Pools and governance
The Pension Schemes Bill contains the core legislative provisions identified in the government's May 2025 response to its local government pension scheme (LGPS) 'fit for the future' consultation, together with powers to make related regulations.
As such the Bill contains provisions and regulation-making powers in connection with asset pools/asset pool companies, governance reviews, and investment strategy and co-operation with strategic authorities. The Bill will also modify the effect of part of the Procurement Act 2023 for pools.
Why this is important
The reforms will have a significant impact on administering authorities and LGPS pools.
Current position and projected timescales
The Pension Schemes Bill has nearly completed its passage through Parliament and is expected to receive Royal Assent soon.
The relevant part of the Bill – Act – will then come into force on a date to be set by regulations.
The government has, however, confirmed a March 2026 deadline to meet the asset pooling requirements.
In September 2025, the following amendments to the clauses relating to the LGPS were approved by the House of Commons Public Bill Committee and added to the Bill:
- Following a formal request from the Scottish government, clause 1 (asset pool companies), clause 2 (asset management), and original clause 4 (scheme manager governance reviews) have been amended to extend them to LGPS Scotland and make the relevant regulation-making powers available to the Secretary of State in relation to the LGPS England and Wales, and to the Scottish Ministers as regards LGPS Scotland.
- To support the planned power for the government to direct a scheme manager to participate (or cease to participate) in a particular asset pool company, a power to direct an asset pool and its participating scheme managers to comply with that direction has been included.
- The planned power for the government to direct an asset pool company "to take, or not to take, a specified decision in carrying out any specified investment management activities" has been removed on the grounds that it was never the government's intention to intervene in specific investment management decisions.
- A requirement for the government to consult specified persons (for example, scheme managers and the relevant asset pool company) before issuing directions under clause 1 has been added.
- The definition of "asset pool company" has been updated.
- A new clause, "additional powers for certain scheme managers", has been inserted. This is a power to make regulations to give LGPS administering authorities that are not local authorities (such as the Environment Agency) certain powers that most administering authorities will already have by virtue of being local authorities. (If needed, the government may request that this provision is extended to include Scotland.)
- An amendment that would have replaced original clause 3 of the Bill (exemption from public procurement rules) with new wording intended to have the same effect but to "move the LGPS exemption directly into…the Procurement Act 2023, thereby future-proofing it against changes to the Procurement Act" was not taken forward.
The insertion of the new clause "additional powers for certain scheme managers", meant that the updated version of the Bill published on 18 September 2025 included eight clauses relating to the LGPS, rather than seven.
At House of Commons Report stage stage in December 2025, some more amendments were approved. These amendments:
- Changed the definition of asset pool company in clause 1(9)(a) so that a company can be an asset pool company either if its shareholders consist only of scheme managers or if it only has one shareholder, being a company whose shareholders consist only of scheme managers.
- Made a follow-on amendment to clause 1(9)(b) (when a scheme manager participates in an asset pool company).
- Adjusted clause 2(2)(c) to reflect "a policy intention for the regulations to require each authority to co-operate (in relation to developing local investment opportunities) with the strategic authority whose area covers the area of the scheme manager." Also to exclude the Environment Agency from this obligation because its area is the whole of England.
- (As expected) replaced clause 4 with a different public procurement exemption for certain investment management contracts between LGPS scheme managers and asset pool companies. The new clause contains more detail and puts the LGPS exemption directly into the Procurement Act 2023 to future-proof it against changes to that Act.
On 16 March 2026, at Report stage, the House of Lords made a number of changes to the pooling and governance provisions in the Bill. Changes were agreed to:
- Clause 2 (asset management) to prevent the regulations to be made under that clause from including "any provision about investment in specific assets or asset classes or about the location of investments." This amendment was proposed to prevent the government from mandating investment in particular assets, asset classes or locations of investment, to provide certainty on this point. (See column 676.)
- Clause 4 (exemption from public procurement rules) to confirm scope of application (only contracts made by a LGPS manager acting in its capacity as such can be exempt contracts, the “80% condition” refers only to investment management activities carried out for LGPS managers acting in their capacity as such, and in the definition of “investment management activities” the reference is to funds or other assets for which a LGPS manager is responsible).
- Insert a new clause requiring LGPS valuations "to be benchmarked against insurer pricing and gilt-based discount rates, with explanations where significantly greater prudence is applied" in the LGPS valuation. "It also requires those benchmarks, the funding strategy statement, and employer contribution rates to be published together, with accessible explanatory material to support meaningful consultation." (See column 692.)
- Insert another new clause which "aims to strengthen regulation 64A of the Local Government Pension Scheme Regulations 2013 to make interim reviews of employer contribution rates more accessible and transparent." (See column 702.)
These amendments may be reversed during consideration of amendments, the final parliamentary stage before Royal Assent.
In November 2025, the Ministry of Housing, Communities and Local Government (MHCLG) opened a consultation on two sets of draft regulations to implement the 'Fit for the Future' proposals.
The consultation paper explained that the first set of regulations (The draft LGPS (Pooling, Management and Investment of Funds) Regulations 2026) will implement the pooling and local investment proposals and replace the LGPS (Management and Investment of Funds) Regulations 2016.
They will be supported by revised investment strategy statement guidance and new asset pooling guidance.
The second set of regulations (The draft LGPS (Amendment) Regulations 2026) will implement the governance proposals, making changes to the LGPS Regulations 2013.
They will be supported by governance guidance covering topics such as governance strategies, independent governance reviews, appointment of independent persons and administration strategies.
The government intends that "the final regulations will come into force on 1 April 2026, subject to the timing of the passage of the Pension Schemes Bill through Parliament."
You can read more about this consultation here.
