The Pensions and Lifetime Savings Association (PLSA) has stated that it supports the further transition of Local Government Pension Scheme (LGPS) assets into pools, but warned that the proposed transition deadline would create “unnecessary risks”.

In its response to the government’s ‘LGPS: Next steps on investment’ consultation, the PLSA raised concerns that the March 2025 deadline would result in considerable investments risks and substantial operational challenges.

While the association agreed that increasing pools’ scale would be beneficial for funds, it argued that assets should be transitioned to pools in an “efficient and well-governed manner”, without artificial timelines that could be detrimental to value.

It called for funds to create a plan for the transition of their unlisted and listed assets, including the detailed rationale for assets that would remain outside of the pool, to be provided in the Investment Strategy Statement.

“Assurances should be given by funds that they are complying with their plans,” the PLSA stated. “We would support the government setting up a timeline for this plan to be presented.”

According to the PLSA, its members believe the best way the government could guarantee more investments in assets that comply with the ‘levelling up’ agenda is to support the creation of the right opportunities in the market for LGPS funds, alongside considerations for regulatory change or setting up fiscal benefits for funds.

It urged the government to set up a framework that will help create a pipeline of investment opportunities.

Furthermore, while the PLSA said it supported the idea of funds investing in other pools’ products, it warned there were several issues to consider, such as product design, rising costs, in-house capabilities, products limited in capacity, and the fact that funds may be better served by investing in asset managers’ offerings directly though their pool.

On investment opportunities in private equities, the PLSA believed that the government should not set an ambition of 10 per cent, as they already allocate 4.3 per cent to private equity and fears that a specific target allocation would affect the funds’ fiduciary duty.

It also argued that focus should be given to growth capital in private markets as a whole, rather than just private equity, and asked the government to consider offering long-term guarantees and/or necessary policy certainty to protect potential investors.

“Given the substantial cost savings already obtained from transitioning LGPS assets to larger asset pools, it is entirely sensible to explore whether new policy intervention might result in further gains,” commented PLSA head of DB, LGPS & investment, Tiffany Tsang.

“Similarly, given that the LGPS already invests extensively in levelling up and private equity it is right to explore whether more investment to these objectives is achievable.

“However, the core objective of the LGPS remains paramount: securing assets with an appropriate risk profile to be able to fulfil pension obligations to members. Therefore, it is important that both further consolidation and investment targets should only be undertaken if they align with the fiduciary duty to invest in the interests of scheme members.

“The LGPS faces mounting regulatory challenges so it is important that any new requirements are carefully thought through and that they build upon, rather than complicate effective scheme administration. We would be pleased to work with DLUHC to help ensure that their proposals meet the needs of the LGPS and are achievable in practice.”

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