Kingston Pension Fund Assets Grow to £1.41 Billion Amid Investment Challenges and Funding Concerns
The Royal Borough of Kingston upon Thames Pension Fund reported a significant increase in its net assets, reaching £1.41 billion by the end of the 2025/26 financial year. This represents an increase of £116 million, or 8.9%, over the previous year, according to the Fund's annual report.
Despite the growth in assets, the Fund continues to operate in a cash flow negative position, with contributions received being lower than the benefits paid out. The primary reasons for this are the widening gap due to reduced employer contribution rates and increasing benefit payments. While employer and employee contributions rose in 2025/26 due to annual pay awards, deficit contributions decreased as several employers are on a stepped approach with annually reducing secondary contribution rates. Conversely, benefit payments increased in line with inflationary uplifts.
This gap was bridged by investment income, which is crucial for ensuring timely pension payments without needing to sell assets. Looking ahead, the cash flow negative position is projected to worsen as employer contribution rates are expected to reduce further and benefit payments continue to rise with inflation. Consequently, investment income will remain critically important for bridging this growing gap.
The Fund achieved a positive investment return of 8.9% for the year, outperforming the average over three, five, and ten-year periods. However, this one-year return was slightly below the PIRC local authority average of 9.6%. Katherine Gray, Head of Pensions Investments and Treasury, noted that the Fund's performance has been ahead of the average over longer periods.
Despite the positive overall return, the Fund faced specific investment challenges during the 2025/26 financial year. These included uneven global resilience, significantly impacted by the early 2026 Middle East conflict and the lingering effects of 2025 US trade tariffs. This led to significant volatility in equities and panic buying in commodities due to geopolitical tensions. While the Fund performed ahead of average over the three, five, and ten-year periods, the one-year performance was 13.7%, below the benchmark of 14.7%, with some underperformance noted in specific equity managers.
Pooling through London CIV has increased to 62.1% of assets, contributing to cumulative savings of £2.9 million. The Fund's strategic asset allocation is being realigned, with a transition of active equity holdings into the new LCIV Core Equity solution planned for September/October 2026. This new Core Global Equity Fund is a multi-manager solution combining complementary investment styles (quantitative, growth, and value) across three underlying managers, aiming for long-term outperformance of around +1.5% p.a. relative to the MSCI All Country World Index while managing volatility.
The current funding level of the Kingston Pension Fund as at 30 September 2026 stands at 128%. This represents a decrease from the 137% funding level recorded following the March 2025 valuation, which was established at the 2025 triennial valuation.
The Pensions Administration Team's permanent structure has also enhanced efficiency and operational stability, leading to a continued decline in the cost per member for administering the scheme. Further details on the pension board meeting can be found in the Public reports pack.