At a meeting of the Hertfordshire Local Government Pension Scheme Local Pension Board, Councillor Liz Needham was welcomed as a new board member, and Jolyon Adam was elected chair. The board discussed the draft audit plan, the pension fund risk register, the LPPA performance report, employer risk and governance, training, and investment performance.

Draft Audit Plan

Rob Winterton, Finance Manager for the pension fund, introduced the draft audit plan for the year ending 31 March 2025, prepared by KPMG, the fund's external auditor. The plan outlines KPMG's risk assessment and planned audit approach, noting one significant risk relating to the fund not enforcing segregation of duty controls over the posting of journals¹, specifically those below £500,000. To mitigate this, the fund has implemented a process requiring all manual journals to be parked and posted by different officers, effective from 1 April 2025.

Sadan Su, Audit Manager with KPMG, explained that materiality² was set at £62.6m, or 1% of the total assets of the fund. Mohamad from KPMG summarised the firm's risk assessment, highlighting the significant risk of management override of controls³, as well as risks associated with the completeness and accuracy of investments, the valuation of level 1, 2, and 3 investments⁴, and the appropriate presentation of the actuarial position in the financial statements. In response to a question from Jolyon Adam about delays in signing off the previous year's accounts, Rob Winterton stated that issues had been resolved and he was not aware of anything that could cause delays to the 2024-25 accounts. However, it was noted that the pension fund accounts are consolidated with the council accounts, so any delays to the council audit could also delay the signing of the pension fund accounts.

The board noted and commented upon the KPMG audit plan for the pension fund accounts.

Pension Fund Risk Register Report

Alison Sharp, Lead Pension Governance Officer, presented the risk register report for January to March 2025. There were no movements in the ratings of risks during the quarter. She noted that the updated risk policy and new look register, which includes accepted risk tolerance levels and risk owners, had been approved at the recent pension committee.

Jolyon Adam suggested flagging when a risk was last reviewed in the new risk register summary, to provide clarity on the frequency of reviews. Alison Sharp agreed to take this into consideration.

The board noted the content of the report and the updated risk management policy.

Hertfordshire LGPS Q4 LPPA Performance Report

Chris Batts from LPPA presented the Q4 performance report, noting a casework performance of 98.9% for the quarter and 98.2% for the year, above the 95% service level target. He highlighted increases in casework volumes related to aggregation and transfer work, and a positive position on monthly returns from employers. He noted that there was still work to do on the timeliness of leaver notifications, and that cases involving AVCs⁵ continued to be a challenge. Chris Batts mentioned that LPPA were considering the idea of an employer relationship manager to have regular meetings with large employers. He also provided an update on projects, including the Efficiency and Service Improvement Programme (ECIP), the online retirement form, and the pensions dashboard. He noted that the valuation was due to be submitted to the actuary next week, using a format which doesn't include McLeod data⁶. Sharon Moore, a member representative, welcomed the positive results across the service and urged continued focus on tracing deferred members and communicating with members about retirement options. Chris Batts responded that work was being done on this, including procurement for tracing services.

Jolyon Adam raised a question about employer retirement notifications and payments made within 30 days, and Chris Batts explained that there were a number of contributing factors to delays, including queries on pay and the return of member forms. He hoped to see a higher level of payments within 30 days in the future as improvements bed in.

The board noted and commented on the report and its appendices.

Employer Risk and Governance

Alison Sharp presented the employer risk and governance report for January to March 2025. The number of risks in the red category decreased by three, leaving seven remaining. Two of the red risks related to ceased employers with outstanding deficits, four related to employers with no indemnity arrangements, and one was due to an amalgamation of green and amber risks.

Jolyon Adam commended the team on the progress in reducing the number of employees in the red risk category.

The board noted and commented on the contents of the report.

Training Update

Taryn Ahlberg presented a training update, noting that board members have a statutory responsibility around training and understanding, but that this is not the same for committee members. She said that a training plan for the year ahead had been drafted, and that a knowledge and understanding assessment would be undertaken later in the year.

Jolyon Adam commented on the difference in attendance between committee members and board members, and suggested that the pension committee chair consider how training of committee members could be supported and validated. Taryn Ahlberg said that she would feed this back to the chair of the pensions committee.

The board noted the content of the report and agreed to undertake training to improve their knowledge and understanding of the local government scheme.

Investment Performance Report as at 31 March 2025

Sandy Dixon from Mercer, the fund's investment consultant, presented the investment performance report as at 31 March 2025. She noted that global equities were down around 4% over the quarter, and that the fund's benchmark return was down about 0.7%. The actual performance of the fund was down just over 1%.

Sandy Dixon said that the fund had returned 1.2% per annum over the three years since the last valuation, below the discount rate of 3.8% per annum. She attributed this to the impact of the Russian invasion of Ukraine and high increases in interest rates. She added that she expected positive performance over the next quarter.

James Kidd asked about complexities around valuation of assets and requirements for post balance sheet events, and Phil Prasad, pulling an investment analyst for the fund, responded that there had been no issues with level three assets, and that he did not expect there to be a post balance sheet event in the accounts.

Jolyon Adam asked whether the discount rate was likely to be significantly impacted by current volatility, and Sandy Dixon responded that she would expect the discount rate to be higher than it was last time, due to higher yields on bonds. Taryn Ahlberg added that Barnett Waddingham would be coming to the next pension board to explain more about how they calculate discount rates.

The board noted the investment performance report.