The Local Government Pension Scheme (LGPS) has demonstrated “strong” performance amid economic uncertainty, with falling employer contribution rates and high levels of stakeholder engagement, according to a briefing note from Hymans Robertson.

The firm’s LGPS 2025 valuations: a strong outcome in a complex environment note showed that total LGPS assets rose from £364bn in 2022 to £402bn in 2025, but assets relative to liabilities had declined, with the scheme holding £32.40 per £1 of pension in 2025 compared to £38.30 in 2022.

This reflected a combination of investment returns broadly in line with expectations and higher benefit payments, driven by inflation.

However, Hymans Robertson argued that the overall outcome remained positive, pointing to improved funding positions and reduced contribution requirements.

The note estimated that average employer contribution rates would fall from around 21 per cent of pay to 16-17 per cent following the 2025 valuations, largely driven by higher long-term investment return expectations adopted by funds.

Hymans Robertson head of LGPS actuarial, Rob Bilton, said the results marked “another significant milestone” for the scheme amid a period of "exceptional" economic uncertainty.

“The early evidence set out in our briefing highlights many positives; from reduction in employer contribution rates to strong stakeholder engagement across the scheme, and decisions that reflect long-term thinking, rather than short-termism," he said.

Bilton noted that although the scheme held more assets in absolute terms, the level of assets relative to benefits had fallen since the previous valuation.

“However, the LGPS has acknowledged higher future investment return expectations at 2025 and struck a balance between affordability now, and stability in the future,” he added.

The briefing also emphasised the importance of prudence, arguing that contribution decisions were not simply about caution but about balancing affordability with long-term stability.

It warned that reducing contributions too aggressively, based on optimistic assumptions, could lead to volatility in future valuations, particularly as the scheme matures and becomes more sensitive to funding shocks.

Funds have therefore stress-tested outcomes against a range of risks, including lower investment returns, persistent inflation, and market volatility, to ensure resilience over the long term.

Meanwhile, the report highlighted increasing variation in outcomes between funds and employers, reflecting differing priorities and funding positions across the scheme.

Survey data included in the briefing showed that engagement between LGPS funds and employers has been strong, with 89 per cent of respondents reporting the opportunity to participate in the contribution-setting process, and 96 per cent expressing comfort with their 2025 contribution rate.

Bilton described this level of engagement as a "key strength" of the valuation process.

“A recent survey of local authorities participating in the LGPS revealed that engagement between funds and employers has been extensive,” he noted.

“Nearly all of the authorities also say that they’re comfortable with their 2025 valuation contribution rate, which is expected to fall by, on average, for the whole scheme, around 4-5 per cent of pay.”

“Our briefing note covers the key themes of the 2025 LGPS valuations in England & Wales, and it points to a scheme doing its job well - delivering adequate and fair benefits for seven million members in the UK with high levels of engagement, and affordability, for its 20,000+ participating employers,” Bilton concluded.

He confirmed that further analysis would follow as more detailed results emerged across the scheme, including a deeper look at the drivers behind funding outcomes and variations between funds.

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