The Pension Committee of Sutton Council met on 12 March 2024 to approve the Pension Fund's Business Plan and Budget for the upcoming financial year, and to review investment performance and governance updates. Key decisions included the approval of the 2024-27 Business Plan and the 2024-25 Budget, alongside noting updates on pension administration, governance, risk, and investment performance.

Pension Fund Business Plan and Budget

The Committee approved the Pension Fund's Business Plan for 2024-27 and its budget for 2024-25. The Business Plan outlines key objectives and actions across five themes: Administration and Communication, Actuarial and Funding, Governance, Financial and Risk Management, and Investment. Notable actions include the conclusion of the McCloud remedy and Guaranteed Minimum Pension (GMP) reconciliation projects, the acceleration of the Pensions Dashboards project, and new initiatives for customer empowerment and employer engagement. The 2024-25 budget anticipates a net surplus of income and expenditure, with increased staffing costs allocated to the Pensions Administration team to address backlogs.

Pension Administration Performance Update

An update on the performance of the Shared Pensions Administration Service was provided, highlighting a slight increase in outstanding processes, with a significant portion relating to leaver and transfer cases. The service has been impacted by staff sickness, leading to minor structural changes and the introduction of interim support to manage priority cases and backlogs. While Service Level Agreement (SLA) performance for transfers out, leavers, and general queries was below target in January 2024, efforts are underway to improve these areas. The report also confirmed no breaches of law, IDRP, or complaint cases were being investigated.

Pension Administration Projects Update

The Committee received an update on ongoing administration projects. The Pensions Dashboards project is progressing, with a proposed staging date for public service pension schemes by September 2025. The Guaranteed Minimum Pension (GMP) reconciliation project is expected to conclude by March 2024. The McCloud remedy legislation is in place, and a standalone calculator has been implemented to ensure compliance for retirement calculations. Data quality scores for common data have improved, and scheme-specific data scores have also risen, with ongoing work to further enhance data quality. The report also detailed a review of the Additional Voluntary Contributions (AVC) provider, Clerical Medical, which found no major concerns over long-term suitability, though recommendations were made regarding complaint handling and potential Shariah fund availability.

Governance and Risk Update

The Committee reviewed the Fund's risk register, noting the addition of a new risk concerning employers' ability to manage ill-health retirement costs following a change in funding strategy. Risk 2, relating to incomplete or inaccurate member data, remains an amber risk despite improvements in data quality scores. Updates were also provided on the Employer Forum, the upcoming Pensions Regulator's General Code of Practice, and cyber security measures. No new fines have been levied against scheme employers for late contributions since the previous meeting.

Investment and Manager Performance to 31 December 2023

The Fund's market value increased to £868 million by 31 December 2023. The Fund outperformed its benchmark by 0.5% for the quarter, with a return of 4.9%. While one, three, and five-year returns remained positive, they underperformed against benchmarks. Key contributors to quarterly performance included the LCIV Diversified Growth Fund, LCIV Multi-Asset Credit Fund, and LCIV PEPPA Fund. The funding level as at 31 December 2023 was 124%, with assets of £867 million and liabilities of £699 million, showing a significant improvement since the 2022 triennial valuation. The report also noted that the Fund's property allocation managers all underperformed during the quarter, and the La Salle fund is in the process of winding up.

Work Programme Update

The draft programme of work for the Pension Committee meetings for the Municipal Year 2024-25 was presented for review. The programme includes regular updates on pension administration performance, governance and risk, investment performance, and the London Collective Investment Vehicle (LCIV), alongside specific training sessions and reviews of key reports.

Pension Administration Strategy Update

The Committee noted the update on the revised pension administration strategy, which sets out the responsibilities of the administering authority and scheme employers. Following consultation with employers, the revised strategy will be presented for approval.