Pensions UK has urged the government to ensure a “practical and proportionate” approach to reforms to the Local Government Pension Scheme (LGPS) in England and Wales.

The comments were made in response to the government’s proposed reforms to LGPS following the ‘Fit for the Future’ technical consultation.

Launched in November 2024, the consultation sought views on proposals aimed at increasing the investment potential of the scheme through greater consolidation, governance and local investment. The government published its responses in May 2025.

Pensions UK said that while it welcomed the government’s ambition to “bolster governance, accountability, and investment practices,” its members had “identified a number of operational, legal and practical challenges” that needed to be addressed.

In a written response outlining key recommendations, it highlighted the potential for regulatory burden under a requirement for funds to hold the full suite of Financial Conduct Authority (FCA) permissions. This, Pensions UK said, was seen by members as “disproportionate”.

The association said there was “significant concern” among members that powers given to the Secretary of State to direct administering authorities (AAs) to a pool could “undermine local authority, accountability and fiduciary responsibilities”.

Pensions UK said that such powers should only be used “in consultation with the AA”, and added that AAs should retain access to independent advice.

Referring to changes to the scope of asset pools, Pensions UK said that plans to expand their responsibilities required clarification. “We recommend clarifying that pools should advise on strategic allocation and implementation only,” the organisation said.

The body also called for more flexibility to address “real-world, practical constraints” when setting publication deadlines for AAs, which, it said, were currently seen as “impractical.”

Commenting on the responses, Pensions UK policy lead for LGPS, Maria Espadinha, said: “We support the drive for increased scale, stronger governance and accountability across the LGPS, but it is crucial that new regulations are proportionate, workable in practice, and do not undermine fiduciary duty or local decision-making.”

“Our members have identified a number of operational, legal and practical challenges that must be addressed if the reforms are to deliver their intended benefits for scheme members.

She added: “The LGPS is one of the largest and most successful funded pension schemes in the world. Its strength lies in local accountability and deep understanding of members’ needs. Any regulatory changes must enhance, not erode, these foundations.”

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