Kingston Pension Fund Surpasses Expectations with £350 Million Surplus
Kingston Pension Fund has announced a significant surplus of £350 million, marking a substantial improvement from its previous valuation. The fund's funding level now stands at a robust 137%, a considerable increase from 111% in 2022. This strong financial position has several long-term implications, including reduced employer contribution rates and enhanced financial stability.
The positive financial outcome was revealed in the triennial valuation results as of March 31, 2025, presented to the Pension Board on Thursday, March 26, 2026. The improved funding is primarily attributed to revised expectations for future investment returns, driven by changes in market conditions. Specifically, high inflation significantly increased the value of accrued benefits, but these factors were offset by an improved outlook for future investment returns, which reduced the calculated present-day value of the Fund's liabilities.
While the primary contribution rate has seen a slight increase to 18.9% of pay, a negative secondary contribution rate has been applied. This reflects the fund's strong financial health and aims to allow employers to reduce their surplus by paying lower total contributions over the coming cycle. The specific impact on different employers varies, as detailed in Appendix 8 of the Triennial Valuation and Funding Strategy Statement Update document. For instance, the Royal Borough of Kingston-upon-Thames
has a secondary rate of -1.3% for 2026/27, 2027/28, and 2028/29, resulting in a total contribution rate of 17.0%. In contrast, Richard Challoner School
has a secondary rate of -6.3% for the same period, leading to a total contribution rate of 14.1%.
The proposed budget for 2026/27 is £15.4 million. This budget reflects transparency in investment management costs and a planned reduction in contribution income due to the fund's surplus position. Key components of the budget include administration costs, investment management expenses (estimated at £7,248k), oversight and governance costs, contributions, benefits (including a provision for the McCloud Remedy), and transfers in and out. The increase in benefits is primarily due to the statutory annual pension increase and the McCloud Remedy provision.
The fund's strong 137% funding level indicates that its assets comfortably exceed its long-term pension liabilities. This robust position has been achieved partly by strengthening risk management, increasing the likelihood of success
in funding assumptions to 85% to buffer against economic volatility. The funding strategy aims to balance prudence and affordability, contributing to the stability of employer contribution rates and reducing the risk of future deficit-related increases.
The surplus is already being utilized to reduce employer contributions, with negative secondary contribution rates effective from April 2026. The triennial valuation results set these rates for the period 2026/27 to 2028/29. While the information does not explicitly detail a timeframe for further utilization of the surplus to enhance member benefits, the reduction in employer contributions is a direct benefit stemming from the fund's strong financial health.
For further details, please refer to the Public reports pack Thursday 26-Mar-2026 10.00 Pension Board, the Pension Fund Business Plan and Budget Update, and the Triennial Valuation and Funding Strategy Statement Update.
