The Pensions Board meeting on 15 April 2026 addressed the significant improvement in the Pension Fund's actuarial valuation, which now shows a 120% funding level, a substantial increase from 96% in 2022, leading to reduced employer contribution rates. The Board also discussed upcoming regulatory changes under the Fit for the Future programme, including the requirement to appoint a Senior LGPS Officer and an Independent Person, and the introduction of triennial independent governance reviews.

Actuarial Valuation Results and Funding Strategy Statement

The meeting heard that the Lambeth Pension Fund's actuarial valuation as at 31 March 2025 shows a significant improvement, with the Fund now 120% funded, up from 96% in 2022. This positive development is largely attributed to higher assumed future investment returns, which have increased from 3.4% per annum in 2022 to 5.5% per annum for the current valuation. This strong funding position means that while the primary contribution rate has increased slightly to 22.1% of pay, the overall employer contribution rates are expected to decrease by around 5% over the next three years due to a negative secondary rate, which reflects the fund's surplus. The Funding Strategy Statement (FSS) was also noted, confirming that it largely complies with new statutory guidance and required only minor adjustments. The FSS outlines the approach to managing the fund's assets and liabilities to ensure sufficient funds are available to pay member benefits while aiming for stable and affordable contribution rates for employers.

Governance Review Outcome

The Board received an update on the independent governance review of the Lambeth Pension Fund, which was conducted to ensure compliance with regulatory standards and prepare for forthcoming changes under the Fit for the Future (FFTF) programme. Key recommendations include the appointment of a Senior LGPS Officer by October 2026, who will have statutory responsibility for the fund's finance, governance, and administration. This role will be separate from the Council's Section 151 Officer role. The review also highlighted the need to restructure the pensions function under a single leadership, develop a comprehensive training strategy for Board and Committee members, and prepare for the appointment of an Independent Person to the Committee by October 2026. This Independent Person will act similarly to a non-executive director, providing scrutiny and challenge. Furthermore, the Fund must prepare for its first triennial Independent Governance Review by March 2028, a process that will assess various aspects of the fund's governance and compliance. Officers have agreed to implement these recommendations, with a detailed plan to follow.

General Update

The Board received a general update on several key areas. Regarding the London CIV (LCIV), the pooled investment vehicle for LGPS funds, assets under management were reported at £21.1 billion (excluding passive investments), with the Lambeth Fund having approximately 63% of its assets invested within the pool. Estimated net fee savings for the quarter ending December 2025 were £519,000. The Pension Schemes Bill is progressing through Parliament, and work is ongoing with the LCIV to transition off-pool assets by the target date of 1 April 2026, with Investment Management Agreements (IMAs) being finalised. Progress was also noted on private equity fund investments, with allocations agreed for Antler Funds, Schroders, and Future Planet Capital, with documentation being finalised.

A significant point of concern was the disclaimed audit opinion on the Pension Fund Accounts for 2024/25, stemming from unsupported balances in assets and liabilities, a continuation of issues from the previous year. Officers are working with auditors and seeking external support to rectify these problems for the 2025/26 accounts. The final Annual Report was published on 27 February 2026. The Board was also informed about upcoming training opportunities relevant to the LGPS and the Fund's business plan, with a particular recommendation for the LGPS Pooling Symposium. Finally, the report noted that resources within the pensions team had been stretched, but additional permanent resources have been secured, and external expert input is being sought to enhance capacity and resilience.

Investment Performance Report - Quarter 4 2025

The Investment Performance Report for the quarter ending 31 December 2025 indicated that the Pension Fund's assets were valued at approximately £1,972.8 million. The Fund's performance for the quarter was 2.1%, which was below the benchmark of 3.0%. This underperformance was primarily attributed to the active Global Equity managers. Performance over the one-, three-, and five-year periods also fell short of their respective benchmarks. The report detailed significant detractors from performance, including London CIV Global Equity and London CIV Sustainable Global Equity. The Fund's asset allocation showed an overweight position in Global Equity, Multi-Asset Credit, and Cash, and an underweight position in Property and Private Equity. The report also noted that the Fund's exposure to fossil fuels had increased slightly to 0.47% of the Fund. An indicative funding level as at 30 September 2025 was estimated at 136%, a significant increase from the 120% at the formal valuation in March 2025 and 96% in 2022.

Investment Strategy Statement 2026

The Board noted the updated Investment Strategy Statement (ISS) for 2026. This statement reflects recent legislative changes and the delegation of future investment management to the London CIV. The updated ISS includes a commitment to a 2040 net zero target for climate change, with interim targets for Weighted Average Carbon Intensity (WACI). The full details of the updated ISS were contained within a Part II (exempt) report.

Annual Accounts and Audit Plan 2025/26

The Board was informed about the timeline for the 2025/26 Pension Fund accounts and audit. Preparatory work by officers was underway, with the draft accounts scheduled for completion by June 2026. The external audit is expected to take place between August and December 2026, with the audit completion and sign-off of the Annual Report anticipated in January 2027. The report noted that the audit fee for 2025/26 is anticipated to increase substantially compared to the £112,000 fee for 2024/25, which is still subject to agreement.

Risk Register Update

The Board reviewed the Lambeth Pension Fund Risk Register. There were no red-rated risks identified, with seven amber-rated risks. Key risks included insufficient resources to support the Pension Committee and Board (PA1), insufficient knowledge and understanding among Board and Committee members (PA2), and the risk of pay and price inflation being higher than anticipated (PA12). The register also highlighted investment risks (PA15), investment underperformance (PA16), climate change impacts (PA19), and a qualified audit opinion on the Fund's financial statements for 2023/24 and 2024/25 (PA22), which has led to a deterioration in its risk rating. Mitigations for these risks were outlined, including structural reviews, ongoing training, diversified investment strategies, and close dialogue with auditors.

Business Plan Tracker 2025/26

The Board noted the Business Plan Tracker for 2025/26. Most items were marked as complete, including the publication of the Annual Report and the Stewardship Code report. The re-tender of the actuarial services contract, marked in red, was noted as not meeting its December 2024 deadline due to the need for a new procurement exercise, with an updated timetable to be developed.

Matters Arising and Work Programme 2025/26

The Board noted the work programme for the remainder of the municipal year. It was confirmed that the quarterly performance update for Q4 would be presented at the next meeting, as there was insufficient time to produce it before the current meeting. The outcome of the governance review by Hymans Robertson, along with its recommendations and proposed action plan, will be presented at the April 2026 meeting.

Declarations of Pecuniary Interest and Minutes of the Previous Meeting

No pecuniary interests were declared. The minutes of the previous meeting held on 28 January 2026 were approved and signed as a correct record.