The Lambeth Council Pensions Committee met to discuss the fund's performance, risk management, and future strategy, including noting the actuarial assumptions for the 2025 valuation, which will influence employer contribution rates. The committee also reviewed the general administration and governance of the Lambeth Pension Fund.

• Actuarial Assumptions 2025
  • Discount Rate
  • CPI Inflation
  • Longevity
• Risk Register Update
  • Investment in Occupied Territories
• Investment Performance Report - Quarter 1 2025
• General Update
  • Fit for the Future Outcomes
  • LGPS Pass
  • LCIV Statement on Israel and the Occupied Palestinian Territories
  • LGPS Access and Fairness Consultation

Actuarial Assumptions 2025

The committee discussed the actuarial assumptions for the 2025 valuation, which are used to calculate funding positions and contribution rates. The key assumptions reviewed were the discount rate (assumed future investment return), CPI inflation (benefit revaluation), and longevity (life expectancy).

The report presented to the committee included advice from Hymans Robertson, the fund's actuary¹.

Discount Rate

The discount rate is the rate of return used to estimate the present value of future cash flows. Councillor Martin Bailey, Chair of the Committee noted that the discount rate seemed punchy . The report recommended maintaining prudence margins at 85%, resulting in a discount rate of 5.5% per annum. This was based on modelling 5,000 simulations of the future economic environment.

CPI Inflation

The committee heard that members' pension benefits in the Local Government Pension Scheme (LGPS) are linked to the Consumer Prices Index (CPI)². The report recommended a CPI inflation assumption of 2.3% per annum at March 2025, based on the median projection from the Economic Scenario Service (ESS) model.

Longevity

The committee was told that the Fund uses Club Vita analytics to set the life expectancy assumption tailored to fit the Fund's specific membership. The report stated that officers had considered various aspects that could impact future longevity and recommended that the latest industry-wide mortality improvement model (CMI) is adopted, with the key parameters of this model remaining unchanged from 2022.

Risk Register Update

The committee reviewed the Lambeth Pension Fund Risk Register, which identifies and manages potential risks to the fund.

Two key changes to risk ratings were highlighted:

• PA1: Insufficient resources: The risk rating was increased to reflect staffing changes in the Treasury and Pensions team and the short-term impact on delivering timely support to the committee and board.
• PA20: Responsible Investment: The likelihood score was increased to reflect the risk to the Fund's reputation due to its exposure to companies engaged in activities in the Occupied Palestinian Territories.

Investment in Occupied Territories

Peter Woodward raised concerns about the reputational risk of the fund's continued investment in illegal settlements in the occupied territories. He argued that this should be recorded as a separate risk in the register and should not be categorised as green.

Councillor Paul Valentine suggested expanding on the description in the cause of risk of PA18 and PA20, rather than creating a new risk. Simon Hannah supported this suggestion, wanting it to reflect as much as possible about the situation and the fund's exposure to potential risky, violent things that are going on in the world.

Investment Performance Report - Quarter 1 2025

The committee reviewed the investment performance report for the first quarter of 2025. The report noted that the fund underperformed against the benchmark by 1.3%, driven by underperformance in global equity, emerging market equity, and UK Private Rented Sector (PRS) funds. Performance against all reporting time frames up to five years fell short of the respective benchmarks. The actuary's estimated funding level as at 31 March 2025 stood at 121%.

Sandy provided a background on the markets, noting that markets started off fairly positively in January and February, but there were some key things that happened over February time, including AI and Deep Seek from China threatening US dominance in artificial intelligence.

General Update

The committee received a general update on several pensions-related matters.

Fit for the Future Outcomes

The committee discussed the government's response to the Fit for the Future consultation, which sets out new requirements for administering authorities and LGPS pools. The key outcomes include transitioning all assets to pools by 31 March 2026, delegating investment strategy implementation to pools, and setting a target allocation for local investment.

LGPS Pass

The committee was informed about the London CIV's LGPS Pension Advisory and Support Service (PASS), which offers investment advisory services and strategy and policy support to client funds.

LCIV Statement on Israel and the Occupied Palestinian Territories

The committee discussed the London CIV's statement on Israel and the Occupied Palestinian Territories, which outlines its general position on human rights as a stewardship priority and its approach to the issue. The statement acknowledges the human rights issues in conflict zones and states that the LCIV takes a neutral stance in line with UK law and the UK's interpretation of international rulings.

Councillor Valentine said that the statement gave him the ick because if you take a neutral stance, you take the position of the oppressor .

LGPS Access and Fairness Consultation

The committee reviewed the government's consultation on proposed changes to legislation, including the equalisation of survivor pension entitlements and addressing inequalities in the regulations. The consultation seeks views on proposed changes to legislation, predominantly focusing on the equalisation of survivor pension entitlements, as well as using the opportunity to address longstanding issues and anomalies in the regulations. The deadline for responses is next Thursday.