There is no evidence to support wholesale restructuring of the Local Government Pension Scheme (LGPS), with future reforms needing to prioritise member outcomes over structural change, according to Pensions UK.

In a new report, Outcomes over structures: A framework for assessing change in the LGPS, the industry body argued that structural reform should only be pursued where it addresses clearly defined problems and delivers improvements for members, employers and the wider scheme.

The report highlighted the LGPS’s strong financial position, with funding levels reaching 122 per cent in England and Wales, 141 per cent in Scotland and 119 per cent in Northern Ireland.

Pensions UK noted that the scheme continues to deliver its core purpose of providing secure retirement benefits, despite facing increasing regulatory, governance and operational pressures.

However, it warned that debates surrounding the future of the LGPS have become increasingly focused on structural questions, including the number of funds, their organisation and the scale required to operate effectively.

The report argued that greater scale does not automatically translate into improved resilience, with governance quality, leadership, workforce capability, risk management and adaptability also playing important roles.

It acknowledged that consolidation could improve access to specialist expertise, investment opportunities and operational efficiencies, but stressed that these benefits were not guaranteed.

Instead, Pensions UK proposed an evidence-led framework for assessing future reforms against eight outcomes: sustainability and reliability of benefits, pension adequacy, service quality, affordability, governance and fiduciary decision-making, member and employer representation, collaboration, and adaptability and resilience.

The framework is intended to provide a consistent basis for evaluating reform proposals without recommending a particular structural model.

The report noted that administration costs in England and Wales increased from £195.7m in 2024 to £226m in 2025, reflecting growing demands relating to regulatory compliance, cybersecurity and member communications.

With this in mind, it warned that further structural changes could put additional pressure on already stretched governance and administration teams, particularly when multiple reforms are implemented at once.

Therefore, the report considered several alternative approaches to structural reform, including retaining existing arrangements with targeted improvements, shared administration services, dedicated pension authorities and fund mergers.

While acknowledging that each model could deliver benefits in certain circumstances, it emphasised the need to consider transition costs, accountability, local representation and operational disruption.

It also suggested that policymakers should allow recent reforms time to take hold before pursuing further significant structural changes, so their effectiveness can be properly assessed.

Commenting on the findings, Pensions UK chief policy officer, Zoe Alexander, said: “The LGPS is one of the largest and most successful pension schemes in the world. It is financially secure, has delivered strong investment performance and is an exemplar among pension schemes in powering growth in the UK economy through long-term investment.

“Crucially, it delivers on its core purpose of providing secure, reliable pensions for its 7.6 million members.

“Further reform of the scheme is a live debate both amongst political parties and within the scheme. Significant reforms to pooling, governance and investment arrangements are already underway, and some funds may actively benefit from further structural change.

“The key question is not whether change occurs, but whether it improves outcomes for members, employers and the wider scheme.

“This paper makes the case that all future reform should be tested against clearly defined problems, practical delivery constraints and the trade-offs involved. That will give the scheme the best chance of continuing to deliver strong outcomes for millions of local government workers.”

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