The Pension Fund Committee convened to discuss key aspects of the council's Local Government Pension Scheme (LGPS), including investment performance, administration, and strategy. The committee approved the content of the Pension Fund Quarterly Update to the 30 June 2025, which included the Fund Managers' current performance. They also noted the Administration of the Councils LGPS function report.

Pension Fund Quarterly Update

The committee approved the content of the report and the Fund Managers current performance.

The report provided an update on the Pension Fund's investment performance for the period ending 30 June 2025. The report noted mixed performance across individual portfolios, but overall, the Pension Fund's investments outperformed the benchmark over the quarter and the past three years. Detailed performance analysis is available in appendices D and E of the Public reports pack.

Global equity markets experienced growth during the quarter, largely due to announcements regarding US trading tariffs. Bond yields showed mixed results, with US Treasury yields remaining relatively flat and UK gilt yields declining due to concerns about high inflation.

The Fund's asset allocation strategy, revised in February 2024, includes commitments to invest £48 million in the London Collective Investment Vehicle (LCIV) UK Housing Fund and £30 million in the Nature Based Fund. As of 30 June, £20.919 million has been invested in the UK Housing Fund, with further drawdowns planned as opportunities arise. Additionally, £13.836 million has been invested in the Nature Based Fund.

The report included a table showing the bid-market values of the Fund by investment mandate on 31 March and 30 June 2025, along with the strategic asset allocation.

The committee also reviewed fund performance, noting that the fund's bid value was £12.25 million higher than the previous quarter. While all portfolios underperformed their strategic benchmark during the quarter, the Fund outperformed its benchmark over the quarter and the past three years. Performance management information is provided by Northern Trust and the Fund Managers.

The report also highlighted the most significant risk for the Fund: the potential failure to generate sufficient returns to meet liabilities. The implemented strategic asset allocation policy aims to mitigate this risk through diversified asset distribution and the engagement of multiple investment managers with differing investment styles. Investments are subject to statutory limits and restrictions.

Administration of the Council's LGPS Function

The committee noted the content of the report.

The report provided an update on pension administration for the period ending 30 June 2025. Key points from the report included:

• The pension administration function is managed by a team of 9.25 full-time equivalent employees, including the Pensions Manager.
• The pensions team returned to the Resources Directorate in July 2025.
• The team continues to work with the Corporate Fraud Team, with no new cases of significant overpayment of pensions identified.
• The team is working to improve turnaround times for work output with the assistance of two recent new hires.
• The Pensions Manager is working with HR to finalise the team restructure, with approval from the Section 151 Officer¹.

Other topical issues addressed in the report included:

• McCloud Judgement: Work is ongoing to identify members in scope and apply the remedy.
• Pensions Dashboard: An ISP² has been secured with Heywoods, the pension software supplier, at an annual cost of £18,435 for the first year. Training for team members is scheduled.
• 2025 Fund Valuation: Initial data for the valuation has been submitted, with a significant number of errors identified due to incomplete data submissions by external payroll providers. The newly appointed technical officer will work with employers who do not use the Council's payroll to ensure compliance.
• 2025 Annual Benefit Statements (ABS): Statements were issued before the deadline of 31 August 2025, with manual updates required for 916 records due to schools and employers not using the Council's payroll service.
• MSS Moving to Engage: Member self-service (MSS) is being replaced with Engage, a more modern product with enhanced facilities for members. Support for MSS will cease in January 2026.
• The Pension Scheme Consultation: The team responded to the consultation questionnaire, and the Pensions Manager attended a meeting of the London Pension Managers where the proposals were discussed. A notable point was the proposed removal of the 75-year age limit for the payment of death grants, intended to be retrospective from 2008. The Local Government Association (LGA) draft response is included with the report as Annex A.

The council monitors the performance of the administration team against a number of performance indicators on a monthly basis. During the quarter, the team successfully met all four targets: PEN01, PEN02, PEN03, and PEN04, with notable improvements in PEN02 and PEN03. Details of the performance from April 2025 to June 2025 are set out in Annex B.

Overview of the Investment Strategy

The committee noted and commented on the content of the report.

The report served to introduce a presentation from the Fund's Investment Advisers, Mercers, regarding a periodic review of the investment strategy, with particular reference to the results of the Triennial Valuation. The results of the 2025 valuation are expected later this year. The review included views on future considerations for the Fund's asset allocation.

The report noted that pension fund investment should have regard to the risks arising from climate change and other market volatility.