The Pension Fund Committee met on 11 December 2025 to discuss investment performance, governance updates, and pensions administration. Key decisions included approving the appointment of an independent member to the Pension Board and noting the fund's strong investment performance over the quarter.

Investment Performance and Asset Allocation

The fund's value grew to £9.4 billion by the end of October 2025, primarily driven by a rally in equities. While equity holdings were slightly overweight, all asset classes remained within their strategic tolerance ranges. Officers recommended an opportunistic rebalancing of global equities due to their strong performance and high valuations. Over the past 12 months, the fund delivered an 8.8% return, outperforming its benchmark. Private equity, infrastructure, and credit mandates were significant contributors to this success. The committee was also informed that the fund's external audit for 2024-25 had been completed and approved by Grant Thornton.

Governance Update

The committee was presented with several key governance issues, including the LGPS consultation response on access and protections, the appointment of an independent chair for the Pension Board, and the potential impacts of Local Government Reorganisation (LGR). The fund submitted responses to government consultations, anticipating significant workload increases due to potential regulatory changes.

A significant decision was made to approve the appointment of an Independent Member to the Pension Board, subject to recruitment and selection processes. Authority was delegated to the Head of Pensions and Treasury to undertake this process. It was also noted that this independent member could be considered for the role of Independent Chair in 2026.

Regarding Local Government Reorganisation, officers are monitoring proposals that could see Kent County Council and district councils replaced by unitary authorities by 2028. Discussions are ongoing with Surrey Pension Fund, which is further ahead in its reorganisation plans and is proposing a Single Purpose Pension Authority (SPPA). Officers are assessing the relevance of this model for Kent.

The committee also noted the fund's business plan and budget for 2025-26. Key aspects include delivering the Triennial Actuarial Valuation and deciding on the future asset pool for the Kent Fund. The external audit for 2024-25 was completed and approved.

A national knowledge assessment for committee and board members was conducted in September 2025, with results indicating the highest levels of knowledge in pensions governance, investment performance, and risk management. These results will inform a training plan.

Pensions Administration

The Pensions Administration team reported on several areas, including team restructuring, recruitment, and performance metrics. To mitigate the risk of losing experienced staff due to retirement, the team has restructured into five new work areas to rebalance workloads and support junior staff. A 12-month training plan is being developed to ensure staff are equipped to handle all types of casework.

Key performance indicators (KPIs) for the period showed that 78.13% of cases were completed within legal targets. The CEM Benchmarking report indicated an improvement in the service score to 57, though still below the peer median. Costs per member rose slightly but remained below the peer average.

The team is actively managing outstanding cases, with a portion outsourced to Hymans Robertson. Recruitment efforts have been successful, with the vacancy rate reduced to 12.81%. The team is also focusing on improving digital engagement, with a record number of website visits and registrations for MyPension Online.

The report also detailed progress on the McCloud Remedy Rectification project and data cleansing efforts in preparation for the national Pensions Dashboard. The Technical and Training Team welcomed new staff and is working on resolving data errors for the McCloud project. They are also reviewing government consultations on LGPS improvements, including proposals for a normal minimum pension age of 57 and extended access for mayors and councillors.

Committee Work Programme

The committee reviewed its work programme for the upcoming meetings, including the Investment Away Day scheduled for 10 February 2026. This away day will focus on the triennial review of the Fund's Investment Strategy, with external speakers from Mercer and Border to Coast. A new combined Investment sub-group is also planned for 2026 to support members in understanding technical investment aspects.

Pension Board Independent Chair Appointment

The committee approved the appointment of an Independent Member to the Pension Board, subject to recruitment and selection processes. Authority was delegated to the Head of Pensions and Treasury to undertake this process. It was noted that this member could be considered for the role of Independent Chair in 2026. The search process aims to have the new member in place by March 2026.

Local Government Reorganisation

Officers are assessing the potential impacts of Local Government Reorganisation (LGR) on the Kent Pension Fund. Discussions with Surrey Pension Fund are ongoing, as Surrey is proposing a Single Purpose Pension Authority (SPPA). Officers are evaluating the relevance of this model for Kent, where a new administering authority will be required following the dissolution of Kent County Council.

Investment Consultant Contract

The committee noted that the contract with Mercer, the investment consultant, was due to end in November 2025. While the contract could be extended, it was not possible to combine two separate year extensions. The fund is likely to require support from both Mercer and Barnett Waddingham over the next two years.

Government Consultations Update

The committee received a verbal update on government consultations, including LGPS Access and Protections. The fund has submitted responses and is awaiting confirmation of regulatory changes, which could significantly increase workload. A further consultation on LGPS access and protections was launched in October 2025, focusing on academies, New Fair Deal, normal minimum pension age, and pension access for councillors and mayors. Officers intend to submit a response, flagging resource and system functionality concerns.

Investment Strategy Implementation

Discussions were held regarding the implementation of the investment strategy, including an update from Mercer on the investment strategy. The plan is to involve Mercer in the process of moving from the current to a new regime, with their head of investment advisory having prior experience with Tony at Mercer.

Project Updates

Updates were provided on various projects, including the Data Rectification project, which is progressing but with invoicing dependent on progress. Actuarial fees are expected to have a small overspend due to exceptional work in a valuation year. Pooling advice costs were lower than initially estimated, but additional support from the investment consultant may be needed in 2026-27. Governance staff costs were higher than estimated due to a reorganisation and the inclusion of some costs previously under Administration. Fund manager fees increased due to higher fund values, and transaction costs are challenging to estimate, particularly with the transition to Border to Coast.

Employer Governance Matters

The triennial valuation results for 31 March 2025 indicated strong fund performance, leading to a potential small reduction in employer contribution rates. The funding strategy statement will be subject to consultation. The committee noted the report and agreed to the proposed financial and demographic assumptions for the valuation, the full pooling of parish and town councils from April 2026, and to proceed with a 3-month consultation on the Funding Strategy Statement.

Pension Fund Risk Register

The risk register identified 30 risks, with 18 rated green and 12 amber. The highest-scoring risks remain Cyber Security, Member Data, and Committee, Board, and Officer Risk. Members were encouraged to complete a training survey to inform the training programme. The failure of the automated payment system was considered a low risk due to manual processing options. Local government reorganisation was identified as a risk, with the need to ensure the fund's requirements are considered in any outcome.

Actuarial Valuation

A presentation on the actuarial valuation covered financial assumptions, including CPI figures and salary increase estimates, and mortality assumptions based on CMI modelling. The valuation aims to provide stability in funding levels and employer contributions, with a recommended maximum reduction in employer contribution rates of 1%.

Government Pensions Review: Pooling Future

The committee approved Border to Coast Pensions Partnership as the preferred partner for the Kent Pension Fund. They also approved continued work with existing ACCESS partner funds to develop a transition plan. Authority was delegated to the Head of Pensions and Treasury to undertake necessary actions for preparatory workstreams. The committee recommended to Full Council that Kent County Council agree to enter into pooling arrangements with Border to Coast. The transition to Border to Coast is expected to begin in March 2026, with costs to be managed carefully. Collaboration on legal advice among seven ACCESS funds moving to Border to Coast is expected to mitigate costs. Asset management costs within Border to Coast are anticipated to be lower than those in the ACCESS pool.