Unveiled as part of the final Pension Investment Review, the reforms will see the assets of the LGPS, currently managed across 86 separate administering authorities, consolidated into just six investment pools by March 2026. To enforce this target, the Government will introduce a backstop power that allows it to direct an authority to join a specific pool if necessary.
Chancellor of the Exchequer, Rachel Reeves, has framed the reforms as a central part of the Government’s wider economic plan,
We’re making pensions work for Britain. These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses – the Plan for Change in action.
Deputy Prime Minister Angela Rayner also emphasised the potential impact on regional development,
The untapped potential of the £392bn LGPS is enormous. Through these reforms we will make sure it drives growth and opportunities in communities across the country for years to come.
Backing the vision, but concerns over “ambitious” pace
While there is clear support for the Government’s overarching aims, concerns have emerged over the pace of reform. Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association (PLSA) described the March 2026 deadline as “overly ambitious,” especially in light of broader local Government reform and the disruption caused by recent elections. “The PLSA encourages Government to continue engaging with funds and pools to develop a roadmap for delivery that is more practical and realistic,” she said.
The pressure to act quickly is compounded by the Government’s message that there will be only ‘limited flexibility’ for funds needing extra time or for pools taking on new members. This has sparked debate about how voluntary the new pooling arrangements really are.
Balancing scale with local control
The reforms aim to scale up LGPS investment capacity and enable access to a wider range of asset classes, particularly in domestic infrastructure and sustainable investment. As Pensions Minister Torsten Bell summarised:
When it comes to pensions, size matters, so our plans will double the number of £25bn plus megafunds. These reforms will mean bigger, better pension schemes, delivering a better retirement for millions and high investment in Britain.”
With greater scale comes the challenge of balancing central policy goals with local accountability. Chris Rule, CEO of Local Pensions Partnership Investments, supports the new standards but stressed the importance of allowing partner funds to retain control over investment strategy, “This approach allows pools to act in the best interest of partner funds and their members, while achieving the scale needed to access investment opportunities most effectively.” He added that funds should be able to define their own local investment priorities and targets in collaboration with local Government.
Governance and oversight concerns
Another area of uncertainty is the Government’s proposed independent review process to assess the capability of each of the 86 administering authorities. Although this will now take place triennially rather than biennially, industry experts say the scope and consequences of these reviews remain unclear. The reviews could result in significant consequences for underperforming funds, including potential mergers, with powers to direct an administering authority to merge its fund with a better performing fund.
Zoe Alexander argues that such powers should only be used as a last resort, and emphasised the need for localised decision-making, “Such decisions require highly specialised and localised knowledge of the funds’ specific circumstances.” She added that while pools will be required to provide principal investment advice, it remains crucial that funds retain the right to seek independent advice, particularly during the early stages of the reforms and as pooling arrangements are finalised.
Looking ahead
Commenting on the reforms, Jonathan Cooney, Business Development Director-LGPS at Equiniti said:
While the Government’s objectives for LGPS reform have been broadly welcomed across the industry, their ultimate success will hinge on how effectively and collaboratively they are delivered in practice. With the March 2026 deadline fast approaching, local funds are under mounting pressure to assess their options, establish robust governance structures, and uphold fiduciary responsibilities amid increasing scrutiny."
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