LGPS Funds Face Authority Change Deadline

Local Government Pension Scheme (LGPS) funds in England and Wales are being urged to plan early for potential changes to their administering authority due to local government reorganisation.

The Ministry of Housing, Communities and Local Government (MHCLG) has issued new guidance on how LGPS funds should select a new administering authority where an existing authority is abolished through reorganisation. LGPS funds must assess whether the proposed body has sufficient capacity to manage a pension fund whose assets and liabilities may significantly exceed its own operational budget.

The guidance notes that previous rounds of reorganisation have generally resulted in one of the new unitary councils becoming the administering authority for all employers in the fund. However, authorities must consider whether the new authority can meet legislative governance requirements and whether additional expertise or safeguards are needed, particularly around cyber risk.

Authorities must also consider the potential benefits of a single-purpose pension authority, which could offer improved service delivery, greater efficiency, stronger accountability, and more focused decision-making. The department has confirmed it is open to proposals for new single-purpose pension authorities, subject to the Secretary of State’s approval.

Proposals for a single-purpose pension authority must be submitted by 15 February 2027. Where an administering authority can submit a proposal to transfer responsibility to a unitary authority before shadow authority elections, the deadline is 1 March 2027.

Proposals submitted after the elections must reach the department by 30 September 2027. The current administering authority can submit representations before shadow authority elections, allowing ministers to reach an in-principle decision that would then be reviewed and ratified after elections in May 2027.

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This approach would allow for more time for discussion and implementation, reducing the risk of disruption to members. As government guidelines emphasize, it’s essential for LGPS funds to plan carefully and submit proposals well in advance of the deadlines to ensure a smooth transition and minimize potential disruptions.

When assessing the capacity of a proposed administering authority, LGPS funds should consider factors such as the authority’s financial resources, staffing, and expertise. They should also evaluate the authority’s ability to manage pension fund assets and liabilities, as well as its capacity to meet legislative governance requirements.

In the middle of this process, the outcome of these changes may depend on the ability of the new administering authorities to balance the needs of different stakeholders, including members, employers, and the government. The success of these changes will likely depend on the careful planning and implementation of the new arrangements.

The MHCLG has stressed the importance of avoiding disruption to members, including the payment of benefits and the transfer of member and employer records. To achieve this, LGPS funds must work closely with the new administering authorities to ensure a smooth transition and minimize potential disruptions, considering their pension advice needs.

They must consider all relevant factors.