Millions of local government workers are set to be affected by major reforms to the way their pension savings are managed, after the Government laid new regulations before Parliament designed to overhaul investment rules within the Local Government Pension Scheme (LGPS).
The regulations, laid before Parliament on 21 May 2026, are due to come into force on 30 June and form part of the Government’s wider Fit for the Future reforms to the LGPS. Ministers say the changes are intended to strengthen returns for members, improve governance and ensure the scheme’s substantial assets are used more effectively to support investment across the economy.
The LGPS is one of the largest funded pension schemes in the UK, holding around £400 billion in assets. The reforms will introduce new requirements for how pension funds are managed and invested, with a particular focus on pooling assets, supporting local investment and improving consistency across funds in England and Wales.
Ministers say reforms will support workers and local communities
Minister for Local Government and Homelessness, Alison McGovern MP, said the reforms were about ensuring that public servants benefit from a pension system that reflects the value of their work.
“Those working on the front line in our local communities are unsung heroes, and they deserve a pension scheme that works as hard as they do.
“These reforms will do exactly that – providing better returns, putting money back into local communities, and driving economic growth that people can actually feel.”
The Government’s argument is that better coordination between pension funds can allow assets to be invested at greater scale, improving the ability of the LGPS to generate returns while also supporting long-term investment in the real economy. This includes investment in local communities, infrastructure and growth opportunities.
Minister for Pensions, Torsten Bell MP, said the reforms marked a significant step in making better use of the scheme’s assets.
“The reforms are a major milestone that will release the untapped potential of the local government pension scheme, ensuring its £400 billion of assets are managed effectively on behalf of members and driving economic growth across the country.”
Pooling to become a legal requirement
A central element of the reform package is the move to make pooling a legal requirement for the first time. Pooling is the process by which individual LGPS funds combine their assets, allowing them to make larger and potentially more effective investments.
Since 2015, LGPS funds have already made substantial progress on this agenda. According to the Government, around 80% of assets are already pooled, with £870 million in savings achieved so far. The new rules are designed to build on that progress by ensuring that every fund meets the same standards and that pooling is no longer voluntary or unevenly applied.
For government, this is both a pension reform and a growth policy. By bringing assets together at scale, ministers hope funds will be better placed to invest strategically, reduce duplication and improve value for members.
Implementation timelines adjusted after consultation
The regulations follow a consultation launched in November 2025. In response to feedback, the Government has adjusted some implementation timescales to reflect what it describes as practically achievable for funds.
This means funds will be given more time to transfer assets to pool management, publish investment strategies and fill new governance roles. That adjustment suggests ministers are seeking to balance ambition with operational deliverability, recognising the complexity of moving large pools of pension assets into new management arrangements.
The reforms also sit within a wider debate about how public sector pension schemes can deliver stronger outcomes for members while supporting national and regional investment. For local government workers, the core test will be whether the changes improve long-term security and returns. For councils and communities, the question will be whether the reforms genuinely unlock investment that can be felt locally.
A major step in LGPS reform
The Government says the package represents a major step forward in building a pension system that delivers better outcomes for workers and communities across England and Wales.
By placing pooling on a statutory footing, ministers are seeking to create a more consistent and coordinated investment framework for the LGPS. The reforms are also intended to ensure that pension savings are not only properly managed on behalf of members, but also used in ways that support wider economic growth.
As the regulations come into force at the end of June, attention will now turn to implementation. The success of the reforms will depend on how effectively funds adapt to the new requirements, how quickly governance roles are filled, and whether pooled investment can deliver the stronger returns and local impact ministers have promised.
(Photo: Headquarters of Essex County Council: Stortford)