The proposed pooling and investment regulations for the Local Government Pension Scheme on which a technical consultation closes today, are unclear about how local priorities should be taken into account by funds, the Society of Pension Professionals has said.

In its response, the SPP argues that regulations about financial objectives provide a basic framework for funding and are reasonable in some contexts. However, it adds that the specific regulation “does not help in how Funds are expected to reconcile the return characteristics alongside contribution stability requirements of Regulation 11(2)(b), and the obligation to consider local economic priorities set out in Regulation 11(3).” 

The chair of the SPP’s Public Sector Committee, Kirsty McLean, said the Society hopes its comments will prove helpful in ensuring that government policy intentions are met and unintended consequences are minimised. 

She added: “We recognise that a sustainable LGPS is in the best interests of scheme members, employers and local taxpayers; that it can be a major source of domestic investment and that the LGPS continues to play a unique role in supporting the economic development of local communities.”

The consultation closing today is about the statutory instruments that will accompany the controversial changes to the LGPS contained in the pension schemes bill, such as giving the government powers to force funds to join a particular pool or change how they invest.

However, the details around implementation will be in statutory guidance, on which a separate – closed – consultation runs until 12 January. The fact that the guidance consultation has only been sent to funds rather than being made public has caused controversy. The Scheme Advisory Board has said it will make its response to the closed consultation public. It has argued that any guidance which LGPS funds are legally bound to follow should be subject to public consultation and advised the government to do so before MHCLG opted for a closed consultation. 

LGPS pools and funds are often in favour of deploying pension assets for local investment. In September, a group of pools, administering authorities and fund managers, with Border to Coast as the lead sponsor, commissioned a white paper on place-based impact investing from advisory firm the Good Economy which recommended a “tailored” local investing approach, collaboration with stakeholders and a common impact reporting standard.

However, others have argued that a quicker way to have local impact would be to reduce or temporarily stop employer contributions when a local authority fund is in surplus, an approach taken by the London Borough of Kensington and Chelsea earlier this year. As the 2025 valuation concludes, more local authorities are expected to be able to reduce contributions given the high funding level of the LGPS.

Last month, Baroness Ros Altmann asked the government what the barriers would be to local authorities taking contribution holidays while their pension schemes are in significant surplus and using the money to fund local services. Ministry of Housing, Communities and Local Government minister Baroness Sharon Taylor pointed out that pension contributions are paid for from local authorities’ general fund, meaning any reduction in contributions “may allow for greater budget flexibility to provide local services”.

The pensions industry is divided over whether LGPS funds in surplus should take contribution holidays. While Isio partner Steve Simkins said on LinkedIn that there would be a benefit for local communities, Sam Gervaise-Jones, managing director at consultancy bfinance, argued the savings could be smaller than expected and might even be lost if central government funding reduces as a result. Professional trustee Darren Masters noted that historic contribution holidays led to deficits in private sector schemes, suggesting this should be a warning for the LGPS.