The Pensions Committee of Lambeth Council met on Wednesday 11 February 2026, where they discussed the actuarial valuation update for the pension fund, the council's contribution rates, and the upcoming financial year's accounts. A decision was made to approve the recommendations regarding the actuarial valuation, which indicated a strong funding level for the pension fund.

Actuarial Valuation Update and Contribution Rates

The committee received an update on the actuarial valuation of the pension fund, which showed a significant increase in the funding level to 100% as of the valuation date, up from 120% previously. This improvement is largely attributed to a decrease in the fund's liability value, driven by an increase in the discount rate assumption, suggesting the fund is expected to achieve higher investment returns in the future. While the asset value has remained relatively stable, the overall funding level is positive.

A key outcome of the valuation is the adjustment of employer contribution rates. The council's current contribution rate is approximately 23.9%. For the next two years, a reduction of 3% is planned for the first year, followed by a 1% reduction annually. This will result in a 5% decrease in the council's contribution rate by the end of the next valuation cycle, equating to a saving of over £9 million over three years based on the council's payroll of around £180 million.

Concerns were raised by Councillor Peter [Surname not provided] about why the full 5% reduction could not be implemented immediately, given the fund's strong position. It was explained that while modelling indicated the fund could still meet its 85% likelihood of success threshold with a full 5% reduction, a phased approach was adopted to avoid appearing as an outlier to regulatory bodies like the Government Actuaries Department (GAD). This approach aims to maintain stability for the council's budget and ensure intergenerational fairness by preventing potential future increases in contribution rates. The GAD monitors Local Government Pension Scheme (LGPS) funds for surpluses and expects employers to receive contribution rate reductions. The phased approach was deemed the most appropriate way to achieve the 5% reduction without attracting undue scrutiny from the GAD, which could potentially interfere with the council's funding plans.

The committee also noted the diversity of funding levels among other employers within the pension fund, with some experiencing significantly higher funding levels than the council. These variations are attributed to factors such as membership experience, past contribution history, and the impact of events like bulk transfers or the death of members without survivors.

The committee agreed with the recommendations presented on page 31 of the pack concerning the actuarial valuation.

General Update and Financial Accounts

The committee received a general update covering several areas. Progress has been made on consultations regarding new regulations and guidance, with the council's representatives having responded individually and collectively. Discussions are ongoing regarding investment management agreements, which will be relevant to the transition post-April.

A governance review has been completed, and its findings, recommendations, and an action plan will be presented at the March meeting.

Regarding the pension fund accounts, it was noted that a historic issue dating back several years, related to a software change and the migration of balances between systems, has presented challenges. The team has been working with auditors to unravel these complex issues. It is anticipated that the accounts for the year just gone will receive a qualified opinion, primarily due to timing constraints imposed by the auditors' backstop date of 28 February. However, the work being undertaken is expected to allow for an unqualified position for the 2025-26 financial year.

The issue stems from a period around 2017-18 when, during a transition between pension funding systems, certain balances required unwinding. Auditors have been investigating these balances, which involve debtors and creditors, and have requested access to source documents. Due to the passage of time and changes in personnel, providing sufficient evidence to support these historical balances has been difficult. The council is considering writing off some of these balances where possible. The complexity of unravelling these historical entries, some of which were manual and others automatic, has proven troublesome. The auditors' focus on these balances intensified when material transactions occurred in the previous year, prompting a deeper look into historical figures that had previously been considered immaterial. The committee was informed that a more detailed discussion on the accounts, including the auditors' report, will take place at the March meeting.

The committee noted the general update.