Local Government Pension Scheme (LGPS) local investments may slow down as a result of greater consolidation, Foresight Group partner and co-head of private equity, Matthew Smith, has warned.

Speaking at the PLSA Local Authority Conference about local investment after the LGPS’ latest round of consolidation, Smith stated: “We think it's going to be a really interesting time, but one where the risk perhaps is that there's some sort of slowdown in local investment, rather than the acceleration that the government severely wants and is looking for.”

The government’s Pension Investment Review, published last month, and the Pension Schemes Bill from earlier this month confirmed the March 2026 deadline for LGPS asset pooling, with a backstop power in the Pension Schemes Bill to ‘protect the interests of LGPS members and local taxpayers where necessary by directing an Administering Authority (AA) to participate in a specific investment pool’.

However, Foresight Group has flagged a number of concerns to the government in response, including how the LGPS is being pulled in conflicting directions – to become larger ‘megafunds’ on the one hand, resulting in larger funds and larger investments, and yet on the other hand to invest ‘locally’.

Smith pointed out that this is even though local investment are often small investments requiring local teams, but the pools are commonly regionally dislocated, so “they don't necessarily work with the local business regions or economic regions”.

In addition to this, he warned that there could be potentially insufficient levels of internal resourcing within the pools to focus on smaller-sized funds, also suggesting that “because the pools are large, they’re likely to want to make large investments, but they might not want to be a large proportion of an [investment] fund”.

“So when you start putting in limits of a particular commitment size, and then you say, ‘I don't want to be more than 20 or 30 per cent of a fund’, then you really start to grow the overall size of the fund that you're trying to invest in, or that you're willing to invest in,” he explained.

“The timetable is going to be a real thing. So, putting the handbrake on investment in any area and then taking it off again is not conducive to long-term, medium-term economic growth in a particular area."

“This means that we are talking about private markets,” he stated, also noting that the 5 per cent requirement to invest in the UK “has gently drifted away in [the government’s] wording, as has the language of ‘levelling up’”.

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