Kensington and Chelsea Council Under High Court Scrutiny Over Suspension of Pension Contributions

Kensington and Chelsea Council is currently facing a legal challenge following its decision to suspend employer pension contributions to zero percent last year. The local authority in West London announced its plans to cease contributions for a three-year period, citing that the pension fund was performing exceptionally well. However, a judicial review has been initiated against the council, based on claims that it, alongside its pension actuary, has not adhered to public law standards.

The legal action has been brought forth by ClientEarth, which is questioning whether Kensington and Chelsea Council adequately assessed the risks that climate change poses to the pension fund. There is a growing consensus among experts that climate change could significantly affect the future value of pensions. They warn that the financial repercussions of climate change are likely to manifest before the physical effects become fully apparent, suggesting that investment values could plummet as markets begin to account for the economic impacts of climate change.

Systemic Risks of Climate Change

Mike Clark, Founder Director of investment advisory firm Ario Advisory, emphasised the urgency of addressing these systemic financial risks. He stated, “The systemic financial risks of climate change – relevant to pension funds – are more present and dangerous than the Earth Science tipping points which are probably some way off, though very scary.” A report from the Institute and Faculty of Actuaries (IFoA) warns that, without immediate policy intervention to address climate-related risks, the global economy could face a staggering 50 percent decline in GDP between 2070 and 2090.

ClientEarth’s case contends that climate change constitutes a material risk that must be factored into evaluations of pension fund performance. This consideration becomes particularly critical when determining the level of employer contributions to pension schemes. The legal action is intended to alert decision-makers to the potential legal ramifications of inadequately managing the financial impacts of climate change.

The Legal Proceedings

Alex Bennett, a lawyer at ClientEarth, commented, “This case gets to the heart of how public pension funds assess climate-related financial risk – one of the biggest risks facing our financial system. Local Government Pension Scheme funds carry long-term obligations to their members, and decisions taken today can shape funding resilience for decades.” ClientEarth is requesting the court to review whether Kensington and Chelsea Council, along with its actuary Hymans Robertson, met the required legal standards in assessing and disclosing climate risk in the 2025 valuation and associated contribution decisions.

Bennett clarified that the case does not seek to dictate specific contribution rates. Instead, it focuses on whether the proper legal protocols for evaluating significant long-term financial risks were followed.

Council’s Response

A spokesperson for Kensington and Chelsea Council acknowledged the judicial review application filed by ClientEarth concerning the administration of the Royal Borough of Kensington and Chelsea Pension Fund. The council stated that it is carefully considering the issues raised and would refrain from further comment while the matter remains in litigation.

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