Pensions Investment Review 2025: Key takeaways

Our experts comment on the UK Government's new pension plans to double £25bn+ 'megafunds', with the aim of boosting investment and delivering better returns for savers.

Mandation looms, but reform still offers a better path for pension success

Matt Tickle, Partner and Chief Investment Officer

“The main concern for schemes following the Government's wide ranging pension announcements is the looming threat of 'mandation'.

"While the Chancellor's 'backstop' power - which could compel funds to back British assets - appears to have deterred that threat for now, any move towards mandated investment is a blunt tool, leaving members and society as a whole at risk of poorer outcomes.

That said, the fact that there is time gives some of the Government's better policies, around planning reform, value for money and retirement pathways more space to succeed. If they do, they could generate opportunities that pension schemes will willingly invest in. Efforts to improve the flow of investable opportunities are certainly positive, however there is still an urgent need to focus on reforms rather than enforcing mandates."

Bigger isn’t always better: pension consolidation must protect member value

Martin Willis, Partner and DC Pensions Consultant

“The Government’s push for £25bn pension ‘megafunds’ is the latest step in a long-standing drive toward consolidation, and eventual investment in private markets. But while scale can bring benefits like investment access, efficiency, and improved governance, it’s not a silver bullet.

"Many smaller, well-run own-trust schemes already deliver strong, member-focused outcomes and forcing consolidation risks losing that added value. Instead, the government should focus on removing the real barriers – such as legacy guarantees – while offering practical support, including indemnities for schemes that want to consolidate but face structural and legacy hurdles.

"Supporting UK growth is a worthwhile goal, but fiduciary duty must remain at the heart of any reform. Bigger isn’t always better – it’s outcomes that matter most." 

Government pooling plans confirm a major shake-up for LGPS

Barry McKay, Partner and Head of Public Sector

"The Government has confirmed today that all the core proposals within its Fit for the Future consultation will be implemented. LGPS pools will be cut from eight to six, rightly or wrongly suggesting there is no possibility of ACCESS or Brunel being given the opportunity to meet the Government’s criteria. There’s no shift in the 31 March 2026 deadline to transfer all assets to the pool and for the pools to be FCA regulated. The pressure is now firmly on, for all funds/pools to meet that deadline and the Government is suggesting that there will be only "limited flexibility" in timing for those funds looking for a new home or for the pools to take on new funds.

The new backstop power allowing government to direct an administering authority to participate in a specific pool represents a material shift in the relationship between central and local government. In deciding which pool to join, funds will be weighing up many different factors and fiduciary duty will be at the core of their decision-making. The Government's preference may be for pool membership to be determined voluntarily, but time is short and many funds have a lot of new committee members and other complexities so it's conceivable that decisions won’t be finalised by 31 March 2026. Not only may the Treasury have different views on how to "protect the interests of LGPS members and local taxpayers", but the very principle of having the sovereignty to make that decision is really significant for the LGPS. Many will now be asking: what comes next?

The Fit for Future consultation response has also just been issued. Does the "new independent review process to ensure each of the 86 administering authorities is fit for purpose" refer to the proposed biennial (now confirmed to be triennial) governance review or something else? Either way, it’s clear that what the review covers, and the sanctions for a poor score (or even "failing" a review), will be critical. It's not clear how far the Government will go, but there are now powers to direct an administering authority to merge its fund with another (better performing) fund."

Our experts will continue monitoring the outcomes and provide further insights on LinkedIn.