The government will give itself the power to decide what pooling organisation a local authority pension fund should join as a “backstop” to ensure its “megafunds” plan for the Local Government Pension Scheme (LGPS) succeeds.
In the Pensions Investment Review - published today by the Treasury, the Department for Work and Pensions and the Ministry for Housing, Communities and Local Government - the government said it was retaining the 31 March 2026 deadline for pools to secure regulatory authorisation and to be able to offer strategic investment advice alongside implementation.
However, given that the ACCESS and Brunel pools have been told to disband and for underlying funds to find a new pool, the government said it would allow “some limited flexibility where necessary” around the deadline for those transitioning between pools.
To ensure that no fund is left without a pool, the review states that “the government will take a power in the Pension Schemes Bill to direct an administering authority to participate in a specific pool”.
Speaking to journalists this morning, pensions minister Torsten Bell emphasised that it was “definitely for the administering authorities to make their own decisions” on what pool to join, with the relevant government departments “supporting them in any way they would like”.
On the new power to direct a fund to join a pool, Bell said: “I would see that very much as a backstop power, and it’s not to do with directing people to which pool they wish to be part of.”
‘Material shift’ in government role in LGPS
Barry McKay, head of public sector consulting at Barnett Waddingham, said the backstop power “represents a material shift in the relationship between central and local government”.
“The very principle of having the sovereignty to make that decision is really significant for the LGPS. Many will now be asking: what comes next?”
Barry McKay, Barnett Waddingham
“In deciding which pool to join, funds will be weighing up many different factors and fiduciary duty will be at the core of their decision-making,” McKay said.
“The government’s preference may be for pool membership to be determined voluntarily, but time is short and many funds have a lot of new committee members and other complexities so it’s conceivable that decisions won’t be finalised by 31 March 2026.
“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. Many will now be asking: what comes next?”
Iain Campbell, head of LGPS investment at Hymans Robertson, expressed concern that the government was pressing ahead with the March 2026 deadline despite “valid implementation issues raised by knowledgeable and experienced members of the LGPS community”.
“As fed back to the 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,” Campbell added.
No plans for further pool mergers
Last month, the government gave the green light on pooling plans for six of the eight existing LGPS pools. ACCESS’s and Brunel’s have been rejected, meaning there will be six LGPS pools in future.
The Pensions Investment Review made it clear that the government “has no plans to intervene to reduce the number of pools to fewer than six”.
It also acknowledged that requiring ACCESS’s and Brunel’s partner funds to find a new pool was “a substantial undertaking with impacts across the LGPS”. It added that “stability will be important for optimum performance and successful collaboration into the future”.
“Administering authorities and pools will need to consider carefully the decision to form a new long-term partnership, alongside capacity to deliver on the required minimum standards by the March 2026 deadline – this will be vital to delivering for members, employers and local taxpayers,” the review stated.
Pooling: the state of play
As of 31 March 2024, the most recent year-end reporting date for the LGPS, the 86 funds in England and Wales had almost £388bn in assets under management between them. This was split between eight pools:
| Pool | Total assets |
|---|---|
| ACCESS | £64.6bn |
| Border to Coast | £63.9bn |
| Brunel | £37.3bn |
| LGPS Central | £61.7bn |
| Local Pensions Partnership | £22.8bn |
| London CIV | £50.9bn |
| Northern | £61.4bn |
| Wales Pension Partnership | £25.1bn |
All data sourced from PensionsPerformance.com, a DG Publishing service. The assets data refers to all assets managed by the underlying funds in each pool. Not all assets listed above are managed by the pool, but it is the government’s intention that this will be the case by 31 March 2026.
Encouraging cross-pool collaboration
Elsewhere in the Pensions Investment Review, the government has pledged to address legislative and regulatory barriers to further pooling and collaboration.
Respondents to the government’s ‘Fit for the future’ consultation had flagged that the Procurement Act 2023 “prevents pools from collaborating to their full potential by requiring demonstration that a significant majority of a single pool’s activity is in the interest of its own partner authorities only”.
“A pool will no longer be limited when investing through another pool, thereby harnessing even greater benefits of scale.”
Pensions Investment Review
The Pension Schemes Bill will include a provision related to procurement that means relevant exemptions apply “as long as a pool is acting in the interests of any LGPS administering authority”.
“This means that a pool will no longer be limited when investing through another pool, thereby harnessing even greater benefits of scale,” the review stated.
Meanwhile, tax officials will shortly be engaging with LGPS pools to discuss stamp duty land tax and its impact on property investments being pooled.
This article has been updated to add quotes from Barnett Waddingham and Hymans Robertson spokespeople.
