The Pensions Committee met on Wednesday 22 April 2026 to discuss the actuarial valuation results and funding strategy statement for the Lambeth Pension Fund, alongside updates on the risk register and the annual accounts and audit plan. Key decisions included noting the positive actuarial valuation results, which show a significant improvement in the fund's funding level and a reduction in employer contribution rates for most employers, and approving the updated Funding Strategy Statement.

Actuarial Valuation Results and Funding Strategy Statement 2025

The committee reviewed the final results of the 2025 actuarial valuation for the Lambeth Pension Fund, conducted by Hymans Robertson. The valuation as at 31 March 2025 revealed a healthy funding level of 120%, a significant increase from 96% at the previous valuation in 2022. This improvement is primarily attributed to higher assumed future investment returns, with the discount rate assumption increased to 5.5% per annum.

As a result of the strong funding position, employer contribution rates are set to decrease for most employers. The primary rate, which covers the cost of future benefits, has increased slightly to 22.1% of pay, but a negative secondary rate, due to the surplus, means that overall employer contribution rates are expected to reduce by around 5% over the three-year period from 1 April 2026 to 31 March 2029. Some exceptions exist for new employers or academies with specific circumstances.

The committee noted the updated Funding Strategy Statement (FSS) for April 2026, which outlines the methodology and assumptions used in the valuation and sets out the approach to managing employer contributions and risks. The FSS was consulted on with employers, and no significant concerns were raised.

Lambeth Pension Fund Risk Register Update

The committee received an update on the Lambeth Pension Fund Risk Register. There were no new red-rated risks identified since the last meeting on 25 March 2026. Seven amber-rated risks remain, including insufficient resource to support the Pension Committee and Board (PA1), insufficient knowledge and understanding of legislative requirements by Board/Committee members (PA2), the risk of pay and price inflation being significantly higher than anticipated (PA12), investment risk (PA15), investment underperformance (PA16), climate change impacts (PA19), and a qualified audit opinion on the 2023/24 and 2024/25 financial statements (PA22). Mitigations are in place for each of these risks, including ongoing recruitment, training, and engagement with advisors.

The Annual Accounts and Audit Plan 2025/26

The committee was provided with an update on the preparatory work for the 2025/26 Lambeth Pension Fund accounts and audit. Mazars LLP, the external auditors, will provide their audit plan shortly. Preparations for the financial year-end are underway, with extensive engagement between the Pensions Administration Team and Investment Team to ensure a smooth closedown process. The estimated audit fee for 2025/26 is anticipated to be substantially higher than the £112,000 reported for 2024/25, reflecting the complexity and ongoing challenges in the audit market. The committee noted the preparatory activity undertaken by officers.

Governance Review Outcome

The committee reviewed the findings and recommendations from an independent governance review of the Lambeth Pension Fund, conducted by Hymans Robertson. The review assessed the team structure, Board and Committee effectiveness, and compliance with The Pension Regulator's General Code of Practice. Key recommendations include the appointment of a Senior LGPS Officer (separate from the Section 151 Officer), restructuring the pensions function under a single leadership, developing a comprehensive training strategy for governance members, preparing for the appointment of an Independent Person to the Committee, and planning for the first Independent Governance Review by March 2028. Officers confirmed that all recommendations are appropriate and will be implemented, with a detailed plan to follow.

Matters Arising and Work Programme

The committee noted the work programme and discussed the ongoing re-tender for actuarial services. It was confirmed that while information regarding the actuarial re-tender was available, there was no specific update on investment advisors. An update on this matter will be provided at the next meeting.

Business Plan Tracker

The committee noted the Business Plan Tracker, which indicated that progress against the tracker remains a priority for the pensions and finance teams. The deadline for the actuarial re-tender was not met and will be discussed at the next meeting, with next steps to be presented.

London CIV Update

The London CIV (LCIV) update was noted and will be carried over to the next meeting.

General Update

Officers provided a general update, referencing points already covered under earlier agenda items, including work on private equity and the governance review. Investment changes to the funds are in progress, with Investment Management Agreements (IMAs) being agreed. The Fit for the Future legislation has not yet completed its passage through Parliament. The LCIV is working with council officers on investment funds within pooled arrangements. The cost associated with the LCIV was noted as £519,000, with explanations provided on how fee savings are calculated. Discussions also covered future governance and decision-making under the new framework and pooling arrangements.

Investment Performance Review – Quarter Four

Mercer presented the Quarter Four 2025/26 investment performance review. Overall performance for the quarter was below benchmark, with drivers of underperformance identified. Total scheme assets increased by approximately 1.7% (£33m) during the quarter. The committee noted that benchmark construction remains challenging and property markets are experiencing difficulties. The fund delivered an annual return of around 7.7% over the five-year period, which was positive but below the desired benchmark. The expected launch date for the relevant pooled funds by the LCIV is May 2026.

Investment Strategy Statement 2026

The committee reviewed and approved the Fund's updated Investment Strategy Statement (ISS). The updated ISS was prepared under existing 2016 regulatory guidance, as draft 2026 legislation and associated guidance had not yet been provided. The principal changes in the ISS relate to the new investment strategy agreed by the committee.