The Institutional Standard
Local Government Pension Schemes (LGPS)
A Local Government Pension Scheme (LGPS) investor in asset management refers to the investment arm of the UK’s statutory public sector pension scheme, which serves local authority workers and other public sector employees. The LGPS is made up of a number of regional pension funds across England, Wales, Scotland, and Northern Ireland, each responsible for managing its own investments, although in recent years, these have been grouped into eight asset pools to improve governance, cost efficiency, and access to a broader range of asset classes.
What distinguishes LGPS investors from other institutional investors is their public sector mandate and long-term funding horizon. As funded defined benefit schemes, they aim to grow assets to meet future pension liabilities, similar to private DB schemes—but they benefit from a taxpayer-backed covenant, giving them a higher risk tolerance and enabling greater allocations to illiquid and growth assets like infrastructure, private equity, and real estate. LGPS investors are also increasingly guided by ESG and local impact objectives, often aligning investments with net-zero targets or regional development goals.
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Looking into LGPS market changes​​
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In recent years, the UK Government has been steering the Local Government Pension Scheme (LGPS) towards a new era of consolidation, scale, and domestic investment, particularly in private markets.
The most visible shift has been the push towards “megafunds.” Chancellor Rachel Reeves outlined plans back in 2024 to merge the 86 regional LGPS funds into eight giant pools, each managing around £50 billion by 2030, with the aim of pooling c. £500 billion in public sector pension assets. Legislation in the upcoming Pension Schemes Bill will require administering authorities to transfer all their assets into these FCA‑regulated mega‑pools, expected by March 2026.
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These reforms aren’t just about scale, they’re changing investment priorities too. The government wants LGPS pools to channel capital into UK-based productive assets, including housing, infrastructure, clean energy, SME funding, and regional development projects. Under the Mansion House Accord, pension schemes—including LGPS, have voluntarily committed to allocate 10% of their pot into private markets by 2030, with at least half of that invested in the UK, translating into roughly £50 billion moving into UK assets.
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While supporters argue this will boost returns and drive economic growth, critics caution that UK schemes may lack the experience, infrastructure, and liquidity management to handle rapid deployment into complex private markets, particularly through rushed timelines.
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The LGPS Advisory Board and various administering authorities have flagged these concerns, requesting more time to properly pool assets and build governance capabilities. Nonetheless, the government has pushed ahead, embedding minimum size thresholds, like requiring all multi-employer DC and LGPS arrangements to reach £25 billion by 2030, and pushing for consolidation or exit of underperforming funds under a value-for-money framework.
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Finally, a broader narrative has emerged from ministers like Torsten Bell, who emphasise that low UK investment by pensions (currently among the lowest in the G7) is a structural drag on productivity and national growth, and that well-run, sufficiently sized pension pools can responsibly invest domestically without compromising member returns .
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In terms of size, the LGPS is one of the largest defined benefit pension schemes in Europe, with total assets exceeding £360 billion across its funds. Its scale, long-term outlook, and commitment to responsible investing make it a major and influential player in UK and global asset markets.