Industry experts are generally supportive of the government's policy direction and desired outcomes for the Local Government Pension Scheme (LGPS), but concerns remain over the “overly ambitious” timing of delivering and implementing the changes.

The final Pension Investment Review report published yesterday (29 May) saw the government confirm the March 2026 deadline for Local Government Pension Scheme (LGPS) asset pooling, with a backstop power to be taken in the bill to protect the interests of LGPS members and local taxpayers where necessary by directing an administering authority to participate in a specific investment pool.

The government, which published its response to its ‘Fit for the Future' consultation alongside the review, also confirmed that the LGPS reforms will see assets currently split over 86 administering authorities consolidated into six pools.

Barnett Waddingham head of public sector consulting, Barry McKay, said that the plan for LGPS pools to be cut from eight to six indicates that there is “no possibility” that ACCESS or Brunel will be given the opportunity to meet the government’s criteria.

However, Pensions and Lifetime Savings Association (PLSA) director of policy and advocacy, Zoe Alexander, said that the proposals around the future of LGPS pooling “does not come as a surprise”.

She pointed out that funds and pools are “working hard” in the background to make a success of this process, emphasising that it is “positive” that the government has signalled that further consolidation of the pools is not in its immediate plans.

However, Alexander suggested that the timeline for delivering and implementing the changes is “overly ambitious”, especially in the context of wider local government reforms, and 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.

McKay echoed this, suggesting that “time is short” for funds deciding which pool to join and that they have to weigh up “many different factors and fiduciary duty will be at the core of their decision-making”.

“The pressure is now firmly on, for all funds/pools to meet that deadline and the government is suggesting that there will be only "limited flexibility" in timing for those funds looking for a new home or for the pools to take on new funds,” he added.

McKay also argued that the new backstop power allowing government to direct an administering authority to participate in a specific pool represents a "material shift in the relationship between central and local government".

And whilst McKay acknowledged that the government's preference may be for pool membership to be determined voluntarily, he argued that, due to time constraints, “it’s conceivable that decisions won’t be finalised by 31 March 2026”, as funds have a lot of new committee members and other complexities.

“Not only may the Treasury have different views on how to 'protect the interests of LGPS members and local taxpayers', but the very principle of having the sovereignty to make that decision is really significant for the LGPS,” he said.

Hymans Robertson head of LGPS investment, Iain Campbell, also raised concerns on the confirmation of the deadline for asset pooling.

Campbell said Hymans Robertson is “supportive” of the government's vision for the LGPS but raised concerns that “some valid implementation issues raised by knowledgeable and experienced members of the LGPS community have been passed over, meaning that the implementation carries risks to the success of both the LGPS and the outcomes for the UK".

“Key to these concerns is the deadline of 31 March 2026, which the government has confirmed remains in place,” he explained.

“As fed back to government throughout the process, including in a letter from the Scheme Advisory Board on 12 May, this deadline is unnecessarily precipitous and raises the risk of rushed decisions, sub-optimal implementation and increased costs.”

Local Pensions Partnership Investments chief executive officer, Chris Rule, said the new asset pooling standards confirmed in the ‘Fit for the Future’ consultation response will help the LGPS to “meet its full potential”, but stressed “the importance of partner funds within pools retaining sovereignty over their funding and investment strategies, including discretion over risk appetite, return targets and strategic asset allocation”.

“In our experience, 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.

Rule also argued that partner funds should be able to define what they mean by local investing and collaborate with local government to set their own, appropriate targets.

McKay also questioned if the “new independent review process to ensure each of the 86 administering authorities is fit for purpose" as set out in the government response to the ‘Fit for the Future' consultation referred to the proposed biennial (now confirmed to be triennial) governance review.

“Either way, it’s clear that what the review covers, and the sanctions for a poor score (or even ‘failing’ a review), will be critical,” he added.

“It's not clear how far government will go, but there are now powers to direct an administering authority to merge its fund with another (better performing) fund.”

Alexander added these plans should only be used as a “last resort” as “such decisions require highly specialised and localised knowledge of the funds’ specific circumstances”.

“The clarification of the responsibilities between funds and pools is important. Since funds will remain accountable to LGPS members it is essential that funds continue to set and drive their investment strategy,” she added.

“For the same reason, whilst the requirement for pools to provide principal advice to Funds has been confirmed, and many pools either operate on this basis already or have started to build capacity to deliver this, the acknowledgement that independent advice may still be needed is crucial.

“This will be especially true in the early stages of implementation and as some funds consider their pooling approach."

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