new target completion date of 30 June 2026. Letters explaining the delay and revised timeline are being sent to all 3,483 in-scope members.

Secondly, an administrative error had been identified regarding six Kingston University statements, which had been corrected and reissued. Controls are being put in place to prevent recurrence.

Regarding the Pensions Dashboard, Mr Taylor reported significant progress, with Kingston now connected to the dashboard in the test environment and testing going positively. Data is being moved to the live environment, with full connection expected by the end of the week. The exact date members can access the dashboard is still to be confirmed, but unofficially expected to be autumn 2026.

Councillor Davies asked about the potential penalty outcome for the McCloud Remedy breach. Mr Taylor stated that the worst-case scenario is a fine of up to £50,000, along with reputational damage. However, he reiterated that the regulator is working with funds to ensure compliance and that all Civica clients are in a similar position. He reassured the board that members retiring imminently have their benefits checked manually to ensure McCloud compliance.

Pauline Lyseight-Jones expressed concern about Civica's responsiveness and the lack of scheduled bug fixing beyond August. Mr Taylor confirmed that they are working with other funds to apply pressure and that Civica has committed to increasing resourcing. He also noted that the contract includes a mechanism to recover financial deficits resulting from Civica's poor performance, which would require discussion with the legal team.

Governance and Risk Update

Tom Taylor presented an update on governance activities and the fund's risk register. He highlighted that Risk 27 (Administration) remains rated as red due to Civica's software delivery issues causing the McCloud Remedy breach. However, this may be downrated to amber in the next quarter if the McCloud 2.0 release is implemented successfully.

The report also covered the Local Government Association's (LGA) response to the Access and Fairness consultation, which was broadly supportive but raised concerns about administrative workload and recommended phased implementation.

Other governance updates included the two-year extension of the actuarial services contract with Hymans Robertson and confirmation that legislation is being introduced to address issues arising from the Virgin Media judgement. The third review of State Pension Age is underway, with a report expected by March 2029.

Regarding administration charges, the fund continues to monitor employer performance, and no additional charges have been levied in the last quarter, a trend that has continued for the past nine months.

Triennial Valuation and Funding Strategy Statement

Tom Taylor summarised the initial results of the 31 March 2025 triennial valuation and the draft Funding Strategy Statement (FSS). He explained that the valuation assesses the fund's funding level by comparing assets to liabilities. Key assumptions discussed included the discount rate, which has increased from 4.2% to 5.6% with an increased prudence level from 70% to 85%, and CPI inflation, estimated at 2.3%. Longevity assumptions remained unchanged.

The draft FSS has been updated to align with new guidance from CIPFA and the Scheme Advisory Board (SAB), aiming for standardised terminology and structure. The draft FSS has been approved and is out for consultation with employers, with initial contribution rate results expected by the end of October.

Mr Taylor reported that the initial whole fund results are positive, showing an increased funding level since the last valuation, primarily due to the higher expected investment return.

Update from the Pensions Panel Meeting

Katherine Gray, Head of Pensions Investments and Treasury, summarised investment-related papers presented to the Pension Fund Panel. She reported that the market value of the fund was £1.336 billion, an increase of £46 million on the previous quarter, with a strong quarterly return of 3.2% against a benchmark of 2.7%.

The strategic asset allocation shows the fund is underweight in impact and property asset classes and slightly overweight in equity and index-linked gilts. The Pension Panel is reviewing the investment strategy for the next three years, to be presented in December.

Regarding funding and cash flow, Ms Gray noted that the fund is now cash flow negative, a trend expected to continue as the fund matures and employer contribution rates are likely to reduce. The investment strategy is being reviewed to include assets that provide stable, inflation-linked income.

An update on the London CIV was also provided, highlighting significant regulatory changes requiring LGPS funds to invest through investment pools. Kingston's chosen pool, the London CIV, is progressing well with its fit for the future plan, having appointed Mercer as a consultant and Hamilton Lane to monitor private market investments. Buckinghamshire Pension Fund has also chosen the London CIV as its preferred pooling partner.

Annual Report and Accounts 2024/25

Katherine Gray summarised the Pension Fund Annual Report for 2023/24 and the Statement of Accounts. She reported that the net assets of the fund rose to £1.294 billion, an increase of £44 million. The fund delivered a positive return of 3.9%, outperforming the PIRC local authority average. The fund became cash flow negative during the year, with benefits paid exceeding contributions received, a trend expected to continue. Membership numbers remained stable, but active members decreased while deferred and pensioner members increased. Savings from investing collectively through the London CIV have grown to £1.6 million over 10 years. The report also highlighted progress on key projects, including the GMP Reconciliation, McCloud Remedy, and Pensions Dashboard. The auditor's report is awaited and will be included in the final Annual Report.

Review of the Work Programme

Tom Taylor presented the proposed work programme for the Pension Board for the municipal year 2025-26. Key items for the December meeting include budget monitoring and the auditor's report on the pension fund accounts.

Update on Pension Fund Task and Finish Group

Sue Cuerden, Executive Director of Corporate Services, provided an update on the cross-party Task and Finish Group established in response to a council motion to review pension fund investments, including those held by the London CIV, to identify holdings in companies allegedly complicit in violations of international law and human rights in Palestine and globally.

The Group met over the summer, receiving training on the LGPS framework and legal/financial considerations. They reviewed three screening lists and decided to focus on the UN OHCHR list due to its perceived neutrality. The group identified four potential investment areas of concern, three of which are held in pooled funds and one outside of a pooled fund. Divesting from pooled funds would necessitate divesting from the entire pool, which would have a significant detrimental financial impact. Therefore, the focus for divestment is on the single holding outside of a pooled fund.

The Group made a unanimous suite of recommendations to the Pension Panel, including actively reviewing and divesting where practical from holdings on the UN list, strengthening criteria for future investments, and contacting companies on the list to understand their actions.

A further motion was debated at full council, strengthening the recommendations. The Pension Panel will remain responsible for approving any updated Responsible Investment Policy, which will be reported back to the Corporate and Resources Committee in March. Ongoing reporting from the Pension Fund Panel to the Corporate Resources Committee on progress against the recommendations will also occur. The Pension Panel will have a training session to review and update the Responsible Investment Policy, considering the political mandate alongside fiduciary duty and member support. The Panel will formally review the policy in December, with officers then assessing implications before a final policy is presented in March.

Urgent Items Authorised by the Chair

There were no urgent items authorised by the Chair.

The meeting closed at 11:17 am.