The Pensions Committee meeting on 22 April 2026 saw the approval of the latest actuarial valuation results and funding strategy statement, indicating a significant improvement in the fund's financial health. The committee also reviewed the risk register, noting several amber-rated risks that are being actively managed, and discussed the upcoming annual accounts and audit plan for the 2025/26 financial year. A comprehensive governance review was presented, outlining recommendations to ensure the fund's future resilience and compliance with upcoming regulatory changes.

Actuarial Valuation Results and Funding Strategy Statement 2025

The committee reviewed the final results of the 2025 actuarial valuation, which showed a substantial improvement in the Lambeth Pension Fund's financial position. The funding level has increased to 120%, up from 96% at the previous valuation in 2022, with a surplus of £297 million. This improvement is largely attributed to higher assumed future investment returns.

As a result of this strong funding position, employer contribution rates are set to decrease for most employers over the next three years. The primary rate, which covers the cost of accruing new benefits, has increased slightly to 22.1% of pay, but a negative secondary rate, due to the surplus, means the overall contribution rate will reduce for many. The council's contribution rate, for example, is projected to decrease by approximately 5% over the three-year period.

The Funding Strategy Statement (FSS) for 2026 was also noted. This document outlines the fund's approach to managing its finances to ensure it can meet its long-term obligations to members. It details how employer contributions are calculated, the fund's approach to managing risks, and policies for employer events such as joining, leaving, or outsourcing. The FSS was consulted on with employers, and no significant concerns were raised.

Lambeth Pension Fund Risk Register Update

The committee reviewed the latest update to the Lambeth Pension Fund Risk Register. The register identifies and assesses risks across various categories, including people, investments, and financial systems. Currently, there are no red rated risks, but seven amber rated risks are being actively managed.

Key risks highlighted include:

• PA1: Insufficient resource to support requirements and demands of Pension Committee and Board: This amber risk (score of 6) reflects short-term pressures due to staffing changes. A structural review is underway to recruit sufficient permanent resources.
• PA2: Insufficient knowledge and understanding of Pension Board/Committee in line with legislative requirements: This amber risk (score of 6) is being addressed through ongoing training and learning resources, with a target rating of 4.
• PA12: The risk that pay and price inflation is significantly more than anticipated: This risk (score of 8) reflects current inflationary pressures. The fund's long-term investment strategy and use of index-linked bonds are key mitigations.
• PA15: Investment risk: Rated amber (score of 12), this reflects heightened market volatility due to interest rate changes, currency fluctuations, and global economic shocks. The fund's diversified asset allocation and engagement with advisors are key controls.
• PA16: Investment underperformance: An amber risk (score of 8), this acknowledges short-term underperformance. The fund's long-term investment horizon and diversification are considered mitigating factors.
• PA19: Climate change: Rated amber (score of 8), this reflects the significant impact climate change poses. Mitigation includes a 2040 Net Zero target, carbon footprinting, and scenario analysis.
• PA22: Qualified audit opinion of the Fund's financial statements: This amber risk (score of 12) stems from historic accounting issues related to system migrations. An accounts improvement plan is in place, with additional resources and close liaison with auditors aimed at resolving these matters for the 2025/26 accounts.

The committee noted that no changes to the risk register have occurred since the last meeting on 25 March 2026.

Annual Accounts and Audit Plan 2025/26

The committee received an update on the preparatory work for the 2025/26 Lambeth Pension Fund accounts and audit. While the formal audit plan from the external auditors, Mazars LLP, had not yet been presented, officers have commenced preparatory work for the financial year-end. This includes collating financial and membership data, performing internal reconciliations, and completing the draft Statement of Accounts.

Extensive engagement has occurred between the Pensions Administration and Investment Teams to ensure a coordinated approach to the year-end close-down. The estimated audit fee for 2025/26 is anticipated to be substantially higher than the £112,000 reported for 2024/25, reflecting the complexities and ongoing issues with the accounts.

Governance Review Outcome

A comprehensive governance review of the Lambeth Pension Fund was presented, with findings and recommendations aimed at ensuring compliance with best practice and preparing for upcoming regulatory reforms under the Fit For The Future (FFTF) programme. The review covered team structure, board and committee effectiveness, and compliance with The Pensions Regulator's General Code of Practice.

Key recommendations include:

• Appointing a Senior LGPS Officer: A new statutory role responsible for the fund's finance, governance, and administration, to be in place by October 2026. This role will be separate from the Council's Section 151 Officer function.
• Restructuring the pensions function: Creating a single, integrated team reporting to the new Senior LGPS Officer.
• Developing a comprehensive training strategy: Replacing the current training policy to meet new knowledge and understanding obligations for committee members, board members, and the Senior LGPS Officer.
• Preparing for an Independent Person: Appointing a non-voting member to the committee to provide professional scrutiny and challenge, similar to a non-executive director, by October 2026.
• Planning for the first Independent Governance Review (IGR): Commissioning a triennial IGR by March 2028, which will assess various aspects of the fund's governance and compliance.

Officers confirmed that all recommendations are considered appropriate and beneficial, and a detailed implementation plan will be developed. While there are no immediate financial implications, future structural changes and additional governance requirements will necessitate budgetary considerations. The committee was advised that failure to implement these recommendations could lead to regulatory intervention.

The meeting also noted the minutes from previous meetings held on 11 February and 25 March 2026, and the Pensions Committee Work Plan. The Business Plan Tracker was also noted, with the actuarial re-tender deadline having been missed and to be discussed at the next meeting.