As at 31 March 2025, the Local Government Pension Scheme (LGPS) is undergoing its latest triennial funding valuation.
The LGPS, a defined benefit pension scheme, is one of the largest pension schemes in the UK with over 6 million members, 18,000 participating employers and four actuarial firms appointed to carry out valuations across over 80 different funds.
While each fund will see differences in their valuation results due later this year, pensions specialists at leading financial services consultancy Quantum Advisory have observed the direction of travel since the last valuation in 2022 and have identified key issues that are likely to affect LGPS participating employers in 2025 and beyond.
Stuart Price, Partner and Actuary at Quantum Advisory, said:
“Since the last triennial valuation, it’s been an incredibly volatile period and the economic backdrop has shifted fundamentally in response to a number of events.
“In the UK we’ve seen four prime ministers, double digit inflation and a general election resulting in the first Labour government in 14 years, on top of the lingering effects of the pandemic and Brexit. Globally, conflicts have impacted supply chains, a new Trump administration in the US has introduced tariffs and there are a number of uncertainties in global markets. All of these elements feed into the backdrop against which the assets and liabilities of a pension scheme are assessed.
“Despite these major changes, we would expect funding improvements across most LGPS funds and that almost all LGPS funds will be in surplus on an ongoing funding basis. For employers looking to potentially exit the LGPS, their exit funding position has likely never been better due to the current high interest rate environment we are in.
“Even if exit from the LGPS is not on the immediate horizon, employers should take steps now to review their strategy to make sure they are comfortable with the risks they are running by maintaining membership. However, membership of the LGPS can be a key staff retention tool and, given contribution rates are likely to fall from April 2026, membership of the LGPS will be more affordable than it has been for a long time.
“If we have learned one lesson from the last three years, it’s that nothing is certain and situations can change rapidly. With a new party in government, we can see plans for policy changing already and at pace.
“The ‘Fit for the Future’ consultation for the LGPS closed in January this year and covered three main themes – the pooling of assets, local investment, and governance of funds and pools – with proposals going further and faster than previous ones. Additionally, the Employment Rights Bill, which could affect employees’ terms and conditions in relation to exiting the LGPS, is likely to become law at some point in 2026. It will be interesting to see the impact of these over the coming years.”