The Kingston upon Thames Pension Board met to discuss the performance of the pension fund, its investment strategy, and key governance issues. The board noted the improved funding level of the pension fund, but also discussed a breach of regulations relating to the McCloud remedy¹ and considered recommendations from the Pension Fund Task and Finish Group regarding responsible investment.

Here's a breakdown of the key topics:

Task and Finish Group Recommendations

The board considered the recommendations of the Pension Fund Task and Finish Group, which was established to review the fund's investments, including those held via the London Collective Investment Vehicle (LCIV), regarding companies allegedly complicit in violations of international law and human rights, particularly in Palestine.

The Task and Finish group was set up after the council received a petition on 8 July 2025, signed by 1,578 people, calling for the council to divest from companies that were complicit in human rights abuses in Palestine.

The Task and Finish Group's report, detailed in Annex 1, made the following recommendations:

• Note the four identified investments on the UN (OHCHR) list² and seek to understand what these companies' responsible investment policies are and whether these companies have taken action to change their own behaviours and activity in relation to violations of international law in Palestine.
• Consider options to divest from and actively not invest in companies on the UN OHCHR List, noting that at the current time only the Motorola investment is held outside of a pooled fund arrangement with it being cost prohibitive to consider this for those held in a pooled fund.
• Take the opportunity in reviewing the Responsible Investment Policy alongside the Investment Strategy and to strengthen the policy regarding prioritising human rights in the ESG considerations.
• Seek to have an Annual Stewardship report, to provide further details of how the Fund's responsible investment policy is implemented in practice, with the first report to be presented to the 11 February 2026 Pensions Panel meeting.
• Report back to the next appropriate Corporate and Resources Committee with the outcome of the review and the steps being taken by the fund as a result.

Sue Kurden, Executive Director of Corporate Services, explained that the task and finish group had identified four potential investment areas of concern, with three of them being held in a pooled fund. She explained the difficulty of divesting from a pooled fund, using the analogy:

if you have a box of chocolates you know have box celebrations and you don't like the bounties um you can't just take the bounties out you have to actually effectively dispose of the entire box of chocolates

Councillor Jackie Davies thanked Ms Kurden for her clear explanation of what has been going on, saying:

when you look at the figures and that list of companies it's just astonishing

Sam Burgess asked if the pooled funds were being contacted individually to ask them what they are doing about the situation and the exposure. Ms Kurden confirmed that this would be happening.

Pauline Lyseight-Jones raised a question about a statement relating to Motorola in paragraph 17 of the report, asking for clarification on what constitutes reasonable in the statement. Ms Kurden clarified that the pension panel must have due regard for all scheme members, and that they need to ensure that any actions that they might take, they could reasonably expect that the majority of scheme members would agree with that action.

The board noted the task and finish group update.

McCloud Remedy Breach

Tom Taylor, Head of Pensions Administration, reported that the fund had not met the statutory implementation deadline of 31 August 2025 for the McCloud remedy, due to delays in receiving a functional software solution from Civica³, and internal challenges relating to historic data collection. He confirmed that the breach had been formally reported to the Pensions Regulator.

Mr Taylor confirmed that a revised project plan had been established with a new target completion date of 30 June 2026, and that manual processes were in place to ensure any member retiring or leaving the scheme has their benefits calculated correctly.

He also stated that the worst case scenario as a result of the breach would be a fine of up to £50,000 and poor reputation for the fund.

Pauline Lyseight-Jones raised concerns about Civica's responsiveness, and the lack of a timeline for bug fixing beyond the end of August in the link provided. Mr Taylor said that he had received an email that morning from Civica saying that the mcleod 2.0 release should be with them by the end of the month.

Triennial Valuation

Mr Taylor presented the initial results of the 31 March 2025 triennial valuation, highlighting that the fund's funding level had improved since the last valuation in 2022. He attributed this mainly to an increase in the expected future investment return, which increased the discount rate⁴ from 4.2% to 5.6%. He also noted an increase in the prudence level from 70% to 85%.

Mr Taylor explained that the funding strategy statement was being updated to align with new guidance from the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Scheme Advisory Board (SAB), including structural alignment, standardised terminology, and enhanced governance.

Investment Strategy and Performance

Catherine Gray, Head of Pensions Investments and Treasury, summarised the investment performance of the fund, noting that the market value of the fund was £1.336 billion as of 30 June 2025, an increase of £46 million over the previous quarter. She reported a strong quarterly return of 3.2%, outperforming the benchmark of 2.7%.

Ms Gray also noted that the fund was underweight in the impact and property asset classes, and slightly overweight in equity and index linked gilts. She explained that the pension panel was in the process of reviewing the investment strategy for the next three years, which would be presented to the pensions panel meeting in December.

Kola Agboola asked Ms Gray to explain what the London CIV was for those who are not investment experts. Ms Gray explained that the London CIV was the London Collective Investment Vehicle, an FCA regulated investment vehicle. She explained that the government had introduced new regulations that all LGPS funds have to invest their assets through an investment pool, and that the London CIV was their chosen investment pool.

Pension Administration Performance

Mr Taylor presented an update on the pension administration performance, noting that the overall number of outstanding cases had fallen, and the backlog of cases overdue by three months or more had been cleared.

He also highlighted a breach of law which has been reported to the regulator regarding the McCloud remedy, and an open internal dispute resolution procedure (IDRP) case, which has now been resolved.

Pauline Lyseight-Jones thanked Mr Taylor for a very positive report, but noted that she had been unable to find the full determination that was available publicly online. Mr Taylor said that he would send her a copy of the link after the meeting.

Sam Burgess congratulated the team on clearing the historic backlog of cases overdue by three months or more.

Governance and Risk Update

Mr Taylor presented the governance and risk update, noting that the risk register had been reviewed, and that risk 27, the administration risk, remained rated as red due to Civica's failings with delivering software on time and causing the breach of the McCloud remedy.

He also mentioned the access and fairness consultation, the state pension age review, and administration charges. He noted that no administration charges had been levied over the last quarter, and that all prior charges had been recovered.

Annual Reporting Accounts

Ms Gray summarised the annual report for 2023/24 and the statement of accounts contained within it. She noted that the assets stood at just under £1.3 billion as at the end of March, and that the benefits exceeded the contributions in for the first time. She also mentioned that membership numbers had been relatively stable, but the number of active members had reduced and the deferreds and pensioner members increased.

She added that a section on responsible investment had been added to the annual report, and that the savings achieved from investing collectively through the London Collective Investment Vehicle was £1.6 million over the 10-year period it has been set up.

Work Programme Update

Mr Taylor presented the updated work programme, highlighting the budget monitoring and pension fund accounts and audit findings report as key items for the next meeting in December.