The Hertfordshire Pensions Committee met on Friday 18 September 2026 to discuss the Hertfordshire Local Government Pension Scheme (LGPS) Risk Register, employer risk, and governance matters. Key decisions included approving revised rebalancing ranges for investments and a local investment allocation, as well as noting updates on the Border to Coast pooling arrangements and the Pension Fund's responsible investment report.

Pension Fund Risk Register Report

The committee reviewed the Hertfordshire LGPS and Fire Pension Scheme Risk Register for the quarter ending 30 June 2026. Two risks exceeded the tolerated threshold for the LGPS: Ineffective investment decision-making (Risk C5), related to the transition to Border to Coast, which has since been resolved with the signing of the final Investment Management Agreement. The other risk, Poor administration, including failure/delays in implementing regulatory changes (Risk E1), has seen its score increased due to the unprecedented volume of regulatory changes impacting the LGPS, the fund, Border to Coast, and LPPA. For the Fire Pension Scheme, Risk E1 also remained above the tolerated threshold due to ongoing high administration activity driven by regulatory changes.

Concerns were raised about the register's reflection of external economic volatility, with officers agreeing to review its expansion to include these risks. The committee was assured that while the register is based on the Pensions Regulator's General Code of Practice, external risks are considered. Discussions also touched upon the significant regulatory changes impacting the LGPS, including Access and Fairness, the McCloud remedy, and Fit for the Future reforms. The risk of cyber attacks was also highlighted, with assurances that training, a cyber policy, and IT team measures are in place to mitigate this. The committee noted the report and agreed to review the risk register for potential expansion to reflect external risks.

Employer Risk

The committee received an update on employer risk for the period 1 April to 30 June 2026. The number of employers classified as 'red risk' increased from nine to fourteen. This increase was attributed to updated governance analysis, revised monitoring parameters, a tier three ceased employer entering administration with outstanding debt payments, and one employer's repeated late submissions of LG221 forms. Of the fourteen 'red risk' employers, nine were considered true red risks requiring direct monitoring, while five were classified as red due to an amalgamation of amber and green risks.

A significant event during the quarter was the administration of a tier three ceased employer with outstanding Debt Spreading Agreement (DSA) payments. Despite legal advice confirming the debt as a non-preferential unsecured claim and unrecoverable, it was deemed immaterial to the fund's overall financial health due to the strong funding of the orphan pool. The committee discussed lessons learned from this situation, with officers explaining the challenges in proactively identifying employers at risk of insolvency, particularly when they are meeting their current obligations. New regulations now require guarantors or indemnity arrangements for new employers joining the scheme, but this cannot be retroactively applied to legacy employers.

The committee also noted that 29 admission agreements were outstanding, with 19 relating to multi-academy trusts. While most admissions are on a pass-through basis, officers are working with employers and legal teams to progress these. Regarding late payments and LG221 form submissions, there were seven instances of late contribution payments and fifty-six instances of late form submissions during the quarter, with penalties issued where appropriate.

Governance Overview

The committee received an update on the fund's governance, compliance, and oversight arrangements, noting the significant regulatory changes introduced by the Fit for the Future reforms. These reforms necessitate updates to policies and strategies, including the development of a new Training Strategy and a Governance Strategy to replace the current Governance Compliance Statement. The committee approved the revised Governance Compliance Statement.

A key discussion point was the low attendance at training sessions, with only 33% of members attending the two sessions in Quarter 1. Members were urged to take training more seriously, given the period of significant change. The availability of recorded training sessions on the Enlighten platform was highlighted as a flexible option for those with time commitments. The committee also noted the importance of substitutes undertaking training and the bite-sized nature of the Enlighten modules. Clive Heathley, Interim Director of Finance, reinforced the critical need for members and officers to stay informed through training due to the unprecedented changes in the pensions world.

The committee also noted the forward plan for future meetings and the upcoming training sessions.

Hertfordshire LGPS and FPS Q1 2026/27 LPPA Performance Report

The committee received a performance report from the Local Pensions Partnership Administration (LPPA) for Quarter 1 of 2026/27. The report highlighted improvements in casework performance, with the Local Government Pension Scheme (LGPS) achieving 98.4% and the Fire Pension Scheme (FPS) achieving 98.8% against Service Level Agreements (SLAs). A positive trend was noted in employer retirement notifications, with an average of 54.6% received on time for the LGPS, leading to an improved payment rate within 30 days of 82.82%.

However, the contact centre exceeded the four-minute target for average wait times, although the median wait time remained low. LPPA is investigating this, with a deeper dive planned for upcoming training. The report also detailed successful issuance of annual benefit statements, with high percentages achieved for both active and deferred members. The Pensions Dashboard project is progressing, with initial testing showing successful connections and data matching.

Chris, presenting the report, noted the unprecedented amount of regulatory change impacting the LGPS, including Access and Fairness, McCloud remedy, and SCAPE factor changes. LPPA is managing these complexities, including pausing transfers temporarily due to SCAPE factor changes. The report also detailed the successful run of annual benefit statements, with high percentages issued for active and deferred members.

Councillor Matthew Hurst noted a sharp increase in late retirement notifications in June and was informed this was a year-on-year pattern, possibly linked to end-of-financial-year activities. Tim Williams, Vice-Chair of the Pensions Committee, commended the report's format and requested a longer timeframe for complaint statistics. Chris agreed to extend the period for complaint data. John Graham highlighted the importance of understanding the magnitude of data flow, not just percentages, and was informed that the scheme has approximately 123,000 members and completed 11,332 casework cases in the quarter.

The committee noted and commented on the report.

Changes to the Constitution

The committee was informed of the requirement to update Hertfordshire County Council's Constitution following the introduction of the Pension Schemes Act 2026 and the Local Government Pension Scheme (Amendment) (Governance) Regulations 2026. These changes, effective from 30 June 2026, introduce strengthened governance requirements, including clearer structures, enhanced knowledge obligations, and the appointment of an LGPS Senior Officer and an Independent Person.

A key proposed change is the creation of a new Appendix 31 within the Constitution, which will contain the Terms of Reference for the Pensions Committee. This is intended to improve accessibility, support future governance reviews, and align the fund with emerging LGPS best practice. The proposed amendments will undergo legal review before being presented to the Standards Committee on 1 October 2026 and then to Full Council on 20 October 2026 for formal approval. The committee noted the report.

Independent Person Appointment Process

The committee received an update on the appointment process for the Fund's Independent Person, a statutory requirement under the LGPS governance reforms. Officers, with support from Marsh, have assessed the fund's needs and identified investment expertise as a key skills gap. The role specification therefore places a strong emphasis on investment knowledge, alongside governance and administration experience.

The first two phases of the appointment process are complete, with candidate search commencing in September 2026. Shortlisting is expected in October, and the final appointment is planned for the end of October 2026. The committee was asked to note the statutory requirement, the work undertaken, the proposed timetable, and to approve the delegation of the appointment to the LGPS Senior Officer, subject to consultation. The committee agreed to these recommendations.

Draft Investment Strategy Statement – Rebalancing and Local Investment

The committee was presented with a draft Investment Strategy Statement (ISS), which is required to be published by 31 March 2027 under new regulations. The draft ISS has been substantially completed, with the remaining policy decisions concerning rebalancing ranges and local investment.

The committee was asked to approve proposed rebalancing ranges for each asset class, developed with advice from Marsh and Border to Coast, to provide flexibility while maintaining risk controls. They were also asked to approve a local investment allocation range of 0% to 5% across the Border to Coast pool region, with a preference for Hertfordshire opportunities. This approach allows flexibility while Border to Coast develops its local investment capabilities. The committee approved both the rebalancing ranges and the local investment allocation.

The full draft ISS will be presented for consultation in October 2026, with final approval expected in February 2027.

Border to Coast Update

An update was provided on the transition of assets into the Border to Coast Pension Partnership. The report highlighted a review of Sterling Investment Grade Credit (SIGC) arrangements, proposing the consolidation of partner fund credit holdings into the Border to Coast SIGC Fund. This move is expected to provide benefits of scale, governance, and lower fees, with estimated cost savings recoverable within a year.

Recent investment activity included an additional allocation of £400 million to the Border to Coast Credit Fund and drawdowns into private market commitments approved in March, including private equity, UK real estate, and infrastructure mandates. An appendix was introduced to provide a clear view of transition progress, showing assets split between ACCESS, legacy mandates under Border to Coast oversight, and fully transitioned Border to Coast assets. As of 30 June 2026, approximately £229 million had transitioned to Border to Coast.

Councillor Richard Roberts raised concerns about the value of government bonds, but was reassured by officers that index-linked gilts offer inflation-linked returns with minimal default risk. John Graham sought clarification on the amount of the fund transitioned to Border to Coast, and was informed that while £229 million was directly held by Border to Coast, the majority of assets remained outside but under Border to Coast's control via power of attorney. The transition of assets is being managed on an asset-by-asset class basis to minimise costs, with equities expected to be one of the last asset classes to transition. The committee noted the report.

Pension Fund Responsible Investment Report

The committee received an update on the Hertfordshire Pension Fund's decarbonisation progress as of 31 March 2026. The report, provided by Marsh, analysed the fund's carbon footprint against its net zero target of 2050.

The listed equity portfolio is currently ahead of its decarbonisation pathway, having reduced its carbon footprint by 32% since 2020. This improvement is attributed to portfolio changes, including divestment from UK equity and a move towards climate-aware funds, as well as Dodge & Cox reducing their absolute emissions. The report noted that the listed equity portfolio is significantly more carbon-efficient than the MSCI ACWI benchmark.

However, the corporate bond portfolio is currently behind its decarbonisation target, with an increase in carbon footprint over the past year. The report acknowledged the limitations of the analysis, particularly regarding Scope 3 emissions and the availability of data for non-listed assets.

Councillor Adrian England questioned the decarbonisation pathway, suggesting it appeared relaxed and asked about its origin and review process. Officers explained that the pathway reflected the fund's starting point and that future influence would be through engagement with the Border to Coast pool on their responsible investment and climate risk policies. Councillor Rachel Carter raised concerns about the scope of the analysis, noting that Scope 3 emissions and the carbon footprint of AI data centres were not fully captured. Officers acknowledged these limitations and the ongoing journey to improve data collection and analysis. The committee noted the report.

Changes to the Constitution

The committee noted the report detailing the requirement to update Hertfordshire County Council's Constitution following the introduction of the Pension Schemes Act 2026 and the Local Government Pension Scheme (Amendment) (Governance) Regulations 2026. These changes, effective from 30 June 2026, introduce strengthened governance requirements. A key proposal is the creation of Appendix 31, outlining the Terms of Reference for the Pensions Committee, to improve accessibility and transparency. The proposed amendments will undergo legal review before being presented to the Standards Committee and Full Council for approval.

Independent Person Appointment Process

The committee received an update on the appointment process for the Fund's Independent Person, a new statutory requirement under LGPS governance reforms. Officers, with support from Marsh, have developed the role specification, emphasizing investment expertise due to the new pooling arrangements and the cessation of Marsh's advisory services in 2027. The recruitment process is underway, with candidate search commencing in September 2026 and a final appointment expected by the end of November 2026. The committee was asked to note the statutory requirement, the process, and to approve the delegation of the appointment to the LGPS Senior Officer, subject to consultation. The committee unanimously agreed to these recommendations.

Draft Investment Strategy Statement – Rebalancing and Local Investment

The committee was presented with a draft Investment Strategy Statement (ISS), required by 31 March 2027 under new regulations. The draft ISS includes proposed rebalancing ranges for each asset class, developed in consultation with Marsh and Border to Coast, to provide operational flexibility while managing risk and transaction costs. The committee was also asked to approve a local investment allocation range of 0% to 5% across the Border to Coast pool region, with a preference for Hertfordshire opportunities. This approach aims to balance financial returns with local outcomes and acknowledges that Border to Coast's local investment capabilities are still developing. The committee approved both the rebalancing ranges and the local investment allocation. The full draft ISS will be presented for consultation in October 2026, with final approval in February 2027.

Border to Coast Update

An update was provided on the transition of assets into the Border to Coast Pension Partnership. A review of Sterling Investment Grade Credit (SIGC) arrangements proposes consolidating partner fund credit holdings into the Border to Coast SIGC Fund. This is expected to yield fee savings and benefit from enhanced scale and governance. Recent investment activity included a £400 million investment into the SIGC Fund and drawdowns into private market commitments. An appendix was introduced to track transition progress, showing assets held within ACCESS, legacy arrangements under Border to Coast oversight, and fully transitioned assets. As of 30 June 2026, £229 million had transitioned to Border to Coast. The committee noted the report.

Pension Fund Responsible Investment Report

The committee received an analysis of the Hertfordshire Pension Fund's decarbonisation progress as of 31 March 2026. The report indicated that the listed equity portfolio is ahead of its decarbonisation pathway, showing a 32% reduction in carbon footprint since 2020, largely due to portfolio changes and manager allocations. However, the corporate bond portfolio is behind its target. The report highlighted limitations in data availability, particularly for Scope 3 emissions and non-listed assets. Members discussed the importance of a comprehensive picture for responsible investment policies and the ongoing efforts to improve data collection and engagement with asset managers. The committee noted the report.

Changes to the Constitution

The committee noted the report detailing the requirement to update Hertfordshire County Council's Constitution following the introduction of the Pension Schemes Act 2026 and the Local Government Pension Scheme (Amendment) (Governance) Regulations 2026. These changes, effective from 30 June 2026, introduce strengthened governance requirements. A key proposal is the creation of Appendix 31, outlining the Terms of Reference for the Pensions Committee, to improve accessibility and transparency. The proposed amendments will undergo legal review before being presented to the Standards Committee and Full Council for approval.

Independent Person Appointment Process

The committee received an update on the appointment process for the Fund's Independent Person, a new statutory requirement under LGPS governance reforms. Officers, with support from Marsh, have developed the role specification, emphasizing investment expertise. The recruitment process is underway, with candidate search commencing in September 2026 and a final appointment expected by the end of November 2026. The committee approved the delegation of the appointment to the LGPS Senior Officer, subject to consultation.

Draft Investment Strategy Statement – Rebalancing and Local Investment

The committee was presented with a draft Investment Strategy Statement (ISS), required by 31 March 2027. They approved proposed rebalancing ranges for asset classes and a local investment allocation range of 0% to 5% across the Border to Coast pool region, with a preference for Hertfordshire opportunities. The full draft ISS will be presented for consultation in October 2026.

Border to Coast Update

An update was provided on the transition of assets into the Border to Coast Pension Partnership. A review of Sterling Investment Grade Credit (SIGC) arrangements proposes consolidating partner fund credit holdings into the Border to Coast SIGC Fund, expected to yield fee savings. Recent investment activity included a £400 million investment into the SIGC Fund and drawdowns into private market commitments. An appendix was introduced to track transition progress, showing £229 million transitioned to Border to Coast as of 30 June 2026. The committee noted the report.

Pension Fund Responsible Investment Report

The committee received an analysis of the Hertfordshire Pension Fund's decarbonisation progress as of 31 March 2026. The report indicated that the listed equity portfolio is ahead of its decarbonisation pathway, while the corporate bond portfolio is behind target. Limitations in data availability, particularly for Scope 3 emissions, were acknowledged. The committee discussed the importance of a comprehensive approach to responsible investment and the ongoing efforts to improve data collection and engagement with asset managers. The committee noted the report.