The Barking and Dagenham Pension Fund is set to significantly shift its investment strategy, reducing its allocation to equities and increasing its holdings in UK Government Bonds. This strategic move, agreed by the Pensions Committee on Thursday, March 26, 2026, aims to reduce overall risk while maintaining forecast returns, following an improved funding position identified in the latest actuarial valuation.

The new Strategic Asset Allocation (SAA) will see listed equities reduced from 53% to 48%. This reduction reflects the objective of reducing risk after a period of strong equity returns. The proposed SAA also includes allocations of 9% to private equity, 6% to property, 10% to infrastructure, and 17% to credit, with a 0-3% tolerance for cash. The LCIV, an asset pooling arrangement for Local Government Pension Schemes in London, will be responsible for the implementation of these changes.

A bar chart illustrating the changes in the primary rate of pay for the pension fund, from an average of 21.5% in 2022 to 18.1% in 2025, detailing the contributing factors.
Changes in the primary rate of pay

This strategic shift follows an improved funding level of 108%, up from 101% in 2022, as reported in the actuary's final report. The improved funding position is attributed to several key factors: higher than expected investment returns (4.8% per annum compared to the assumed 4.3%), offsetting inflation, higher discount rates, and updated mortality assumptions. This positive development has led to a reduction in the employer contribution primary rate from 21.5% to 18.1% of payroll. For the largest employer, the London Borough of Barking and Dagenham, the employer contribution rate will reduce from 22% to 18% from 1 April 2026, easing the financial burden on employers.

A bar chart comparing the pension fund's assets and liabilities for 2025 and 2022, showing a funding level of 108% in 2025 with a surplus of £0.11bn, and 101% in 2022 with a surplus of £0.01bn. The liabilities are broken down by 'Pensioners', 'Deferreds', and 'Actives'.
Pension fund assets and liabilities

The shift in investment strategy, which includes a reduction in listed equities and an increase in UK Government Bonds, is projected to result in a forecast return of 6.5% per annum, compared to 6.6% for the current SAA. While this represents a slight decrease in forecast return, it is accompanied by an 8% reduction in Value at Risk, indicating a lower overall risk profile. The London CIV, in preparing the updated Investment Strategy Statement (ISS), will model a range of different investment options with potential returns and risks from each. The LCIV will also consult with the committee on any changes to mandates and will provide transparency over its activities.

The London CIV has been commissioned to prepare an updated Investment Strategy Statement (ISS), which will be subject to consultation and reported back to the committee in June. The implementation of these changes is at the discretion of the London CIV, and the Fund will need to make an allocation to Local Investment under the Fit for the Future requirements. The London CIV anticipates that changes to the investment management structure will be done in consultation with the committee.

For more details, please refer to the Public reports pack and the Investment Strategy covering report.