Local Government Pension Scheme (LGPS) funds affected by local government reorganisation have been urged to begin planning early for potential changes to their administering authority, with the government warning that pension decisions must not be left until the last minute.

New guidance from the Ministry of Housing, Communities and Local Government (MHCLG) sets out how LGPS funds in England and Wales should select a new administering authority where an existing authority is abolished through reorganisation.

Although the decision should be made locally, any change will require approval from the Secretary of State to confer administering authority functions on the new body and legally transfer the assets and liabilities of the former authority and other councils involved in unitarisation.

MHCLG noted that previous rounds of reorganisation had generally resulted in one of the new unitary councils becoming the administering authority for all employers in the fund.

However, authorities 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.

They should also consider whether additional expertise or safeguards are needed, particularly around cyber risk, and whether the new authority can meet legislative governance requirements.

The guidance also stressed the need to avoid disruption to members, including the payment of benefits and the transfer of member and employer records.

Meanwhile, the department confirmed it was open to proposals for new single-purpose pension authorities, subject to the Secretary of State's approval.

It argued the model could offer strategic and practical benefits, including improved service delivery, greater efficiency, stronger accountability and more focused decision-making.

However, councils considering this option would need to demonstrate that the fund operated at sufficient scale.

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.

Alternatively, a decision can be taken after the shadow authorities have been elected, although this would leave less time for discussion and implementation, the MHCLG warned.

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.

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