Increased funding levels across Local Government Pension Schemes (LGPS) raise some ‘novel issues’ for funds, according to the Scheme Advisory Board (SAB).

In August, SAB reported an increase in the average funding level of all LGPS funds in England and Wales, showing an improvement from 98% in 2019 to 107% in 2022, with all the funds reporting an improvement in their position since 2019.

While the SAB said the surplus was welcome, it raised some “novel issues” for funds.

This includes increased appetite from some employers and their advisers to try to influence funds’ investment and funding strategies. It said that increased employer engagement is welcome and many funds have been trying to increase this for some time, but it said that expectations may need to be managed. In particular, tailoring of strategies does require additional resources, governance, support from advisers and consistency with the regulations, it added.

The board added that funds should consider how the costs of tailored approaches might be met and how they fit with their overall risk management approach. They are more likely to be appropriate where there is a critical mass of employers targeting a particular strategy.

It said that funds would need to consider their own circumstances, those of their employers and their members – and be ready to provide a clear justification for their approach.

Another issue is “partial termination” where an employer exits the fund for deferred and pensioner members but remains a participating employer for active members.

The board said that while the objective is to lock in current liability values for deferred and pensioner members, there is no recourse to that employer if those estimates prove too low in the future. If that happens, it said that the extra costs become the responsibility of all employers in the fund.

It added that funds should satisfy themselves that such an approach is consistent with the regulations and would need to consider the best way to help an employer manage risk, as well as whether it is consistent with the interests of other employers in the scheme.


Investment and funding strategies are set in line with the LGPS Investment Regulations 2016 and associated guidance.

The SAB said it is currently working with the Chartered Institute of Public Finance and Accountancy (CIPFA) to refresh the existing funding strategy statement guidance, and has already identified that more guidance is needed around risk management, exit credit policy and how to conduct effective consultation with fund employers.

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