Pension Schemes Bill compliance will be a sprint, not a marathon

Written By: Nick Reeve Editor Pensions Expert

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The government has fired the starting gun on wide-ranging and ambitious pension system reforms with the publication of the Pensions Investment Review final report and the Pension Schemes Bill. The LGPS now faces a race against time to meet policymakers’ expectations

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The 31th March 2026 – the date now looms large on the LGPS calendar after the government published the Pension Schemes Bill, confirming its plans to hit the accelerator on asset pooling. The bill was laid in parliament on 5th June and is arguably one of the most wide-ranging and ambitious pieces of legislation to affect the pensions sector this century.

Called a “game changer” by chancellor Rachel Reeves, the bill was also variously referred to as a “blockbuster” and a “pivotal moment”, but also a “huge challenge”.

Nowhere is this last observation more obvious than with the Local Government Pension Scheme.

Alongside primary legislation for private sector defined benefit and defined contribution pension schemes, the bill – combined with the response to the Fit for the Future consultation and the final report of the Pensions Investment Review, both published a week earlier – confirmed the government’s plans to force the closure of the ACCESS and Brunel pools.

All LGPS fund assets will have to be managed by the remaining six pools, which will also be expected to give strategy advice to their partner funds.

And all this must be completed by 31st March 2026, with limited flexibility for the 21 funds who are seeking a new pooling partner.

An “overly ambitious” timeline
Councillor Roger Phillips, chair of the Scheme Advisory Board, warned that “the scale and pace of the proposed changes carry significant risks if not managed with care”.

The board has been lobbying government for more time to implement the pooling plans, first outlined in the Fit for the Future consultation, but it has as yet been unsuccessful.

“The current timetable places considerable pressure on funds to balance these reforms with other critical responsibilities, including the development and approval of key policies that require thoughtful planning and robust governance,” Phillips said.

Aside from pooling and the day-to-day demands of running large pension funds, administering authorities are also grappling with changes to pension committees following the recent local elections and the workload from the latest triennial valuation.

Then there is ongoing work around the McCloud remedy and connection to the pensions dashboards system by 31st October 2025.

Phillips said the Scheme Advisory Board “remains committed to supporting funds through this transition” and will “continue to engage with government to ensure that funds are given the time necessary to establish the governance structures required, both at fund and pool level, to deliver on these expectations effectively”.

The Pensions and Lifetime Savings Association (PLSA) has also indicated its concern around the timeline, which it called “overly ambitious, especially in the context of wider local government reforms and recent elections”.

The association called for the government to “continue engaging with funds and pools to develop a roadmap for delivery that is more practical and realistic”.

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 12th May, this deadline is unnecessarily precipitous and raises the risk of rushed decisions, sub-optimal implementation and increased costs,” Campbell added. “The ambitiousness of the government’s plans are not to be underestimated.”

 

“Material shift” in government role in LGPS
One implication of the deadline challenge is the risk that funds are left without a pooling partner, if negotiations have not progressed sufficiently by the end of March.

To counteract this, the Pensions Investment Review stated that the government would “take a power in the Pension Schemes Bill to direct an administering authority to participate in a specific pool”.

Speaking to journalists after the review was published, 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.”

However, others in the industry voiced concern about the implications of such a power.

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”.

“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 31st 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?”

The PLSA also questioned the need for the new power, arguing that “such decisions require highly specialised and localised knowledge of the funds’ specific circumstances”. The trade body emphasised that such a power “should only be used as a last resort and after dialogue with the affected funds”.

Zoe Alexander, director of policy and advocacy at the PLSA, added that the measure would “require careful scrutiny”.

 

Local investment and the issue of “sovereignty”
When chancellor Rachel Reeves introduced the Fit for the Future consultation in November, it was part of a wider aim to create so-called “megafunds”.

Primarily aimed at defined contribution pension schemes, the measures are in part designed to increase scale and the ability of pension schemes to invest in the UK economy through assets such as infrastructure and private equity.

Fast-forward to May, and the Pensions Investment Review praised the LGPS’s track record of local and regional investing, adding that it was “critical” that this continued.

To this end, the Pension Schemes Bill includes a potential requirement for administering authorities to “co-operate with strategic authorities… in order to identify and develop investment opportunities”.

This echoes the government’s work with private sector defined contribution pension schemes, which are being strongly encouraged to increase their domestic investments. In response, pension schemes and providers have urged the government to create a pipeline of suitable assets.

For the LGPS, the government has called for a 5% overall allocation to local investment, which it said would secure £27.5 billion for “local priorities” across England and Wales.

On the day the Pension Schemes Bill was introduced to parliament, London CIV announced it was working with the British Business Bank on the development of the British Growth Partnership, an investment vehicle specifically designed to enable pension schemes to invest in smaller, high-growth UK companies.

Bell was also keen to highlight the work of the Wales Pension Partnership in allocating to local investment opportunities. The minister – who represents the Swansea West constituency – visited the Uskmouth Power Station in Newport in May after the pool announced a £6.5 million investment into its redevelopment.

In recent weeks, the City and County of Swansea Pension Fund has established a partnership with Newcore Capital to invest in social infrastructure in the local area, while the Wales Pension Partnership has backed the development of affordable, low-carbon homes in Ceredigion and Pembrokeshire through loans made by Pluto Finance.

Chris Rule, chief executive officer at Local Pensions Partnership Investments (LPPI), said it was important for LGPS funds to be able to define what qualifies as ‘local’. “The significant investments we’ve made in local projects across the country were made because they aligned with our partner funds’ objectives,” he said.

The Pension Schemes Bill as it is currently worded suggests that, while LGPS funds will be responsible for setting strategies and identifying local investments in collaboration with strategic authorities, it will be the pools that will be responsible for due diligence and ongoing management of the assets.

LPPI’s Rule emphasised the need for partner funds to “retain their sovereignty when it comes to setting their funding and investment strategies”.

“This is critical to allowing pools to act in the best interest of partner funds and their members, while also achieving the scale needed to access investment opportunities efficiently,” Rule explained.

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