Kensington & Chelsea RBC has agreed to freeze employer pension contribution rates at 0% for three years, after a decision was made at the authority’s investment committee on Monday.

In a report by Phil Triggs, the tri-borough director of treasury and pensions, it said that the actuarial modelling meant that there was discretion for rates to be set between 0% and 7.2%.

The committee proposed that contribution rates should be at 0% after it found the fund would still operate at an 84% likelihood of success of reaching full funding over 20 years, even with a drop to 0%. If the rate had been set at 7.2% there would have been an 87% likelihood of success. The funding strategy currently requires an 80% likelihood of success.

The council said that the differences in funding outcomes between the 7.2% and 0% contributions were “modest”, adding that this, “reflected the fund’s current strong surplus position,” with the range of rates being strong enough to meet funding objectives.

The report said an excessive surplus for the fund has meant that the fund could “withstand significant shocks”, even with a three-year zero contribution rate. It added that not setting the lowest rate possible could force employers to reduce public services or employment “with little discernible benefit for the pension fund”.

Last year the royal borough decided to set a year-long contribution holiday after a review was called following a contribution hike from 7.5% to 15% for the 2025-26 financial year.

The previous year’s decision to set contribution rates at 0% was opposed by the fund’s actuary, after he said he was unable to certify it and warned it could cost the council millions and put the fund at risk of government intervention. He had also warned the move could face opposition from unions who would argue members should also benefit from reduced contributions.

The latest report said that while the decision to lower contribution rates to 0% was supportable, “it would represent a material policy shift, with potential implications for perceived fairness, cashflow management and external scrutiny, particularly if adopted against a backdrop of elevated global risk.”

Cem Kemahli (Con), lead member for finance, digital, and efficiency at Kensington & Chelsea, said: “The continued strong performance of RBKC’s pension fund due to years of good and careful management has enabled our investment committee to take the decision to fix our employer contribution rate at 0% for the next triennial period.”

Cllr Kemahli added that due to the scheme being a fully funded defined benefit scheme, the decision would not have an impact on staff pensions, saying that this was a “testament to sound money and prudent investment principles”.

He said: “Following the pernicious government’s fair funding review, the council faces a budget gap of £108m over the next four years through no fault of its own, and this decision will help us focus our resources on protecting and delivering vital services for our residents in the face of this government challenge.”

Kensington & Chelsea is among six councils granted freedom from council tax referendum principles for 2027-28 and 2028-29. The government said these councils had been selected because they are upper tier, have below average council tax levels and 95% of their funding will be protected under transitional arrangements set out as part of the fair funding review.

All London boroughs have all-out elections this May.