The Pension Board met on Tuesday 9 July 2024 to discuss pension administration performance and projects, governance and risk, and investment strategy and performance. The Board noted updates on these key areas and reviewed the work programme for the upcoming year.

Pension Administration Performance Update

The Board received an update on the performance of the Shared Pensions Administration Service. Rachel Howard, Assistant Director of Finance, reported that the number of outstanding benefit processes had fallen to 1,769 by the end of June, the lowest figure in over a year. This reduction has been attributed to a new work allocation process designed to prioritise high-priority cases and meet deadlines more systematically. The majority of the remaining backlog relates to transfers in or out, which were impacted by government factor changes.

Councillor Jackie Davies raised a question about the 44 leaver cases that were over 12 months old. Rachel Howard explained that these often occur when there are discrepancies in information from third parties, such as employers, and that resolving these can take time.

The Board also discussed the ongoing issue with the SLA legal deadline tracker, which could not be populated due to a software issue. While acknowledging the inconvenience, officers assured the Board that a breaches of law register is maintained and that legal requirements are being complied with. Alexandra Harris suggested that a simpler statement might be more helpful if the table cannot be populated.

Regarding staffing, Rachel Howard confirmed that there were vacancies for two senior pensions officers and a gap at the head of service. She noted that recruitment and retention of staff with the necessary pensions administration experience is an ongoing challenge, but expressed confidence that the new work allocation method and ongoing recruitment efforts would improve capacity.

Pension Administration Projects Update

The Board was updated on key projects within the Shared Pensions Administration Service. The annual returns project is progressing well, with 56 out of 58 employer returns received. The annual pensions increase has been applied, and work is underway on the pensions dashboard, with a deadline of 31 October 2025. The McCloud Remedy legislation is in place, and a standalone calculator has been developed to ensure compliance.

Looking ahead, the team will focus on issuing annual benefit statements by 31 August. The report also highlighted upcoming changes to the Lifetime Allowance (LTA) and tax-free cash rules, which took effect from 6 April 2024, introducing new Lump Sum Allowance (LSA) and Lump Sum and Death Benefit Allowance (LSDBA) rules.

Pauline Lyseight-jones enquired about the timeline for a full project update on the McCloud Remedy, and officers indicated it would likely be by the December meeting.

Governance and Risk Update

The Board reviewed the Fund's risk register, which had been updated since the last report. While some risk scores had changed, there were no overall changes in the RAG status of any risks. A new risk concerning ill health retirement and associated pension strain costs had been added. Officers are exploring options to fund these costs through employer contribution rates, with a proposed amendment to the funding strategy statement to be presented to the Pension Fund Panel for approval and subsequent consultation with scheme employers.

Councillor Jackie Davies raised concerns about cybersecurity. Rachel Howard stated that while there is always an element of risk, the Fund has robust monitoring and management processes in place, and works with providers who also have their own security arrangements. She assured the Board that everything reasonable is being done to mitigate cyber risks.

Update from the Pensions Panel Meeting

The Board received a summary of the investment strategy and performance papers presented to the Pension Fund Panel. The market value of the Fund's assets had increased to £1.25 billion by 31 March 2024, with a quarterly return of 5.6%, outperforming the benchmark. The one-year performance was 13.2%, placing Kingston eighth out of 63 local authority pension funds over one year and third over five years.

The estimated funding level had improved significantly to 150%, resulting in a surplus of £410 million. This improvement is largely due to a reduction in liability values, influenced by an increase in the discount rate linked to interest rates.

The London CIV had achieved its target of bringing an additional £1.6 billion onto its platform, leading to negotiated fee savings of approximately £182,000 per annum for the Fund.

Review of the Work Programme

The Board reviewed the proposed work programme for the Pension Board meetings for the 2024-25 financial year. The programme includes regular updates on pension administration, governance and risk, and investment performance, as well as specific training modules. A responsible investment training session was highlighted for 10 September.

Members provided feedback on the online training modules, suggesting that they could benefit from updates and more interactive elements. Officers acknowledged this feedback and committed to reviewing the modules.

Other Business

Andrian Mayers, Head of Pension Investments, announced his departure to the London CIV. The Chair, Robert Ewing, thanked him for his contributions and wished him well in his new role.

The meeting concluded at 10:42 am.