UK: Consultation on the future of the Local Government Pension Scheme (LGPS) in England and Wales

The MHCLG consultation “Local Government Pension Scheme in England and Wales: Fit for the Future - technical consultation” sets out proposed reforms to LGPS asset pooling, local investment and governance

Why should I read this?

The Ministry of Housing, Communities & Local Government (MHCLG) is consulting on two draft statutory instruments, “The Local Government Pension Scheme (Pooling, Management and Investment of Funds) Regulations 2026” and “The Local Government Pension Scheme (Amendment) Regulations 2026”.

The proposals in the MHCLG consultation “Local Government Pension Scheme in England and Wales: Fit for the Future - technical consultation” have implications for administering authorities (AAs) and LGPS pool companies. Managers of funds in which AAs currently invest may also be indirectly affected by the proposed consolidation. The proposals will change how the assets of the affected AAs are managed and governed. Each affected AA will have to join one of the now six LGPS pools, which control and manage all the AAs assets. AA will also be required to take their principal investment advice from their LGPS pool company.

The consultation follows on from the November 2024 Fit for the Future consultation and the May 2025 MHCLG response to that consultation.

As part of the Pensions Review reforms, the government asked each LGPS pool to explain how they will achieve the new minimum standards for investment management. Two pools’ proposals fell short of what the government required and the twenty-one AAs affected have been asked to select one of the remaining six pools to join by 1 April 2026, to coincide with the new rules coming into force.

What should I do?

Review the consultation

Assess how the proposed changes to pooling, investment and governance may impact AAs, LGPS pool companies and fund managers.

Engage with stakeholders

Discuss the implications with your pool, AAs and advisers.

Prepare for compliance

Identify any gaps in current pooling arrangements or governance structures. Compliance is expected to be mandatory from 1 April 2026, subject to some lead in periods.

What do I need to know about the LGPS consultation?

The proposals represent a marked shift towards greater centralisation, oversight and accountability. The Secretary of State will be given statutory powers to intervene if AAs or LGPS pool companies do not meet expected standards.

	Summary of Proposals
FCA authorisation	All LGPS pools must be FCA authorised for, at a minimum, the regulated activities listed in the schedule to the regulations
Asset pooling	All LGPS pools must meet new minimum pooling standards and have the capacity to manage local investments AAs must delegate implementation of their investment strategy to their LGPS pool AAs may only be in one LGPS pool at any given time (unless transitioning from one to another) Subject to certain exceptions, all assets to be managed by the relevant AA’s LGPS pool within 21 days of the AA first participating in the LGPS pool AAs must take principal investment advice from their pool
Local investment	Stronger expectations for investment in local and regional UK projects LGPS pools required to devise plans for local investment LGPS pools must demonstrate the capacity to manage local investments as part of minimum governance standards
Governance	Strengthened governance arrangements for AAs and LGPS pools AAs must prepare a governance strategy, a training strategy and a conflict of interests policy. This may be in the form of a combined document Regular governance reviews required, aligned with valuation cycles Appointment of a senior LGPS officer
Powers of the Secretary of State	To direct non-compliant AAs to join a specific LGPS pool To direct a LGPS pool to comply with guidance and to direct a LGPS pool to carry out particular investment management activities in a manner specified in the direction To direct AAs and LGPS pools to invest locally To direct governance reviews

Next steps

The consultation closes on 2 January 2026. Responses can be submitted online through Citizen Space on the MHCLG website or by email to lgpensions@communities.gov.uk.

Guidance is expected to accompany the new Regulations and MHCLG plans to update industry on progress when it responds to the consultation. Subject to the legislative passage of the Pensions Bill proceeding as expected, the new rules will become mandatory from 1 April 2026.

How can Eversheds Sutherland help?

We believe we have one of the UK’s strongest pensions investment practices. It includes members of the firm’s market-leading Financial Services team, together with specialists in pensions, tax and financial services disputes. We have leading advisers to both pension scheme trustees and product providers, giving us a unique insight into all sides of the market.

We are at the forefront of innovation in the investment industry, working closely with HM Treasury and HM Revenue & Customs to develop new products for use by pension schemes. This includes for example, the authorised contractual scheme (ACS) and the property authorised investment fund (PAIF).

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