The Assistant Director – Resources presented the Quarter 1 Corporate Performance Report for 2025-26, noting that this is the first quarter reporting on the new Corporate Strategy that was approved by the Authority in February.

The Assistant Director – Investment Strategy provided an update on the Investment Performance, noting that a separate report for this quarter was not included in the agenda due to the recent transition to a new custodian, which led to some inevitable teething issues. A slimmed-down version of the report will be made available in the online reading room for members in due course and normal reporting procedures will resume from next quarter.

The Head of Finance and Performance provided an update on the budget outturn, noting that there was a forecast £247k underspend, some of which will be used towards costs associated with clearing the backlog in pensions administration. The prime driver of the underspend was employee costs, including the pay award which was budgeted at 4% but was now confirmed at 3.2%; alongside some recruitment delays and the Director transition which has had a knock-on effect.

Members probed about the risk relating to clearing the backlogs, asking that if we are not able to meet the current target what will be a realistic timeline for clearing the casework. The Assistant Director – Pensions responded that we hope to have it cleared by March next year based on current clearance rates and will be keeping a very close eye on it.

Members further questioned whether there was a published timeline for the Investment Strategy Statement and consultation arrangements.

The Director responded that there will be engagement with elected members in the period leading up to March 2026, before it is brought to the Authority for approval. Further to this we are obliged to consult with those who have an interest in the strategy.

Members requested an update on the procurement for the Local Affordable Housing Mandate Manager and how this will interact with local authorities.

The Assistant Director – Investment Strategy updated that we are expecting responses from managers who are continuing in the process and the assessment day is scheduled to take place in two weeks' time. During this session, there will be detailed discussions and scrutiny. As part of these discussions, we will also be looking to understand how the managers plan to engage with local authorities.

Members sought further explanations in relation to the risk register section of the report; with questions relating to the increased risk of cashflow imbalances as a result of anticipated reduction in employer contributions income, and about the risk relating to Border to Coast strategic plan and expansion.

The Director explained that there would be a post-lunch briefing session from the actuary to provide further details regarding the valuation results and implications for employer contribution rates. He also noted that the Assistant Director – Investment Strategy will work with the investment consultants to assess the investment income needed to bridge the cashflow gap between contributions and pension payments.

In relation to Border to Coast, the Director responded that the risk has been identified due to the considerable amount of time, resource and effort required from Border to Coast to integrate the seven new funds into the pool. SYPA has its own priorities for Border to Coast, which creates a potential conflict and while the risk appears to be managed at present the score cannot be reduced at this stage.

The risk score may decrease in the Q2 review, depending on how the integration of the seven new partners funds is progressing.

Rachel Elwell added that she does not discount the concern raised by SYPA and has already implemented changes in how her teams operate, including bringing in additional resources.

In addition to this, longer term bringing in additional partners will increase the demand and capacity for products SYPA want to see delivered. Border to Coast is clear on the actions required and remains committed to delivering on their 2030 Strategy, whilst acknowledging and accepting the risk.

Members raised concern that in the context of the Pensions Review and Investment Strategy, any efforts to gather views of our scheme members should be carefully worded to avoid giving the impression that the process is a referendum.

Noting the importance of ensuring that scheme members understand the broader context, including the potential impact of the Pensions Review and decisions made by the Authority. Emphasising that transparency is essential, and scheme members need to aware of their role in the process and how decisions are ultimately made.

The Director responded that he is not currently able to provide a definitive answer on how this will be communicated to scheme members, as it will depend on the final content of what needs to be communicated. He noted that the Authority will be working within the menu of investment options provided by Border to Coast as this is the restriction placed upon us and the Investment Advisers will then provide recommendations based on these available options.

Communicating this back to scheme members presents a challenge, given the complexity of the subject and the range of potential scenarios, and the importance of factors such as cashflow, income generation, and the various mechanisms for harvesting income from the portfolio.

The Chair noted that Rachel Elwell the Chief Executive Officer of Border to Coast and her colleague Sharmila Sikdar joined the meeting at this item.

RESOLVED: Members noted the report.