7. Budget & Cashflow Forecast 2026-29
The 2026-27 budget of £35.4m is £0.8m (+2%) above the £34.6m budget of 2025-26.
| 2025-26 | 2026-27 | 2027 vs 2026 | |
|---|---|---|---|
| Budget £ millions | Budget £ millions | Change £ millions | |
| Admin & Governance | 9.9 | 9.6 | -0.3 |
| Investment management fees | 24.7 | 25.8 | +1.1 |
| Total | 34.6 | 35.4 | +0.8 |
The 2026-27 budget shows a £0.8m (2%) increase vs 2025-26.
Admin & Governance
The £0.3m reduction in Admin & Governance costs reflects a combination of material increases and decreases to budgets between 2025-26 and 2026-27.
Increases to the budget include a) new digital system costs covering a full financial year, b) annual salary increases, c) reduction in the vacancy factor provision, d) expected support costs arising from Fit for Future implementation and change of asset pool.
Decreases to the budget include a) a reduction in consultancy requirements, b) savings on LGPS employer contributions for APF staff, c) Triennial Valuation costs funded from the 2025-26 budget, d) a reduction in fees paid for independent investment advice as LPPI take on more responsibility for delivering the investment strategy and providing advice.
Rising operational efficiencies will enable lower unit costs, e.g. through deploying new software and digital integration. Such savings will feed through from 2027-28.
Investment Fees
2026-27 investment management fees of £25.8m are £1.1m (4%) higher than the £24.7m for 2025-26.
Increased investment fees are driven by: a) higher asset values, b) continued build out of the Local Impact portfolio, c) higher exposure to index linked gilts through Liability Driven Investment. In aggregate this represents a 1 bps increase in investment management fees to 40 bps, projected to fall to 39 bps for the next two years.
Investment costs also include fees paid to LPPI which will manage the Fund’s assets. The estimated share of LPPI costs is 11% or £1.75m (3 bps). There are also ongoing costs associated with the run-down of Brunel in 2026-27.
In the budgets for 2026-27 and 2027-28, we have assumed an increase in fees paid to LPPI as they take on more responsibility for implementing the investment strategy and providing investment advice, alongside a corresponding reduction in fees paid for independent investment advice, e.g. fees paid to Mercer.
Cashflow
As Fund membership matures, monitoring cash flow trends becomes increasingly critical.
The Fund has now passed an inflection point from being cash flow positive (contributions exceed benefits) to cash flow negative. At the same time, the Fund has now moved into an actuarial surplus. Taken together, these factors result in projected net cash outflows of £106.7 million in 2026–27, with further detail provided in Appendix 3.
Future service contribution rates are expected to reduce, and employers will transition from making deficit recovery payments to claiming surplus in accordance with the valuation. This change materially lowers the projected level of employer contributions from an estimated £244m in 2025-26 to £186m in 2026-27.
Pensions in payment are scheduled to increase by 3.8% in 2026-27.