Local Government Pension Scheme (LGPS) investment in local opportunities should not be ‘target driven’ The Good Economy CEO and co-founder, Sarah Forster, has advised.

Speaking at the Pensions UK Local Authority Conference, Pensions UK Local Authority Committee chair and West Yorkshire Pension Fund managing director, Euan Miller, highlighted that the LGPS Fit for the Future regulations are "very clear" that LGPS funds should consider a local investment target, and questioned whether this is helpful.

In response, Forster noted that having a target [means] funds are more intentional about local investing, and so mindsets and behaviours are changing. “We've definitely seen, since the government's made this requirement, that mindsets have changed. There's certainly more interest in local investing than there ever been,” she added.

However, Forster noted that setting a local investment target is "tricky", as it partly depends on location and the extent to which investable opportunities exist.

She gave the example of Greater Manchester Pension Fund having invested around 4.5 per cent against its 5 per cent local investment target.

“However, that's a region that is very joined up politically, with a lot of alignment, a very active combined authority and capability to generate investable opportunity, so in that context, it makes sense. But in others, I can see why one would be wary. So, I definitely don't think one should be target driven” Forster explained.

She highlighted how investing in local opportunities takes time to be implemented successfully, “because the worst thing would be that one hurries to deploy capital into projects that then are white elephants or fail, and returns aren't there, and everybody criticises their investment”.

Therefore, “one needs to measure performance, but not overly focus on whether you reached the target”, Forster stated.

The government published the outcome of its LGPS 'Fit for the Future' consultation and laid its final regulations to overhaul investment and governance arrangements across the scheme before parliament on 21 May, with the rules due to come into force on 30 June 2026.

The regulations require administering authorities to outline their approach to local investment, including a target range for asset allocation, directly within their Investment Strategy Statement.

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