The Pension Committee of Croydon Council met on Tuesday, 11 June 2024, to discuss the Fund's Medium Term Business Plan for 2024-27, receive updates on pension administration, and review the Fund's risk register and breaches of the law log. The committee also received an update on the London Collective Investment Vehicle (London CIV) and noted the quarterly investment monitoring report.

Medium Term Business Plan 2024-27

The committee reviewed and agreed the draft Medium Term Business Plan for the Croydon Pension Fund for the financial years 2024/25 to 2026/27. The plan outlines the team's achievements over the past year, including the introduction of policies on conflicts of interest, responsible investment, and cyber security. Key priorities for the upcoming municipal year include the transfer of assets to the London CIV, enhanced training for committee and board members, cybersecurity measures, updating annual reports and accounts, addressing the McCloud remedy, preparing for the pensions dashboard, ensuring compliance with the Pensions Regulator's Code, and reviewing departmental resourcing.

Members raised questions regarding the documentation of risk factor investigations, the process for external audits, and the rationale behind increased investment management fees. Officers explained that the audit process was complex due to Croydon's financial history and the re-tendering of contracts, and that fees were generally competitive compared to other councils. The transfer of assets to the London CIV was highlighted as a strategy to achieve better fee discounts. The committee was assured that efforts were being made to ensure accurate record-keeping for risk factors.

Councillor Hopley congratulated officers on the groundwork laid with policies and processes, while Councillor Brew commended the team's hard work and the Fund's performance. Councillor Fraser acknowledged the significant work undertaken by officers and the improvements in the Fund's financial standing and governance. Councillor Hay-Justice requested that investigations into pension fund risk factors be documented for future reference. The committee agreed to invite the Chief People Officer to the next meeting.

Pension Administration Update

The Pension Manager presented an update on the administration team's performance from February to April 2024. The team continued to perform well in key areas such as deaths, retirements, and estimates. Improvements were noted in leaver calculations, attributed to process changes and resourcing adjustments. The team had successfully processed over 500 bulk leaver calculations following a software update, with efforts underway to incorporate this data into KPI reporting.

The end-of-year processes were progressing well, with a good response from employers. The team was working to update member records and issue annual benefit statements by August. Pension increases of 6.7% were applied in April, with some software issues identified and manually adjusted for pensioner cases. The upgrade of the Member Self-Service system to Engage had commenced, with user testing expected in the autumn.

Members inquired about the Insights reporting tool, contribution returns, and the potential use of AI in managing workload. Officers confirmed the effectiveness of the Insights tool and explained the resolution of a previous employer contribution issue, noting a current unusual delay from one payroll provider. Discussions were ongoing with other councils and the software provider regarding new KPI recording and potential access to phone data. The team aimed to clear outstanding leaver cases to focus on aggregation and interfund cases, acknowledging that some open cases were historical with legitimate reasons.

Breaches of the Law Report

The Head of Pensions and Treasury reported that there were no new breaches logged since the previous meeting. The Corporate Director for Resources provided an update on the outstanding audit findings for the 2019/20 accounts, explaining that the delay was due to the Kroll report and stringent requirements from auditors Grant Thornton. The formal sign-off of the accounts was pending the resolution of the Kroll report and the outcome of regulatory changes related to the audit backstop date, which was now uncertain due to the general election. The 2021 accounts were with the auditors, and officers were seeking an extension for the backstop deadline. Councillor Stewart requested that the Chief People Officer be invited to the next meeting to discuss the discretions policy.

Risk Register

The Head of Pensions and Treasury presented the updated Pension Fund Risk Register. Officers had made improvements, including future actions on the register. Regarding the risk of scheme employer insolvency, fund actuaries were assisting with covenant assessments of admitted bodies, with no immediate concerns identified. The risk of insufficient assets to meet liabilities was being mitigated by quarterly funding updates from the actuary and improved contribution monitoring. A mapping exercise was underway as part of the cybersecurity strategy. The Head of Pensions and Treasury confirmed his permanent appointment to the role.

Training Update

The Head of Pensions and Treasury highlighted the importance of committee members completing the online Hymans training modules. The report detailed training undertaken by committee members in the 2023/24 financial year, with appendices providing logs of training activities and progress on the Hymans Robertson training portal. It was noted that only one committee member and no reserve members had completed modules on the Hymans platform, despite login details being resent and reminder emails issued.

Published Fund Documents

The Head of Pensions and Treasury presented a list of documents published on the Fund's website as of 30 April 2024, in accordance with Aon's governance review recommendations. The list, provided in Schedule A, included accounts, annual reports, various forms, newsletters, and policy documents. The Business Continuity Plan and Cyber Security Strategy were excluded due to their sensitive nature.

Scheme Advisory Board and Pensions Regulator Updates

The Head of Pensions and Treasury provided an update on matters being considered by the Local Government Pension Scheme Advisory Board (SAB) and The Pensions Regulator (TPR). Key points included the outcome of the LGPS scheme cost assessment, which found no need to change scheme benefits, and updated guidance for preparing the fund annual report. The SAB's work on the Gender Pensions Gap was highlighted, along with reports on Sharia law compliance within the LGPS and the progress of the Economic Activity of Public Bodies (Overseas Matters) Bill. The Pensions Regulator's new General Code of Practice, which consolidates previous codes, was also discussed, with officers confirming they would review its implications for the Fund.

Quarterly Investment Monitoring Report

The Head of Pensions and Treasury presented the quarterly investment monitoring report for the period ending 31 March 2024. The Fund's market value increased to £1.86 billion, with a quarterly return of 4.8%. The indicative funding level was estimated at 126%, with an 87% chance of achieving the required investment return.

The report detailed the asset allocation strategy, noting that Global Equities were slightly above the target allocation at 49.8%, leading to a divestment of £100 million from the LGIM Developed World Equity fund and reinvestment into the London CIV Multi-Asset Credit Fund. Fixed Interest allocation was below the target range at 14.9%, but this was brought within the target range to over 20% following the transfer of assets. Infrastructure and Private Equity investments were performing well over the long term, despite short-term revaluation adjustments. Property values had declined, but the Schroders portfolio showed a positive return due to reinvestment strategies.

The committee noted the report and agreed that officers should continue to rebalance the Fund's investments over the next year to align with the target asset allocation.

London CIV Update

Dean Bowden, CEO of the London CIV, provided an update on the organisation's developments. He highlighted efforts to improve efficiency, reduce duplication, and lower the Discretionary Funding Charge (DFC), with a view to its eventual elimination. New funds, including the UK Housing and Buy and Maintain Credit funds, had been launched. Mr. Bowden noted the government's deadline of March 2025 for transferring liquid assets to pools, acknowledging this was ambitious and that the London CIV proposed a more realistic timeline of March 2026 for illiquid assets. He also discussed the importance of collaboration within the LGPS community to invest in infrastructure and the role of Environmental, Social, and Governance (ESG) investments.

Exclusion of the Press and Public

The committee resolved to exclude the press and public from the remainder of the meeting due to the likely disclosure of exempt information relating to the financial and business affairs of particular persons. This exclusion applied to the Part B sections of the Quarterly Investment Monitoring Report and the Corporate Bond Transfer to London CIV.

The meeting concluded at 12:58 pm.