The Croydon Pension Fund’s 2025 Valuation Initial Results and Funding Strategy Statement Update, recently published on November 13, 2025, reveals a significant improvement in the Fund’s financial health and outlines future investment intentions.
Funding Level Surges to 132%
The Fund’s past service funding position has increased from 97% at the 2022 valuation to 132% as of March 31, 2025. This is based on assumed future investment returns of 5.9% per annum. The total liabilities are reported at £1,483 million, with assets at £1,963 million, resulting in a surplus of £480 million. The primary driver for this improvement is the change in the economic environment since the 2022 valuation date, including an increase in interest rates and higher-than-expected inflation. (Source: Croydon Pension Fund -2025 Valuation Initial Results and Funding Strategy Statement Update, page 159)
Contribution Rate Reductions for Croydon Council
Fund Officers and the actuary have recommended an immediate 3% reduction in contribution rates for Croydon Council, moving from 23.2% of pay per annum to 20.2% of pay per annum for the period of April 1, 2026, to March 31, 2029. This strategy balances affordability for the Council with security for the Fund, incorporating an increased prudence level and funding target. The likelihood of the Fund’s investment strategy achieving the required 4.2% per annum return is now 91%, up from 73% in 2022. (Source: Croydon Pension Fund -2025 Valuation Initial Results and Funding Strategy Statement Update, page 160-161)
Increased Prudence in Discount Rate Assumption
The Fund proposes to increase the prudence level in its ongoing funding basis from 75% to 80% for the 2025 valuation. This adjustment recognizes increased market volatility and uncertainty in long-term inflation and global economic factors. A higher prudence level results in a lower discount rate assumption and, consequently, a lower reported funding level. The reported discount rate assumption is 5.9% per annum. (Source: Croydon Pension Fund -2025 Valuation Initial Results and Funding Strategy Statement Update, page 205-206)
Strategic Asset Allocation Targets Maintained
The strategic asset allocation target, agreed upon by the Committee on September 19, 2023, and incorporated into the Investment Strategy Statement, remains in force for 2024/25. The target allocation includes 42% in Developed Equities, 23% in Fixed Interest, 34% in Alternatives (12% Infrastructure, 10% Private Equity, 12% Property), and 1% in Cash. The operational ranges for these allocations are also specified. (Source: London Borough of Croydon Pension Fund Annual Report 2024/25, page 64)
Transfer of Corporate Bond Mandates to London CIV
In June 2024, the Pension Committee agreed to transfer Corporate Bond mandates totaling approximately £130 million, previously managed by Wellington and Aberdeen Standard, to the London CIV All Maturities Buy and Maintain Credit Fund. This action was part of the Fund’s commitment to the ‘pooling’ concept. (Source: London Borough of Croydon Pension Fund Annual Report 2024/25, page 43)
Exploration of Indirect Real Estate Pooling (IREP) Solution
The Fund is considering transferring UK Property Funds from Schroders to CBRE, which has been appointed by London CIV to manage indirect property investments through its IREP solution. Officers have met with London CIV and CBRE and are comfortable with the move, especially given London CIV’s likely full discretion after March 31, 2026. A decision is pending on whether to maintain a UK-only focus or include a global element. (Source: The Collective Investment Vehicle for London Local Authorities Pension Funds: Update, page 20)
Responsible Investment Policy Harmonization
London CIV is developing a matrix to align the diverse Responsible Investment (RI) approaches of its 32 Partner Funds into two or three options with differing exclusion levels. Officers support this matrix approach and have invited London CIV to present the solution to the Pension Committee to aid in formulating the Fund’s RI policy. A minimum investment of £300 million is believed to be required for an investment product to be viable. (Source: The Collective Investment Vehicle for London Local Authorities Pension Funds: Update, page 21)
Mercer Appointed for Strategic Asset Allocation Advice
London CIV has appointed Mercer to support its Strategic Asset Allocation (SAA) Advice provision for Partner Funds. This partnership aims to strengthen the operational platform and deliver on the government’s Pensions Investment Review and Fit for the Future outcomes. The SAA Advice service is expected to be fully operational by January 2026, with two Partner Funds participating in a pilot project. (Source: The Collective Investment Vehicle for London Local Authorities Pension Funds: Update, page 16-17)
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