The Pension Fund Panel of Kingston upon Thames Council met on Wednesday 28 February 2024 to approve the Pension Fund's Business Plan for 2024-27 and its Budget for 2024-25. The panel also received updates on pension administration, governance and risk, investment performance, and the work programme.

Business Plan and Budget Approved

The Pension Fund Panel unanimously approved the draft Business Plan for 2024-27 and the draft Budget for 2024-25. The Business Plan continues to follow five key themes: Administration and Communication, Actuarial and Funding, Governance, Financial and Risk Management, and Investment. Key projects to be concluded in 2024/25 include the McCloud remedy and guaranteed minimum pension reconciliation. The plan also introduces actions for customer empowerment and employer engagement. The budget for 2024-25 shows a net expenditure of approximately £720k, a significant increase from the £82k budget in 2023-24. This change is primarily due to the council prepaying three years of deficit contributions in the previous financial year, partially offset by an expected increase in transfers in as the pensions administration team clears a backlog of cases.

Pension Administration Update

The Panel received an update on the Shared Pensions Administration Service. The government's pensions dashboards project now has a deadline of 30 September 2025 for public sector pension schemes. The Pension Regulator data scores for 2024 showed a positive improvement, and benefits processing performance is on target. The report highlighted that the McCloud remedy software is still being delivered, necessitating a standalone calculator in the interim. The annual pensions increase will be applied at 6.7% from 8 April 2024. Members requested a list of backlog items, particularly concerning key processes such as leavers, deaths, and retirements, with the Chair suggesting members communicate specific metrics they would find useful. A review of the Additional Voluntary Contributions (AVC) provider arrangements by Aon found no major concerns over long-term suitability, recommending the current AVCs be maintained and further investigation into the status of members over normal retirement age.

Governance and Risk Update

The Panel reviewed the Fund's risk register, noting the addition of a new risk concerning scheme employers who are no longer self-insured for ill health retirements and have not purchased insurance, meaning they will bear the full cost of any ill health retirement strain. Risk 2, related to member data accuracy, remains an amber risk despite improvements. A revised pension administration strategy has been produced and is currently out for consultation with scheme employers. The Pension Regulator's new General Code of Practice is expected to come into force on 27 March 2024, consolidating ten previous codes. The Fund will conduct an enhanced assessment of its cyber security ratings in light of this.

Work Programme

The Panel noted the draft work programme for the Pension Fund Panel meetings for the next municipal year (2024-25). This programme includes ongoing items such as governance and risk management, pensions administration, and performance reporting, as well as specific work on the Fund's Responsible Investment Strategy and preparation for the next Triennial Valuation.

Investment Performance Report

The Pension Fund's investments showed a positive return of 5.3% over the quarter ending 31 December 2023, outperforming the benchmark by 1.3%. The one-year return was 11.2%, an improvement from the previous period. The market value of the Fund's assets stood at £1,183m, an increase of £61m. The actuary's estimated funding level as at 31 December 2023 had improved to 146%, resulting in a surplus of £380m. The report noted that the allocation to equities was the main driver of the one-year performance. Direct exposure to fossil fuels was 1.81% at the end of the quarter.

London CIV Update

The Panel noted a progress update on the London Collective Investment Vehicle (LCIV).

Exclusion of the Press and Public

The Panel agreed to exclude the press and public from the meeting for a portion of the proceedings, citing the likelihood of exempt information being disclosed.