The Government has now published its statutory guidance on asset pooling for the Local Government Pension Scheme (“LGPS”), issued by the Secretary of State under the LGPS (Pooling, Management and Investment of Funds) Regulations 2026. The guidance represents a key building block of the wider Fit for the Future reform programme which, following an initial consultation in late 2024 and a government response in May 2025, is reshaping how LGPS assets in England and Wales are managed and invested. At its core, the programme seeks to harness the full scale of the LGPS to deliver better outcomes for members and employers, while unlocking investment in UK growth, infrastructure and local communities. Below, we summarise the main elements of the new guidance.
Asset Pool Companies
The guidance confirms that pools must be UK-registered companies, solely owned by LGPS administering authorities, and established for the purpose of managing investments on behalf of their participating funds. Each administering authority may participate in a pool either as a shareholder or as a client, and may only participate in one pool at a time. Pools must obtain FCA authorisation as either a full-scope UK AIFM (Alternative Investment Fund Manager) or a MiFID investment firm before managing any assets, and by 30 September 2027 all pools must be authorised as full-scope UK AIFMs.
Asset Management
All LGPS assets, with the exception of operational cash, must be held and managed by the pool within three months of an authority beginning to participate. This is a significant shift: all investment management decisions below those in the investment strategy, including tactical asset allocation, manager selection, stock selection and investment stewardship, must be made by the pool. Pools are expected to maximise the benefits of scale when implementing strategies, including determining when collective investment vehicles are more appropriate than segregated mandates.
Crucially, pools must be the principal source of investment strategy advice to their partner funds, and administering authorities must not routinely test that advice against external advisers. Outside advice is permitted only in exceptional circumstances, typically no more than once in a valuation cycle.
Local Investment
The guidance defines “local investments” broadly as investments in, or for the benefit of, persons living or working in the area of the administering authority or the areas of other authorities in the same pool. Administering authorities must set a target range for local investment in their investment strategies and take account of Local Growth Plans set by relevant strategic authorities. They must also cooperate with strategic authorities to identify and develop appropriate local investment opportunities, and may delegate this responsibility to their pool.
Reporting and Governance
Pools must produce an annual report covering assets, costs, performance and local investment, relating to the scheme year ending 31 March and published by 1 November. On governance, the guidance emphasises FCA compliance, company law obligations and appropriate representation of both shareholder and non-shareholder client administering authorities. Scheme member and employer views must be taken into account in developing investment strategies, and pools are encouraged to provide avenues for those voices to be heard.
Secretary of State Powers
The Secretary of State retains powers to direct an authority to join or leave a particular pool, and to direct pools on the manner in which they carry out investment activities, where there is a risk of significant detriment. Importantly, this power may not be used to direct a pool to invest or not invest in a specific asset, asset class, sector or region.
Conclusion
The guidance brings clarity to the practical mechanics of pooling, and the responsibilities of administering authorities and pools respectively. Administering authorities in England and Wales will need to assess how the new framework affects their current governance and advisory arrangements and ensure they are prepared for the transition timetable.
If you would like to discuss anything raised in this blog in more detail, please get in touch with a member of the pensions team or your usual Brodies contact.
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