LGPS Fit for the Future: pooling and governance regulations laid

On 21 May 2026, the Ministry for Housing, Communities and Local Government (MHCLG) published the response to its technical consultation on regulations to implement its “Fit for the Future” reforms for the LGPS. The consultation on the draft regulations ran for 6 weeks and closed at the beginning of January 2026.

Alongside the response, MHCLG laid two sets of regulations:

• The Local Government Pension Schemes (Pooling, Management and Investment of Funds) Regulations 2026 (the “Pooling Regulations”); and

• The Local Government Pension Schemes (Amendment) (Governance) Regulations 2026 (the “Governance Regulations”)

Both sets of regulations will come into force on 30 June 2026. The response indicates that statutory guidance on pooling, the investment strategy statement and fund governance will be published “in time for the regulations coming into force”. 

In this article we consider the consultation response, identify key changes from the draft regulations that were consulted on and highlight areas where further detail is awaited in the statutory guidance. 

Pooling Regulations

31 March 2026 was, of course, the deadline set by the government for those pools not already authorised to secure regulatory authorisation; for pools to be able to offer strategic investment advice to member funds; and for the implementation of the transfer of asset management to the pool.  Despite the Pension Schemes Bill not quite being finalised in time for the new era for LGPS pools to begin on 1 April 2026, a herculean effort from funds and pools means that almost all orphaned funds were successfully onboarded by their new pools in time, and the pools themselves made significant changes to their legal and operating models to reflect the Fit for the Future requirements in anticipation of what would be required. 

The subsequent passing of the Pension Schemes Act 2026 (PSA26) on 29 April 2026 therefore, in some senses, put on a statutory footing some changes that have already been largely implemented under government policy. However, moving assets into the pools is only the beginning of the story and the Pooling Regulations build on the PSA26 provisions to set out the framework for how the relationship between funds and pools will be managed going forwards. 

The Pooling Regulations are made under a combination of powers in the Public Service Pensions Act 2013 and the PSA26. The consultation response sets out a helpful reminder of some of the key measures included in the regulations, confirming that when they come into force they will:

• require administering authorities to: 

  • delegate the implementation of their investment strategy to their asset pool; and 

  • take principal investment advice from their pool.

• require all assets to be controlled and managed by the relevant asset pool;

• provide backstop powers for the Secretary of State to direct administering authorities to participate in specific pools, and for specific pools to facilitate participation; and

• establish minimum standards for pools, including Financial Conduct Authority (FCA) authorisation and capacity to manage local investments.

Looking more closely then at the technical detail of the regulations, some of the key changes from the previous draft include:

• Status of asset pool companies

  The response says that the government has decided to “reframe” how the regulations meet its policy objective that all asset pools are FCA-authorised investment management companies. This is in response to feedback that the original drafting, which required compliance with a specified list of authorisations, goes further than needed. 

  The response explains that under the updated regulations “asset pool companies will now be required to be established as a full scope UK Alternative Investment Fund Manager (AIFM) or an investment firm as defined by Markets in Financial Instruments Regulation (a MiFID investment firm) prior to managing LGPS assets”.

  The response also extends the deadline by which pools must meet the ultimate requirement to be established as full scope UK AIFMs to 30 September 2027. This is in recognition of the different starting positions of the various pools in terms of their existing structures.

• Moving assets into pools

  Transitional provisions have been updated in line with concerns raised in responses, to extend the deadline for assets to be transferred into a fund’s new pool to 3 months (previously 28 days) from the date the fund joins the pool. There is also flexibility for this to be further extended on a case-by-case basis as the asset pool company may agree where it is “not reasonably practicable” to meet the 3 month deadline (Regulation 24).  If there may be issues with assets transfers, funds will therefore need to engage with their asset pool company to ensure an appropriate extension period is agreed.   

  During the period where a fund is transitioning between pools there is also a 3 month exemption from the requirement that says that a fund can only participate in one asset pool (save where the fund is participating in another asset pool solely for the purposes of winding up that company where there is no time limit on the exemption).  There does not appear to be any mechanism for extending the exemption beyond this 3 month period.

• Investment strategy deadline extended

  The deadline for administering authorities to publish their first investment strategy in line with the new requirements has been extended from 30 September 2026 to 31 March 2027. This is a response to concerns raised by numerous respondents – reasons included lack of advisory capacity to advise all funds within a pool in the timeframe, and the interplay with the dates for appointing the new Independent Person and Senior Officer (more on this below), both of whom are required to be involved. The deadline to publish a revised strategy subsequently remains 18 months from the valuation date.

• Pool implementation of fund investment strategy

  Although no substantive changes are made to the regulations, there is some helpful commentary around the interplay between the fund’s investment strategy and the pool’s implementation of it. 

  Addressing concerns raised by some respondents about the meaning of “reasonable steps” in Regulation 14, MHCLG says that “Asset pool companies are expected to have regard to achieving the benefits of scale when determining how to implement the strategies of their partner funds. It is expected that administering authorities will support that endeavour through discussion with their asset pool and other participating funds in the pool to identify where they can increase alignment without compromising fiduciary duty”.

  The response promises that both the situation where an asset pool is genuinely unable to deliver a fund’s investment strategy and the need for a “robust” conflicts policy will be addressed in the statutory guidance.

• Obtaining independent advice on investment strategy (Reg 10(3))

  Regulation 10(3) provides that in “exceptional circumstances” administering authorities will be able to take investment advice from an independent person outside of the investment pool. The response confirms that further clarity on what constitutes “exceptional circumstances” will be provided in the statutory guidance.

• Directions by the Secretary of State in relation to investment strategies (Reg 16) 

  This provision has been updated in response to consultation feedback – a number of concerns were raised in response to the draft power to allow the Secretary of State to issue Directions to make specific changes to investment strategies where a fund has not complied with the statutory guidance. In the updated provision, an alternative power has been added to allow the Secretary of State to direct the administering authority to reconsider, and if necessary revise, its strategy rather than the Secretary of State imposing its own specified changes. 

Governance Regulations

As a reminder, the policy objectives of the Governance Regulations are to:

• strengthen governance arrangements for administering authorities;

• require regular governance reviews aligned with valuation cycles; and

• provide powers for the Secretary of State to direct governance reviews where necessary.

Key changes made as a result of the technical consultation are set out in the response and include:

• Conflicts of interest

  The requirement to have a conflict of interest policy has been extended and clarified (Regulation 5). The amended version of new Regulation 55A sets out an expanded list of conflicts of interest, which now specifically includes individual conflicts relating to s151 offices, the senior LGPS officer and the independent person. It also includes conflicts relating to pension board members, anyone who holds a position of authority at the administering authority or asset pool, or is employer by them.

• Senior LGPS officer

  Recognising that timescales have slipped the deadline for appointing the new senior LGPS office which each authority will be required under the Governance Regulations to have has been extended from 1 October 2026 to 6 months from the date the regulations come into force (i.e. appointed by 29 December 2026). 

  The response notes that in a small number of cases there may be administering authorities that are unable to meet this deadline. It highlights that such a breach should be reported to The Pensions Regulator (TPR), and that if the appointment is significantly late (e.g. 2 months or more), TPR is more likely to investigate further and consider possible regulatory action.

  There is some helpful commentary in the response about appropriate candidates for the new role. The role is intended to be “very senior” – executive team level is suggested – and the LGPS should be the main priority. The s151 officer is specifically excluded from eligibility under Regulation 3. Expect further guidelines to be included in the statutory guidance.

• Independent person

  The Governance Regulations require administering authorities to appoint an independent person to advise pension committees. Again, the deadline for appointing someone to this new role has been extended to 6 months from the date the regulations come into force (i.e. by 29 December 2026). Although we’re aware that some funds have already made appointments or are undertaking selection processes, the extension will no doubt be welcomed by the majority.

  The government has attempted to clarify the role of the independent person in the final regulations – new wording has been added to confirm that the role is to support the discharge of the committee’s functions, including in respect of investment strategy, governance and administration (rather than simply to advise on them). In a change from the original drafting, the independent person themselves is not required to be a non-voting member of the committee.

  This is a key area where we await further detail in the statutory guidance – this will include the process for selecting an independent person. The response says that administering authorities will be able to appoint a selected individual or procure the service from a firm such as a professional trustee firm (in which case there should still be a named individual but they may be supported by others at the firm).  For those who have already made appointments or who are undertaking selection processes, it will therefore be important to check that the processes undertaken or being undertaken have been or are in line with the statutory guidance. 

• Knowledge and understanding requirements

  The response notes that statutory guidance will confirm that the “reasonable period” for a committee member to meet the new requirements is within 3 months of joining or before their first meeting, whichever is sooner.  Therefore, administering authorities will need to ensure that appropriate training is available for new committee members in order to meet this deadline. 

• Independent governance review

  No substantive changes to the regulations in this area but some helpful commentary in the response about what we can expect to see in the statutory guidance. This includes:

  • Review criteria (MHCLG says that these will be distinct from existing statutory audit processes)

  • A requirement to publish an action plan in response to review recommendations within 6 months of the report being published

  • Where a governance review finds significant matters of concern, the Secretary of State will review the findings and “may consider intervention in exceptional cases” – the example given is where there is no credible action plan. The “intervention” would use the new power in the PSPA (inserted by section 6 of the PSA26) which allows regulations to be made providing for compulsory merger of funds. 

Key takeaways

It’s a change we knew was coming thanks to MHCLG’s 1 April 2026 letter to funds, but administering authorities will no doubt be breathing a sigh of relief with confirmation in the regulations that key deadlines such as publication of the investment strategy and appointment of the LGPS senior officer and independent person have been extended. 

It’s helpful to have the regulations and the commentary in the response document but it is clear that a lot of important detail on the implementation of the new requirements is still to follow in the statutory guidance.   While the consultation process was undertaken on the draft regulations, there has been no public consultation process in relation to the promised statutory guidance and therefore it will be interesting to see what the government’s position is on various key matters (such as the ‘exceptional circumstances’ for obtaining independent investment advice or the role of the independent person).  As highlighted above, we have been promised that the statutory guidance will be published “in time for the regulations coming into force” so we will be monitoring closely for updates over the coming weeks.