The Pensions Committee of Hillingdon Council met on Tuesday 24 March 2026 to discuss the triennial valuation results, approve the Funding Strategy Statement, and review the Responsible Investment Policy and Investment Strategy Statement. The committee noted updates on administration performance, responsible investment activities, and the fund's risk register, and approved the draft Pension Fund Annual Report.

Triennial Valuation Results and Funding Strategy Statement

The committee was informed that the 2025 triennial valuation showed a significant improvement in the fund's financial health. The funding level increased from 88% in March 2022 to 118% as of March 2025, moving from a deficit of £167 million to a surplus of £211 million. This improvement has led to a reduction in the average employer contribution rate from 23.7% to 19%. The committee agreed to the draft Triennial Valuation Report and approved the Funding Strategy Statement for the London Borough of Hillingdon Pension Fund. Concerns were raised regarding the actuarial assumptions, particularly in relation to employer contribution rates and the potential impact of geopolitical events, but it was confirmed that the fund's modelling incorporated scenario testing for such risks and that the fund was considered resilient.

Responsible Investment Policy

The committee approved the updated 2026 Responsible Investment Policy, which positions the fund for full asset pooling with the London Collective Investment Vehicle (LCIV) by March 2026. The policy strengthens climate and stewardship commitments, introduces exclusions and a 5% target for impact investments, and embeds four priority UN Sustainable Development Goals (SDGs): Climate Action (SDG 13), Decent Work and Economic Growth (SDG 8), Good Health and Wellbeing (SDG 3), and Reduced Inequalities (SDG 10). Members raised questions about ethical considerations, particularly concerning investments in weapons manufacturing, and the pace of progress towards more impactful investments. It was noted that while immediate divestment was not recommended, a gradual transition towards more impactful options would be pursued as suitable products become available through the LCIV. The committee requested clarity from the LCIV on the availability of Pillar 3 products and an indicative timeline, with an update promised for the next meeting. The policy was approved with an amendment to include quarterly updates on responsible investment progress in committee agendas.

Investment Strategy Statement

The committee approved the updated Investment Strategy Statement (ISS), which reflects the outcomes of the triennial valuation and the planned transition of all assets to the London CIV from April 2026. Key changes include the introduction of UK residential housing exposure for ESG impact and inflation linkage, increased allocations to private equity and private credit, adjustments to the equity mix, consideration of currency hedging, and revised control ranges. These changes are forecast to increase the modelled investment return from 9.1% to 9.4%, with a small increase in the Value at Risk (VaR). Members sought assurance on the LCIV's ability to manage investment specifications and stressed the importance of maintaining fiduciary duty, including ESG risk management and reputational protection.

Investment Strategy and Fund Manager Performance - Part I

The committee received an update on the fund's funding and performance as of 31 December 2025. The funding level had reduced to 127%, a 19% quarterly fall, primarily due to an increase in liabilities following the adoption of more prudent financial assumptions from the 2025 valuation. Assets had increased to £1.58 billion, and the fund achieved a return of 2.8%, slightly outperforming its benchmark. Global equities and property remained overweight against strategic targets. The Alpha Growth Fund continued to be monitored for underperformance. The outlook for 2026 was positive, with expectations of global growth driven by AI investment and supportive fiscal and monetary policies. Members sought clarification on local infrastructure investment opportunities and how the fund could best access them, noting that this was a longer-term process and subject to ongoing discussions with the London CIV.

Responsible Investments Update

The committee noted the fund managers' ESG activities and compliance efforts, as well as the activities of the LCIV and the Local Authority Pension Fund Forum (LAPFF). The report detailed proxy voting statistics for LGIM and London CIV managers, highlighting director elections as the most common shareholder resolutions. Updates were provided on LGIM's and LAPFF's work on business decarbonisation and net-zero objectives.

Risk Register Report

The committee reviewed the Pension Fund Risk Register, noting that seven risks remained open and actively managed, while seven had been closed and were now managed as business as usual or tolerated. The overall risk position was unchanged, but the delay in parliamentary approval of the Fit for the Future legislation, expected to come into force on 1 April 2026, was highlighted as a potential significant risk if not resolved soon. Members discussed the potential impact of changes in council administrations on investment approaches and the importance of ongoing training for committee members to ensure a clear understanding of fiduciary duties. The committee considered and agreed the risk register, noting the revised format and the status of open and retired risks.

Governance

The committee discussed the Governance report, which included updates on the committee workplan, future meeting dates, continuous professional development, and progress towards compliance with the General Code of Practice. The draft Pension Fund Annual Report for 2024/25, including the audited accounts, was presented and approved. Members raised concerns about experience levels within the committee and the management of key officer risk, receiving assurances about training arrangements and the statutory role of key officers. The committee noted the dates for future meetings, the workplan, the training update, the General Code of Practice update, and approved the draft Pension Fund Annual Report.

Restricted Minutes and Part II Items

The committee approved the restricted minutes from the meeting on 9 December 2025. Items 14 and 15, concerning Governance Part II and Investment Part II respectively, were discussed in private session due to the disclosure of confidential or exempt information. The committee noted the recommendations detailed in the confidential reports for these items.