The Local Government Pension Scheme Local Pension Board of Hertfordshire Council met virtually on Friday 12 December 2025. The meeting focused on the 2024-25 draft audit report for the Pension Fund, the Fund's response to this report, and the Pension Fund's risk register.

Pension Fund 2024-25 Draft Audit Report

KPMG presented their draft audit report for the Hertfordshire Pension Fund for the year ending 31 March 2025. Subject to the resolution of a few outstanding items, KPMG expects to issue an unmodified audit opinion. Key findings included a control deficiency regarding segregation of duties in journal postings and a small timing difference of £7.7 million in the valuation of level 3 pooled investment vehicles, which has since been adjusted. KPMG confirmed their independence throughout the engagement.

Pension Fund Response to the 2024-25 Draft Audit Report

Officers provided a response to the draft audit report, noting that the outstanding items from KPMG's review included the retrospective review of level 3 investments and journal testing. Regarding the control deficiencies identified, officers stated that the council's constitution and code of conduct already address related party identification. For journals below £500,000, a new park and post control has been enforced from April 2025 for all journals, regardless of value, to provide assurance.

Pension Fund Risk Register Report

The report for the period 1 July to 30 September 2025 indicated two risks rated above the tolerated level: Skills or knowledge gaps at the Administrative Authority (Risk A2), which remains high due to the impending departure of the Head of Pensions, and Ineffective investment decision making (Risk C5), related to the move to a new asset pool by March 2026. Risk B3, Conflict of interest, had decreased to its tolerated level due to consistent member levels on the committee and board. The Board discussed the progress on the Business Continuity Plan (BCP) and confirmed that a wider cyber policy, including an incident response plan and IT security training, is being developed with Barnett Waddingham.

Employer Risk and Governance

This report for July to September 2025 showed a decrease in the number of employers in the red risk category from nine to seven. Six of these were genuine red risks, comprising two ceased employers with outstanding deficits and four employers with no indemnity arrangements. Work is underway with Barnett Waddingham to complete a risk analysis for admitted bodies, and employers identified as risks will be contacted to discuss solutions. There were 20 admissions in progress, with four new admissions received and completed during the quarter.

Hertfordshire LGPS Q2 2025/26 LPPA Performance Report

The Local Pensions Partnership Administration (LPPA) performance report for Q2 2025/26 highlighted positive trends. Casework performance against contractual service levels was 98.4%, exceeding the 95% target. Contact centre average wait times improved to 3 minutes and 31 seconds. A notable improvement was seen in employer retirement notifications, with 52% submitted on time, up from 38% in Q1. Customer satisfaction for the contact centre was just under 80%, and for agents, it was over 96%. The report also detailed progress on projects such as the McCloud Remedy, the Efficiency and Service Improvement Programme, and the Pensions Dashboard.

LGPS Consultations: Access and Fairness/Access and Protections

This report provided an update on two government consultations. The Access and Fairness consultation, which closed on 7 August 2025, aimed to address discrimination in survivor benefits and the gender pensions gap, with proposals for new reporting and amendments to address service gaps. The Access and Protections consultation, closing on 22 December 2025, focuses on increasing the normal minimum pension age to 57, reinstating LGPS access for elected members, introducing criteria for employer transfers to other administering authorities without Secretary of State consent, and updating New Fair Deal protections for outsourced staff.

Hertfordshire Pension Fund Investment Strategy Statement and Responsible Investment Review

This paper outlined the process for reviewing the Fund's Investment Strategy Statement (ISS) and Responsible Investment Policy. The ISS, last updated in March 2023, requires review by March 2026. The review will consider the Fit for the Future consultation, which may lead to changes in how the strategic asset allocation is published. A survey is being conducted among fund members to inform the development of the Responsible Investment (RI) policy. The report noted that the Fit for the Future regulations will require the Fund to publish a revised ISS within six months of their coming into force, likely necessitating another review by September 2026. The report also highlighted the positive trend in the Fund's funding level over the last 15 years, now exceeding 100%.

Investment Performance Report as at 30 September 2025

Mercer's report indicated that the Hertfordshire Pension Fund's investments outperformed their benchmark for the quarter ending 30 September 2025, with a return of 4.9% against a benchmark of 4.5%. The Fund also outperformed its benchmark over the five-year and ten-year periods. However, it underperformed over the one-year and three-year periods. Ten of the Fund's investment manager mandates outperformed their benchmarks during the quarter, while five underperformed.

Dates of Future Meetings

The Board noted the dates for future meetings, including virtual meetings on 5 February 2026 and 13 March 2026, and an additional meeting on 25 March 2026 to cover agenda items for the Pensions Committee.

Other Part I Business

An urgent item concerning a letter received from scheme members to board members was noted, with its discussion deferred to Part II business due to its sensitive nature.

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