UK: The Local Government Pension Scheme Investment Regulations 2016 Have Landed

Last Updated: 13 October 2016
Article by Kevin Milton

The Local Government Pension Scheme (LGPS) (Management and Investment of Funds) Regulations 2016 were published on 23 September 2016, following the issue, on 15 September 2016, of the Guidance from the Department for Communities and Local Government (DCLG) on Preparing and Maintaining an Investment Strategy Statement required by those regulations (the Guidance).

The Government also published its response to submissions to the consultation "Revoking and Replacing the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009" on 27 September 2016.

The 2016 Regulations come into force on 1 November 2016. Administering authorities must publish their Investment Strategy Statements in accordance with the Guidance by 1 April 2017 at the latest.

Background to the Regulations

Last November, DCLG issued a consultation on proposed new regulations to replace the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 (the 2009 Regulations).

For some involved in the LGPS, the 2009 Regulations were already in need of reform because, in their view, the regulations did not address the needs of a "modern" investment strategy and, in particular, did not cater for the wider variety of investments often considered necessary to reflect the profile of the LGPS, its members and the benefits which need to be paid out. In addition to these perceived deficiencies were DCLG's requirements for funds to pool investments, to seek economies of scale and to consider investments in infrastructure.

See our alert of 18 December 2015 for further detail on the background to the new Regulations.

The 2016 Regulations are fundamentally different in approach, style and feel from the 2009 Regulations. In particular, they contain fewer restrictions on what an LGPS fund can invest in, subject to complying with official guidance published by the Secretary of State, and noting that the Secretary of State has the power to intervene in the investment functions of an administering authority.

The investment strategy statement

At the heart of the new regime is each LGPS fund's Investment Strategy Statement which must include the specific matters set out in the 2016 Regulations, be in accordance with the Guidance, allows for consultation prior to publication, and must then be periodically reviewed.

The 2016 Regulations require LGPS funds to invest in a variety of investments, bearing in mind the fund's approach to risk and to pooling and policies on social, environmental and corporate governance.

An authority must take "proper advice" when formulating the Investment Strategy Statement, meaning the advice of the person who the authority reasonably considers to be qualified by their ability in, and practical experience of, financial matters. The Strategy Statement must address the following requirements:

  • to invest fund money in a wide variety of investments;
  • to assess the suitability of particular investments and types of investment;
  • to set out the authority's approach to risk including the ways in which risks are to be measured and managed;
  • to set out the authority's approach to pooling investments, including the use of collective investment vehicles and shared services;
  • for a policy on how social, environmental or corporate governance considerations are taken into account in the selection, non-selection, retention and realisation of investments; and
  • to set out the authority's policy on the exercise of the rights (including voting rights).

Comment on the 2016 Regulations

The 2016 Regulations are largely unchanged from the draft regulations on which the Government consulted earlier in the year. Many commentators raised concerns during that consultation, particularly as the 2016 Regulations do not require an Act of Parliament to bring them into force and the nature of the new requirements are so significant (see below).

Secretary of State's intervention power

Concerns raised during consultation regarding the wide power under Regulation 8 for the Secretary of State to issue directions if it is satisfied that the authority is failing to act in accordance with the guidance on preparing and maintaining an Investment Strategy Statement are largely unaddressed by the final Regulations.

There were over 23,000 members of the public who objected to the proposal that the Secretary of State could intervene in investment decisions. It was seen as undermining the rights and choices of pension fund members and the independence of financial decision making to act in members' interests.

The Government's response to such comments in the consultation largely focuses on the fact that the 2016 Regulations significantly de-regulate administrative authorities' investment functions. Many respondents considered that the proposed intervention power is too broad. In response, the Government pointed out that the very large sums of public money involved in the Local Government Pension Scheme requires appropriate checks and balances to be included in the framework. Administering authorities will continue to be responsible for setting their policy on asset allocation, risk and diversity.

The Government has also pointed out that the 2016 Regulations require the Secretary of State to consult the authority concerned before deciding whether to issue a direction and there is a non-exhaustive list of the sort of evidence that the Secretary of State must have regard to in reaching a decision to intervene.

In its response to the consultation, the Local Government Association suggested that the Regulations should include a minimum time period for considering and examining evidence prior to any decision to intervene and that the Secretary of State should be "satisfied beyond reasonable doubt" of the authority's failure to have regard to the guidance. The Government responded that the period allowed for consultation before the Secretary of State makes a decision to intervene will depend on the complexity and extent of the intervention in any particular case. It would not therefore be appropriate to prescribe a set period.

The LGA also pointed out that Regulation 8 and intervention by the Secretary of State could place it in the position of directing strategic investment decisions which could breach EU restrictions on government intervention in pension fund investment. Those concerns were echoed by Unison, which wants the law changed so that it is clear that it is the authority, not the Government, who decides where LGPS funds are invested in the best interests of scheme members.

The Government remains of the view that authorities will continue to be responsible for setting policy on asset allocation, risk and diversity but that, given the amounts involved, it is right that the Secretary of State should have intervention powers.

Clearly, this issue of intervention by the Secretary of State remains a contentious issue and a petition requiring Parliament to debate the issue of LGPS investment has received the requisite number of signatures. In response to the petition, the Government has stated that the power of intervention for the Secretary of State would "further protect members' and tax payers' interests". They expect that the power to intervene would be used exceptionally when there was clear evidence that the pension fund authority was not acting reasonably and lawfully.


While at first sight the Secretary of State's intervention power is broad and potentially onerous, the Government remains of the view that it is important given the large sums of public money involved in the LGPS. In the world of occupational pension schemes, the Pensions Regulator also has potentially onerous powers such as contribution notices and financial support directions which it rarely uses. But the threat of the use of such powers together with its guidance on best practice helps to drive behaviours and raise governance standards.

The first Investment Strategy Statement must be in place by 1 April 2017, so administering authorities need to be focusing on its production. This is quite a short window within which the authorities must respond to the new guidance and put in place the appropriate documentation.

Things to do now

We suggest authorities schedule an agenda item at the next available opportunity to discuss the formulation of the Investment Strategy Statement and open the dialogue with their local pension boards if they have not already done so. Proper advice from investment advisers will need to be obtained and work undertaken to document the process and secure the timely publication of the Statement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
29 Nov 2017, Seminar, London, UK

Join us at 4 More London for this breakfast seminar on Wednesday, 29 November 2017 to gain a greater understanding on this debate. Coffee and breakfast will be from 08:30 with the discussion commencing at 09:00. We will finish and have you on your way by 10:00.

7 Dec 2017, Seminar, London, UK

Would you like the opportunity to hear more about the potential disruptive effect that blockchain is going to have in the energy sector? If so, please join us on 7 December where Jo-Jo Hubbard, a leading light in this area, will explain all.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.