The government's plans to reform the Local Government Pension Scheme (LGPS) represent a “clear path forward” for LGPS pooling, although “stronger collaboration” will be needed to meet the March 2026 deadline, the Local Pensions Partnership Investments (LPPI) has said.

Following the Chancellor’s Mansion House speech in November, the government launched a consultation on plans to create LGPS ‘megafunds’ by requiring the 86 LGPS administering authorities (AA) to consolidate their assets into fewer, larger pools of capital.

Whilst industry experts have been broadly supportive of the objectives behind the reforms, concerns have been raised over accelerated timelines and potential conflicts of interest.

However, LPPI chief executive officer, Chris Rule, argued that whilst there has been some concern in the sector that greater consolidation, and stronger government direction on investment management standards and processes, could mean a loss of control for LGPS funds, this may not be the case in practice.

"We don’t see it that way and this hasn’t been the experience of our partner funds," he stated.

“The consultation signifies a clear path forward for LGPS pooling. By setting common standards, aligning investment expertise with decision making, and encouraging further collaboration, the proposals aim to drive greater scale and efficiencies that will ultimately drive better outcomes for LGPS members and employers, and taxpayers.”

In its response, LPPI, which is one of eight existing pools, said it agreed with the government on the need to simplify processes, reduce duplication, and improve collaboration between LGPS funds and pools to ensure funds are invested professionally and cost-effectively.

The LPPI also said that the proposed changes would help councils fulfil their legal duty to act in the best interests of pension fund members, employers and taxpayers and ensure clear accountability between councils and pools.

However, the LPPI stressed that “stronger collaboration” between pools and councils was required to meet the government's proposed deadline.

In addition to this, LPPI urged pools to share expertise and merge where necessary to avoid wasting time and resources and ensure all pools operate at the same high standards, making the system fairer and more effective.

Pools should work with councils to align investments with climate, social, and local priorities without creating inefficiencies, added the LPPI, while they should also proactively collaborate on identifying and managing local investments and balancing financial responsibilities.

They also said pooled assets must focus on outcomes rather than overly detailed breakdowns to keep reports accessible and meaningful and achieve long-term benefits.

Rule added: “With strong leadership, proactive collaboration and timely action, these changes can make LGPS pooling fit for the future while supporting pension fund committees to achieve their strategic goals and maintaining democratic accountability.”

“The LGPS was created to make sure that public service pensions are paid when they are due. It’s the responsibility and sole purpose of the funds and pools to make this happen whilst working to ensure employer contributions are as stable and affordable as possible."

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