The Pensions Committee of Hertfordshire Council met on Tuesday 17 March 2026. The committee discussed the Pension Fund's Treasury Management Strategy for 2026-27, reviewed the draft Investment Strategy Statement, and considered the implementation of the Fit for the Future reforms. The committee noted the Investment Performance Report as at 31 December 2025.

Pension Fund's Treasury Management Strategy 2026-27

The committee approved the proposed Treasury Management Strategy (TMS) for the Hertfordshire Pension Fund for the 2026-27 financial year. This strategy outlines how the fund's operational cash will be managed to ensure sufficient funds are available to meet statutory liabilities, including monthly pension payments. A key decision was to approve an increase in the cap on cash held by the Pension Fund from £59 million to £64 million for the upcoming financial year. This increase is intended to assist officers in managing cash flow, particularly in light of anticipated reductions in employer contributions and a projected 3.8% increase in pension payments due to the September 2025 Consumer Price Index rise. The strategy prioritises the security of invested capital, followed by liquidity, and then yield, adhering to the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management Code of Practice.

Draft Investment Strategy Statement

The committee reviewed and approved the draft Investment Strategy Statement (ISS) for consultation with the fund's employers. This statement sets out the Hertfordshire Pension Fund's investment objectives and is a mandatory requirement under the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016. The review, conducted every three years, also encompassed the fund's responsible investment policy. A significant aspect of the revised ISS is the proposed adoption of the Border to Coast Responsible Investment Policy as the fund's own. This policy aligns with survey results from members and committee members, and includes stronger provisions on areas such as nature and biodiversity, and exclusions for controversial weapons and high-emitting carbon activities. The committee also agreed to a revised consultation process, with an initial light touch consultation targeting the largest employers, followed by a broader consultation in July 2026, in line with legal advice received regarding the upcoming Pensions Bill.

Fit for the Future Implementation

The committee was informed about the significant changes arising from the Pension Schemes Bill and the draft 2026 LGPS Regulations, collectively known as Fit for the Future. These reforms aim to formalise asset pooling and redefine the responsibilities between pension funds and their pool companies. Under the new framework, the committee will retain responsibility for setting investment strategy, including the Strategic Asset Allocation (SAA), while Border to Coast Pension Partnership (BCPP) will be responsible for all investment implementation, including portfolio construction, manager selection, and stewardship. The committee agreed to delegate authority to the Head of Pensions (or Director of Finance in consultation with the Chair) to enter negotiations and settle an Investment Management Agreement (IMA) with Border to Coast. This IMA will formalise the relationship and enable the fund to comply with the anticipated LGPS (Pooling, Management and Investment of Funds) Regulations 2026. The committee also noted wider governance changes, including new statutory roles and oversight expectations for administering authorities.

Investment Performance Report as at 31 December 2025

The committee noted the investment performance report for the quarter ending 31 December 2025. The Pension Fund's investments underperformed their benchmark by 0.4% during the quarter, achieving a return of 2.6% compared to the benchmark's 3.1%. Over one and three-year periods, the fund also underperformed its benchmark. However, over the longer term, the fund has outperformed its benchmark over five and ten-year periods. The report detailed the performance of individual investment managers, with ten out of the fund's investment manager mandates outperforming their respective benchmarks during the quarter. The presentation also provided an overview of market conditions, including geopolitical events and their potential impact on investments, and discussed the fund's diversified asset allocation strategy as a means of mitigating market volatility.