Chancellor, Jeremy Hunt, has announced plans to consult the Local Government Pension Scheme (LGPS) on new targets to double their existing investments in private equity to 10 per cent, in a move that is expected to help unlock £25bn by 2030.

The consultation, announced in the Chancellor's Mansion House Speech yesterday (10 July) and launched today (11 July) also outlines a March 2025 deadline for all LGPS funds to transfer their assets into LGPS pools, suggesting that each pool should exceed £50bn of assets.

In the consultation, the government suggested that while pooling has delivered "substantial benefits" so far, the pace of transition should accelerate to deliver further benefits, including improved net returns, more effective governance, increased savings and access to more asset classes.

Given this, it has proposed a deadline for asset transition by March 2025, confirming that it will consider action if progress is not seen, including making use of existing powers to direct funds.

The consultation is also seeking views on plans to increase investment into high growth companies via unlisted equity, including venture capital and growth equity, suggesting that there are "real opportunities in this area for institutional investors with a long-term outlook, such as the LGPS".

In addition to this, the government is seeking views about proposed amendments to the LGPS’s regulations to implement requirements on pension funds that use investment consultants.

It is also proposing to make a technical change to the definition of investments within LGPS regulations.

The plans for the LGPS were announced alongside measures for the broader defined benefit (DB) space, with further plans for a call for evidence on the possible role of the Pension Protection Fund and the part DB schemes could play in productive investment.

Commenting on the plans, Hunt stated: “British pensioners should benefit from British business success. By un-locking investment, we will boost retirement income by over £1,000 a year for typical earner over the course of their career.

“This also means more investment in our most promising companies, driving growth in the UK.”

Secretary of State for Work and Pensions, Mel Stride, added: “British workers should have the confidence that their pension savings are working as hard as they are.

“Our reforms will benefit savers and society – unlocking investment into pioneering UK businesses, growing the economy, and helping the record number of people in this country saving into a pension to achieve the retirement they want.”

Adding to this, Pensions and Lifetime Savings Association (PLSA) director of policy and advocacy, Nigel Peaple, suggested that while there is already a great deal of consolidation happening in the UK landscape, these measures will speed up the consolidation that is already happening and go further.

However, he noted that there are things other than consolidation that the government can also do to facilitate investment in the UK, for example amending the rules applying to the auto enrolment market, introducing more flexibility in the The Pensions Regulator's DB funding code for open DB schemes, and supporting the good governance of the LGPS scheme.

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