The Hertfordshire County Council Pensions Committee met to discuss the pension fund's draft audit report, risk management, investment performance, and responsible investment strategy. The committee reviewed the fund's performance, noting its strong financial position and discussed strategies for managing its surplus. Members also considered consultations on LGPS ¹ access and fairness, and the implications of pooling investments with Border to Coast Pensions Partnership².

Pension Fund Investment Strategy and Responsible Investment Review

The committee discussed the Hertfordshire Pension Fund Investment Strategy Statement and Responsible Investment Policy review. Phil, whose last name was not provided, explained that the Investment Strategy Statement, required by 2016 regulations, must be reviewed every three years, with the last review in March 2023, and the next due by March 2026. The primary objective is to provide pension benefits by selecting investments to fully fund requirements over an extended period. The current asset allocation is 65% growth assets and 35% defensive assets.

Phil also noted that officers have begun working with Mercer³ on a new strategic asset allocation, and members received training on this. He said that the Fit for the Future consultation will change how the strategic asset allocation is published, requiring both a granular and high-level version. He added that the government released the Fit for the Future technical consultation on 20 November, providing information on the draft statutory instruments to be implemented within the Pensions Bill. Regulation 12 will require the fund to publish its investment strategy statement within six months of the regulations taking effect, expected in March 2026, meaning another review by September 2026.

Jonathan, whose last name was not provided, presented appendix C, highlighting the fund's strong financial position due to prudent investment policy and contributions, leading to a surplus and potentially lower contributions. He noted that the fund's funding level as of 31 March was 109%, with a discount rate of around 5%. Jonathan explained that the committee's job for the next few years is to manage that surplus effectively and try and maintain it.

Jonathan also outlined the proposed investment strategy, which involves reducing the equity allocation and increasing the bond allocation to build a risk buffer. He said that the revised strategy is expected to deliver a similar total investment return with less volatility and risk.

Councillor Duncan Jones asked about the reduction in hedge funds and the move to pooling, and Jonathan explained that hedge funds offer diversification, but few local government pension schemes hold them as an asset class, making it unlikely Border to Coast will maintain them.

Councillor John Graham raised concerns about reducing the equity portfolio and increasing bonds, questioning the relevance of the collar and cap situation on equities. Jonathan responded that the equity protection would be retained, and its relevance would be reviewed, considering Border to Coast's offerings. He also noted that equity markets are highly valued, making the move prudent.

Councillor Stuart Roberts raised concerns about the responsible investment strategy, noting that it is now about influencing discussions with others, rather than controlling the fund's own destiny.

The committee agreed to include a free text box in the survey to gather more detailed feedback from members.

LGPS Consultations: Access and Fairness/Access and Protections

Alison Murray from Barnett Waddingham⁴ presented the LGPS consultations on access and fairness, and access and protections. The access and fairness consultation addresses discrimination related to survivor pensions, aiming to equalize benefits for dependents in marriages or civil partnerships, regardless of gender. It also intends to remove the upper age limit on death grants and includes changes related to family or caring leave, and seeks data on members opting out of the LGPS.

The access and protections consultation proposes increasing the normal minimum pension age from 55 to 57 by April 2028, with protections for those entitled to an earlier age before 4 November 2021. It also proposes enabling councillors in England and mayors to access the LGPS, treating them consistently with other members and councillors in other parts of the UK. Individual councils will not need to pass a resolution to enable their councillors to be eligible.

The consultation also addresses directions, allowing employers to apply for a change in administering authority, typically used by academies. The proposals aim to streamline the process if certain criteria are met, avoiding contribution rate shopping.

Alison Murray explained that the access and protections consultation also introduces new fair deal arrangements in the LGPS, removing the broadly comparable option for contractors and introducing the concept of a fair deal employer. This aims to prevent gaps in service for members, but raises concerns about the administration of employer contributions.

Councillor Ian Albert asked whether the responses to the next consultation would be a Hertfordshire response or one from Barnett Waddingham, and requested to see the response.

Investment Performance Report

Sandy, whose last name was not provided, presented the investment performance report as of 30 September 2025, noting that the total assets of the fund had grown to £6.9 billion. The net return of the fund over the last three months was 4.9%. Longer-term performance also exceeded the discount rate, with 8.8% over one year, 6.5% per annum over three years, 4.3% per annum over five years, and 6.9% per annum over ten years.

Sandy said that global equities in sterling terms were up around 4% over the last two months, and indexing gilts and bond markets were probably up about 1% or 2%.

Councillor John Hale sought clarification on the strategy monitoring slide, asking whether the 40% in overseas equity meant there was no investment in UK equity. Sandy clarified that there was exposure to UK equities through various mandates, but the overseas equity portion was currency hedged.

Councillor John Graham noted that the biggest area where money had been taken from was the global climate aware equity, and asked whether this meant the council was reducing its ESG ⁵ commitment. Jonathan clarified that the equities had been notionally moved to a real asset warehouse, but not sold.

Pension Fund 2024/25 Draft Audit Report

Sudhan Shudhadeech, audit manager at KPMG, presented the Pension Fund 2024/25 Draft Audit Report. He confirmed that KPMG expected to issue an unmodified audit opinion, subject to resolving a small number of outstanding matters. The key risk identified was management override of control, but testing found no reportable misstatements or indicators of fraud. A control deficiency was noted regarding the segregation of duties in posting and approving journals.

Mohamed, engagement in charge for the audit of the HEDFAC pension fund, detailed the risk of management override of controls, explaining the testing performed and the control deficiency related to parking and posting of journals. He also addressed the risk that investments were not complete, did not exist, or were not recorded accurately, outlining the procedures used to address this risk.

Sudhan Shudhadeech confirmed KPMG's independence and noted the audit fee for the 2024/25 financial year. He also mentioned a corrected misstatement of £7.7 million relating to the updated valuations of level 3 pooled investment vehicles.

Councillor John Graham raised concerns about the timetable, noting that the audit was still not complete in December. Stephen Pillsworth responded that the pension fund accounts were an integral part of the wider county council accounts, and both would be formally signed off by the end of February.

Pension Fund Response to the 2024/25 Draft Audit Report

Rob, whose last name was not provided, presented the Pension Fund Response to the 2024/25 Draft Audit Report. He noted that the draft annual reports had been published on the website on 1 December, and the finalised audit report would be signed in the February audit committee. He addressed the corrected audit misstatement of £7.8 million, explaining that it was due to updated financial information from investment managers.

Regarding the control deficiency in related party identification, Rob said that the fund believed it was okay as it was held centrally, but would look at producing a working paper to address this. He also noted that a new process had been started from 1 April 2025 to address the journals control deficiency.

Councillor John Hale asked whether KPMG thought the response in relation to the declarations of interest was sufficient. Sudhan Shudhadeech responded that if there were procedures to formally document the interest and have evidence of the review, the control deficiency could be removed next year.

Pension Fund Risk Register Report

Tyran, whose last name was not provided, presented the Pension Fund Risk Register Report for 1 July to 30 September. Two risks were rated above the tolerated risk level: skills or knowledge gaps at the administering authority, and ineffective investment decision making due to the requirement to move to the new asset pool by March 2026. The risk of conflict of interest had decreased back to its tolerated risk level.

For the fire pension scheme, one risk was rated above the tolerated risk level: poor administration, including failures and delays in implementing regulatory changes, due to continued delays in McLeod immediate choice retrospective service statement payments.

Councillor John Hale asked whether the meeting to discuss the fund's business continuity plan had happened, and whether anything had arisen from it. Tyran responded that officers had met in October and discussed it, and work had started on a wider cyber policy with assistance from Barnett Waddingham governance consultants.

Councillor John Graham requested that the risk register be made easier to read on the mod gov screen.

Employer Risk and Governance

Alison Murray presented the Employer Risk and Governance report for July to September 2025. The number of risks in the red category decreased from nine to seven. Six related to ceased employers with outstanding deficits, and four related to employers with no indemnity arrangements. Work was being done with Barnett Waddingham to complete a risk analysis for admitted bodies, and employers highlighted as risks would be contacted to minimise their risks. There were 20 admissions in progress, four new admissions were received, and four were completed.

Hertfordshire LGPS and FPS Q2 2025/26 LPPA Performance Report

Chris, whose last name was not provided, presented the Hertfordshire LGPS and FPS Q2 2025/26 LPPA Performance Report. He reported that the local government and fire performance against service levels was 98.4% and 98.1% respectively. The average wait time for the contact centre was three minutes 31 seconds for LG and two minutes seven seconds for fire.

Chris noted improvements in employer retirement notifications, and the aspirational target to pay within 30 days was achieved in 78% of cases. He also highlighted challenges with AVC ⁶ providers and the disinvestment process.

The active retirement survey had a 37.8% return rate, with 87% satisfied or neutral. The member panel had grown to 4,500, with 724 from Hertfordshire. Pension Point usage continued to increase, with 53,000 members now using it.

Chris reported that 70% of retirement responses were now received online, compared to 40% before. Automation was also progressing, with 50% to 80% of deferred quotes going through automation.

Regarding Project McLeod, 70% of the local government assessment had been completed, and payments were starting to be made. Progress on the fire side was slower due to difficult cases. The pensions dashboard was due to be connected before Christmas.

Councillor John Hale asked about the data on first payments to pensioners that did not make 30 days.

Councillor Ian Albert asked about staff numbers working on the fire service scheme and the local government pension scheme in LPPA, and how this had changed over the last 12 months.

Councillor John Hale asked about the calls answered for the pension scheme, noting that the average time was three minutes 31 seconds, but some callers were waiting up to 15 minutes.

John Crowhurst, who was online, added that functionality was being added to the telephony system to offer call backs, and call rerouting was being deployed to casework teams.