The Government’s Reforms to the LGPS: An Explainer for Campaigners
The government is reforming the Local Government Pension Scheme (LGPS), including by making changes to the way that LGPS funds invest.
According to the new reforms, all LGPS assets must be transferred to asset pools by 31 March 2026. Pools are bodies which manage the investments of multiple LGPS funds. This means that all LGPS investments will be managed through a pool.
The asset pools are being given increased power and influence over investment strategy. Pools will have full responsibility for the implementation of the investment strategy set by the Administering Authority (the formal term for the council with responsibility for a pension fund). In addition, Administering Authorities will be required to receive their principal investment advice from the pool.
The most important piece of information for campaigners is that even after the reforms, councils will still be able to take action to divest their Pension Fund from companies enabling Israel’s crimes against Palestinians. Therefore, you should continue to build your divestment campaign as before.
Should I continue to campaign for my council to divest its Pension Fund, and what should I be calling for?
Yes, you should continue to build your divestment campaign.
We are calling on all councils to pass a motion stating they will take action to divest their Pension Fund from companies enabling Israel’s grave violations of international law. Councils that are not Administering Authorities should call on the relevant authority to divest.
To achieve divestment, Administering Authorities must use their influence as shareholders and/or clients of the pool to:
- Direct the pool to create new investment funds with robust exclusion criteria that ensure no investments are made in companies enabling Israel’s crimes.
- Demand that the pool divest all of its existing funds from companies complicit in Israel’s genocide, military occupation and apartheid against Palestinians, and puts in place policies to ensure that no future investments can be made in these companies.
Do all the councils in a single pool need to agree in order for the pool to take action?
The creation of new, ethical investment funds would not need a majority of councils in the pool to commit to invest in them. Currently, some pool-managed sub-funds have as little as two investors.
What are ‘pools’, and what powers do the reforms give them?
Since 2015, LGPS funds have been required to invest together in groups. The body that manages the combined investments of several LGPS funds is known as a pool. Even before the implementation of these reforms, all LGPS funds were required to be part of a pool.
Currently LGPS funds invest partly in investment funds managed by the pool, and partly by holding some investments on their own, usually managed by an external fund manager.
The reforms require all assets to be transferred to the pool by 31 March 2026. Therefore, councils will no longer control any investments separate from the pool. Administering Authorities will also be required to take their principal investment advice from the pool.
Councils have a large degree of influence on the pool. They often act as the pool’s shareholders and will be involved in the pool’s governance. As addressed above, councils should use their influence to push the pool to divest from companies enabling Israel’s grave violations of international law.
After the reforms, who has responsibility for investments?
Administering Authorities retain responsibility for setting an investment strategy for their fund, which must set out its approach to responsible investment and ESG matters. The Administering Authority can direct the pool that it does not want to be invested in companies enabling Israel’s crimes against Palestinians (see the answer to the first question for more detail).
The pools will have responsibility for the implementation of this investment strategy, and will be the principle source of investment advice for the Administering Authority.
Will all the current pools continue to exist?
No. The government has given the greenlight for 6 of the pools to continue, but it has denied permission for 2 pools to proceed. The Pension Funds that were part of these pools were told to select an alternative pool by September 2025.
The two pools that were refused permission are the Brunel Pension Partnership and the ACCESS Pool. Both appear to be engaging with the Pensions Minister to try and overturn the decision.
Do the reforms change the legal obligations on councils to end financial ties with companies enabling Israel’s crimes?
No. Administering Authorities retain responsibility for the Pension Fund and its investments, and councillors on Pensions Committees will continue to act as quasi-trustees of the fund.
As our legal notice outlines, they must act to take steps to divest the Pension Fund from companies enabling Israel’s breaches of the fundamental norms of international law.
Will the reforms have an impact on the level of investment in companies complicit in Israel’s violations of international law?
Potentially, but it’s too early to know.
The government has said that one of its aims with the reforms is to increase the level of “local investment”, including in “affordable housing, small and medium size enterprises, clean energy investment, local infrastructure, and physical regeneration.” Administering Authorities will be required to set out their approach to local investment, including a target range for this investment, in their Investment Strategy Statement.
However, local investment does not necessarily mean ethical investment. Some British headquartered companies contribute to Israel’s violations of international law. In addition, most “local investment” while be made through private markets, which are often opaque with little transparency.
We believe that Administering Authorities must disclose full information on all their investments, and set out publicly that they will not invest in companies complicit in Israel’s crimes against Palestinians.