The Pensions Committee is scheduled to consider the business plans for the Wales Pension Partnership (WPP) and its investment management company (IMCo) for the upcoming financial year. The committee will also review and potentially approve the Funding Strategy Statement (FSS) for the Cardiff & Vale of Glamorgan Pension Fund, which outlines how the council aims to meet its pension liabilities.

Wales Pension Partnership and WPP Investment Management Company Business Plans 2026/27

The committee is set to review and approve the 2026/27 Business Plans for both the Wales Pension Partnership (WPP) and the WPP Investment Management Company (IMCo). These plans have already been presented to and approved by the WPP Joint Governance Committee. The WPP is a collaboration of eight Welsh Local Government Pension Scheme funds, managing combined assets exceeding £25 billion. The establishment of WPP IMCo is a response to the government's Fit for the Future consultation, which aims to pool LGPS assets through FCA-regulated investment management companies.

The WPP's business plan for 2026/27 will outline its governance structure, priorities, objectives, and financial budget. It is noted that there is a significant decrease in WPP's activity with external advisors compared to previous years.

WPP IMCo's initial business plan for 2026/27 details its strategic objectives, governance, financial summary, investment management approach, operations, staffing, risk management, and responsible investment strategy. The company, established in August 2025, is on track to obtain FCA authorisation by 31 March 2026. The 2026/27 financial year is described as a period of transition and capacity building for IMCo, with plans to recruit up to 24 employees and establish six company directors. A more comprehensive five-year business plan is scheduled for production before April 2027.

The report highlights the legal implications of these plans, referencing the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016, the Council's public sector equality duties under the Equality Act 2010, and the Well-Being of Future Generations (Wales) Act 2015. Financial implications include WPP costs being recharged as a one-eighth share to the Cardiff and Vale of Glamorgan Pension Fund, and IMCo costs being charged through a combination of fixed fees and asset-under-management fees.

Funding Strategy Statement (FSS) and 2025 Valuation Update

The committee will also review and approve the Funding Strategy Statement (FSS) for the Cardiff & Vale of Glamorgan Pension Fund. The FSS details how the administering authority aims to meet its fiduciary duty to ensure funds are available for pension liabilities while keeping employer contributions as stable as possible. This statement is typically reviewed every three years as part of the Triennial Valuation.

The report notes that revised guidance for FSS preparation was issued in January 2025 by the LGPS Scheme Advisory Board, CIPFA, and MHCLG. The 31 March 2025 valuation is due to be completed by 31 March 2026.

Key highlights from the 2025 actuarial valuation presented by the Fund Actuary, Aon, include a significant increase in the funding level to 111% (up from 98% in 2022) and an increase in the Probability of Funding Success to 82%. Unlike the 2022 valuation, there is no additional short-term inflation allowance included in the 2025 valuation. For employers in surplus, a buffer of at least 110% funding level is retained before any reduction in secondary contributions is calculated. The report also indicates that consistently high gilt yields over the past three years have resulted in a significant reduction in proposed contribution rates for orphan bodies, with nearly all having a 0% employer contribution rate for the three years starting April 2026.

The draft FSS has been circulated to employers and the Local Pension Board, with no comments received by the respective deadlines. The FSS is a technical document outlining the processes for establishing a clear and transparent funding strategy, aiming for stable primary contribution rates, ensuring solvency and long-term cost efficiency, and taking a prudent long-term view of funding liabilities. The appendices to the FSS include details on key risks, employer exit processes, employer grouping, roles and responsibilities, and a glossary.

The report outlines legal implications, including Regulation 58 of the Local Government Pension Scheme Regulations 2013, and references the Equality Act 2010 and the Well-Being of Future Generations (Wales) Act 2015. There are no direct financial implications arising from this report. The recommendations are to note the progress with the 2025 Valuation and approve the attached Funding Strategy Statement.