If your setting file is in ANSI encoding (the default encoding for text files on Windows, e.g. if you create them with Notepad), then you need to convert then to UTF8 (since String is UTF8 in LCL/Lazarus).
If you created the file using a Lazarus program, then the encoding of the strings actually will be UTF8.
Notice that all of this only matters if the setting file contains any characters that are not lower ASCII.
You can simply test this by loading the file into a TMemo and see if it looks OK.
If you see odd characters, or questionmarks that do not belong there, most likely the file is ANSI encoded.
If it looks OK, then either the file is UTF8, or it is pure ASCII (since all ASCII is by definition alss correct UTF8).
Bart