The Hertfordshire Pension Fund Committee met on Wednesday 3 December 2025 to review the draft audit report for the 2024-2025 financial year, discuss the fund's risk register, and consider updates on employer risk and governance. Key decisions included noting the draft audit report and the fund's response to it, reviewing the pension fund risk register, and commenting on employer risk and governance.

Pension Fund 2024-2025 Draft Audit Report

KPMG presented the draft audit report for the Hertfordshire Pension Fund for the year ending 31 March 2025. The auditors expressed satisfaction with the progress made, noting that they expected to issue an unmodified audit opinion, subject to the resolution of a few outstanding matters. A single corrected misstatement of £7.7 million was identified, relating to the updated valuations of Level 3 pooled investment vehicles. Two control deficiencies were also noted: one concerning the segregation of duties in journal authorisation and another regarding the formal process for obtaining declarations of interest for related party transactions. Officers provided responses to these deficiencies, indicating that new processes had been implemented to address the journal authorisation issue from April 2025, and that related party information is available on the council's website. The committee noted and commented on the draft audit report.

Pension Fund Response to the 2024-2025 Draft Audit Report

The committee reviewed the fund's response to the draft audit report from KPMG. The report detailed the fund's actions to address the identified control deficiencies. For related party identification, the fund noted that information is available on the council's website and declared at the start of each meeting, and that officers do not produce a separate working paper. Regarding the journal authorisation control deficiency, the fund stated that a new process was enforced from April 1, 2025, requiring all journals, regardless of value, to be parked and posted, ensuring proper oversight. The committee noted and commented on the fund's response.

Pension Fund Risk Register Report

The committee reviewed the risk register for the Hertfordshire Local Government Pension Scheme (LGPS) and the Hertfordshire Fire Pension Scheme for the period of July to September 2025. For the LGPS, two risks remained above the tolerated risk level: A2 (Skills or knowledge gaps at the administering authority) and C5 (Ineffective investment decision-making). The A2 risk remains high due to the impending departure of the Head of Pensions, with recruitment planned. The C5 risk is linked to the requirement to move to a new asset pool by March 2026. Risk B3 (Conflict of interest) had decreased to its tolerated risk level. For the Fire Pension Scheme, risk E1 (Poor administration, including failure or delays in implementing regulatory changes) remained above its tolerated risk level due to ongoing delays in retrospective service statement payments. Risk B3 also decreased to its tolerated level for the Fire Pension Scheme. The committee noted and commented on the report.

Employer Risk and Governance

This report provided an update on the risk monitoring of scheme employers and the performance of the administering authority against administration strategy indicators. The number of employers in the 'red' risk category decreased from nine to seven. Six of these were identified as true red risks, relating to ceased employers with outstanding deficits or employers with no indemnity arrangements. Discussions were ongoing with the actuary regarding solutions to minimise risk for employers with no indemnity arrangements. The report also detailed the progress on outstanding admission agreements, with 20 agreements in progress and four completed during the quarter. The committee noted and commented on the report.

Hertfordshire LGPS and FPS Q2 2025/26 LPPA Performance Report

The committee received an update on the performance of the Local Pensions Partnership Administration (LPPA) for the Hertfordshire LGPS and Fire Pension Schemes for the second quarter of 2025/26. Casework SLA performance for the LGPS was 98.4%, and for the Fire Pension Scheme, it was 98.1%. Contact centre wait times remained below the target of four minutes for both schemes. The report also detailed customer satisfaction scores, with a notable improvement in satisfaction with individual call handlers. Updates were provided on key projects including the McCloud Remedy, the Efficiency and Service Improvement Programme, and the Pensions Dashboard. The committee noted and commented on the report.

LGPS Consultations: Access and Fairness/Access and Protections

The committee received information on two significant consultations affecting the Local Government Pension Scheme (LGPS). The Access and Fairness consultation, which closed in August 2025, aimed to improve fairness and outcomes for members and dependants, focusing on survivor benefits, the gender pension gap, and opt-out rules. The fund's response highlighted areas requiring further clarity and consideration of administrative burden. The Access and Protections consultation, closing in December 2025, focuses on increasing access to the LGPS and strengthening member protections, including proposals to increase the normal minimum pension age to 57, allow councillors and mayors to access the LGPS, streamline processes for academies, and introduce new Fair Deal protections for outsourced staff. Fund officers were preparing a response to this consultation. The committee noted and commented on the report.

Hertfordshire Pension Fund Investment Strategy Statement and Responsible Investment Review

The committee was presented with the process for reviewing the Fund's Investment Strategy Statement (ISS) and Responsible Investment (RI) policy. The ISS, last approved in March 2023, requires review every three years. The review is being conducted alongside the 2025 actuarial valuation and will consider the impact of the government's Fit for the Future consultation. A survey is being issued to fund members to gather views on responsible investment, with results to be discussed in March 2026. The committee noted and commented on the report.

Investment Performance Report as at 30 September 2025

The committee received a positive report on the fund's investment performance. For the quarter ending 30 September 2025, the fund achieved a net return of 4.9%, outperforming its benchmark of 4.5%. Over the last ten years, the fund's investments have returned 6.9% per annum, outperforming the benchmark. The total fund assets had grown to approximately £6.9 billion. The report also detailed the performance of individual investment managers, with ten out of nineteen mandates outperforming their benchmarks during the quarter. The committee noted the investment performance report.