The Pensions Committee of Newham Council met on Wednesday 24 July 2024 to discuss the Newham Pension Fund's business plan, budget, and investment strategy. Key decisions included the approval of the 2024-25 pension administration budget and the draft 2024-25 Pension Fund Business Plan.

Pension Fund Business Plan and Budget

The committee reviewed the Newham Pension Fund's 2023/24 business plan and developments since the last meeting. They were asked to note the response to a letter from the Department of Housing, Communities and Local Government (MHCLG) regarding pooling, the Government Actuary's Department (GAD) Section 13 Report, and the Fund's budget monitor and cash flow updates.

Crucially, the committee was asked to agree to the Draft Pension Fund Budget for 2024-25, which was set at £0.973m. This represents a 14.5% increase on the 2023-24 budget, attributed to an increase in membership numbers and a rise in the rate per member. The increase in membership numbers is correlated with the reported growth in the Newham pension fund, leading to increased calls to the Local Pension Partnership Administration (LPPA) contact centre and a higher number of cases. The rise in the price per member is due to inflationary pressures, service development, and legislative requirements, including the implementation of the McCloud remedy and preparations for the Pension Dashboard.

The committee also agreed to the Draft Pension Fund Business Plan for 2024-25. This plan builds on the previous year's activities and outlines key tasks for the committee, including the progression of LCIV pooling, the development of a Climate Action Plan, preparation for the Task Force on Climate-Related Financial Disclosures (TCFD), and the review of the Active Equity Management Structure. The plan also includes a member-training plan to ensure compliance with CIPFA's Knowledge and Skills framework.

Investment Strategy Update

The committee received an update on the investment strategy and its implementation. The Fund's asset valuation for Q1 2024 stood at £1.846 billion, the highest ever for the Fund, an increase of £79 million from Q4. The Fund's performance against its benchmark was positive, with a 4.94% return in the three months to 31 March 2024, outperforming its composite benchmark by 1.1%. The LGIM ESG Paris Aligned World Equity Index Fund and the LCIV Global Equities Focus Fund were noted as the largest contributors to this performance.

However, the report also highlighted a funding deficit of £96 million at 31 March 2024, resulting in a funding level of 95%. This is a decrease from a surplus of £4 million at 31 March 2022. The primary reasons for this reduction are the higher-than-assumed inflation and pension increases, which have increased liabilities. Investment performance in Q1 was slightly lower than anticipated by the Actuary.

The committee was also informed about the appointment of a new Global Equity Value manager by the LCIV, with a launch expected in October 2024, which aligns with the Fund's investment strategy. Updates on climate action were also presented, with the climate action plan and emissions data to be presented at the next meeting.

Pension Administration Update

An update on the administration of the Newham Pension Fund was provided, covering legislative changes, overall administration performance, and updates from the Local Pension Board. The report detailed the progress on the McCloud remedy, with LPPA's software updated to identify eligible members. The Pensions Dashboards (Amendment) Regulations 2023 were noted, setting a final deadline of 31 October 2026 for schemes to connect to the dashboard. LPPA's performance was reported as above its 95% Service Level Agreement (SLA) for the third consecutive quarter. The number of registered members for the online portal had increased to 4,145 by the end of Q4.

The committee also noted the ongoing increase in membership numbers across the fund, contrary to concerns that cost of living pressures might lead to members exiting the fund. The Local Pension Board had met on 8 July 2024, discussing the latest administration report, legislative changes, and risks on the Fund's Risk Register.

Government Actuary Department (GAD) Section 13 Report

The committee reviewed the Government Actuary's Department (GAD) draft Section 13 Report, which assesses the actuarial valuations of LGPS funds. The Newham Pension Fund received green flags across all four aims assessed: compliance, consistency, solvency, and long-term cost efficiency. This indicates that the Fund is in a healthy financial position, with sufficient assets and contributions to meet its long-term benefit obligations. The report noted that the Fund's funding level had improved since the 2019 review, and there were no specific recommendations for remedial action.

The committee also noted the response to a letter from the MHCLG regarding pension asset pooling and the potential for long-term savings and efficiencies through mergers. The Fund's response emphasised the importance of maintaining local accountability and fiduciary responsibility to members, while acknowledging the benefits of scale. The response also highlighted the progress made in implementing the Scheme Advisory Board's Good Governance recommendations.