Councillors and LGPS investment decisions: what your pension can and can’t do

What this article covers

• Does: Set out who has legal authority over LGPS investment decisions, what that authority covers, where fiduciary duty creates hard limits on what councillors can do, how the October 2026 pooling reforms shift the governance picture, and what routes exist for ordinary scheme members to engage.
• Doesn’t: Take a position on whether the LGPS should pursue or avoid ESG-integrated investment, divestment from any specific sector, or any specific stewardship policy. Those are political and policy questions on which this site does not editorialise.
• If you need advice: For decisions about your own pension, speak to a regulated financial adviser or contact MoneyHelper.

LGPS investment decisions sit at an awkward intersection. The funds are publicly accountable through elected councillors. The members are public sector workers and their families. The assets are around £390 billion across 87 administering funds. And the legal framework, set by the LGPS Regulations and now by the Pension Schemes Act 2026, places a fiduciary duty on the pensions committee that does not bend to political pressure from any direction. The result is a system that is publicly visible, politically contested, and tightly constrained at the same time. After the 2026 local elections, that constraint became visible from both sides: newly elected councillors pushing in opposite directions on ESG-integrated investment, and pool-level decisions that limit how far either pressure can be acted upon at fund level. Here is the governance map, what it allows, and what it does not.

Who decides what gets invested

Every LGPS administering fund is governed by a pensions committee, established under the LGPS Regulations 2013. The committee is a formal committee of the administering authority (typically the county council, unitary authority, or for London the relevant borough). It is made up of elected councillors (the majority of seats), employee representatives (usually trade union nominees), and increasingly, independent advisers. Under the new governance reforms taking effect from 1 October 2026 via the Pension Schemes Act 2026, each fund must also have a nominated independent person in the committee structure.

The committee is legally responsible for the Investment Strategy Statement (ISS), a document required by Regulation 7 of the LGPS Management and Investment of Funds Regulations 2016. The ISS sets out the fund’s investment objectives, its approach to risk and return, its policy on responsible investment, and its approach to stewardship of holdings. The ISS is a public document, published on the administering authority’s website. It is the single most important document for understanding what your fund actually does with its assets.

The committee is advised by the fund’s officers (the s151 finance officer, the new Senior LGPS Officer from October 2026, and the fund’s investment professionals) and by external investment advisers (a regulated investment consultant, on which the committee is required to obtain advice before making material investment decisions under section 36 of the Pensions Act 1995 as applied to LGPS funds).

From October 2026, decisions about specific manager appointments and specific underlying investments will be made by the investment pool rather than the committee directly. The pool is a regulated investment vehicle (typically FCA-authorised) collectively owned by the partner funds. The committee’s role becomes one step more strategic: choosing among the pool’s offered strategies, setting the fund’s asset allocation across those strategies, and overseeing performance. Selecting individual asset managers is the pool’s job, not the fund’s.

What pensions committees can do

The committee, with its officer and advisory inputs, has genuine discretion over several material questions. Those include:

• Asset allocation. How the fund splits its assets between equities, fixed income, real estate, infrastructure, private equity, and cash. Allocation is the single largest determinant of long-term fund returns and is squarely a committee decision.
• Investment Strategy Statement content. The ISS sets the fund’s overall approach, including how ESG factors are integrated, what the fund’s stewardship priorities are, and how the committee will monitor pool performance.
• Choice of pool strategy. Each pool offers a range of sub-strategies (equity, fixed income, alternatives, infrastructure). The committee chooses which of the pool’s strategies the fund participates in, and in what weights.
• Policy on responsible investment. The committee sets the fund’s policy on how environmental, social, and governance factors are integrated into investment decisions, on stewardship and voting, and on engagement versus divestment. This policy operates within fiduciary duty and must be justified on long-term financial grounds, but how the committee balances those grounds is a legitimate matter for committee judgement.
• Policy on stewardship. The committee can set priorities for how holdings are voted at AGMs, how engagement with investee companies is approached, and how the fund’s voice is used as a long-term owner. From 2026 the practical mechanism for this runs through the pool’s stewardship team, but the policy direction comes from the fund’s ISS.

Under the new structure, these policy decisions matter more than they did before, not less. A committee that knows what it wants to achieve, sets a clear ISS, and engages substantively with the pool can drive a meaningful difference in how the fund’s assets are managed. A committee that defaults to whatever the pool defaults to gets the pool’s defaults.

What pensions committees cannot do

Three categories of decision sit outside committee authority, regardless of political pressure or membership demand.

• Direct individual stock or security selections. Under the 2016 Investment Regulations and from October 2026 under pool governance, the committee does not choose individual stocks. That sits with the appointed investment manager (under the pool) or the pool’s in-house investment team. A councillor cannot vote to buy or sell a specific security.
• Bind the pool to a strategy the pool’s fiduciaries reject. The pool is itself a regulated entity with its own fiduciary obligations to all partner funds collectively. A single partner fund cannot direct the pool to adopt an investment approach that the pool judges inconsistent with the collective interest. Where a partner fund’s policy preferences cannot be accommodated through the pool’s available sub-strategies, the practical resolution is between the fund and the pool’s governance body, not a unilateral instruction.
• Make investment decisions purely for political reasons inconsistent with long-term financial interests. This is the fiduciary duty, set out in the next section. It is a real constraint, not a notional one, and it cuts in both directions: a committee cannot blacklist a sector purely because it is politically unpopular if doing so would harm long-term returns, and equally cannot direct investment into a politically favoured sector if the financial case does not stand up.

Fiduciary duty: the hard limit

Pensions committees owe a fiduciary duty to the members and employers of the fund. The duty has been progressively clarified by case law, including the 2014 Law Commission report on fiduciaries’ duties of investment intermediaries and the 2017 Palestine Solidarity Campaign judgment in the Supreme Court, which dealt with the limits of LGPS pension committees’ authority over divestment decisions.

What fiduciary duty requires, in summary, is that committee decisions must be taken in the financial interests of beneficiaries (the scheme members and the employers funding the scheme). Where ESG factors are material to long-term financial returns or risk, the committee is required to consider them. Where divestment from a sector or stewardship engagement on an issue can be justified on financial grounds (because of regulatory risk, stranded asset risk, governance concerns, or long-term return considerations), the committee can pursue it. Where a policy can only be justified on non-financial grounds, the legal position is much narrower: the policy cannot override the financial interests of beneficiaries.

Important: this constraint applies equally to all directions of policy pressure. A committee cannot direct divestment from a sector for purely political reasons. A committee also cannot block divestment from a sector for purely political reasons. Both are governed by the same fiduciary framework. Either kind of decision must be capable of being justified, in writing in the ISS, by reference to the long-term financial interests of the fund.

The Pensions Regulator (TPR) and the LGPS Scheme Advisory Board (SAB) both publish guidance on how fiduciary duty interacts with ESG and responsible-investment considerations. The SAB’s Responsible Investment Guidance for LGPS funds, updated in 2024 and again in early 2026, is the most accessible plain-English summary of where the legal line falls. It is available on the SAB website.

ESG and divestment: what the law actually allows

This is the section that gets the most heat. The simplest way to set out the law is in three propositions.

One: ESG integration is permitted, and in many cases required. Where environmental, social, and governance factors are material to long-term investment risk and return (climate transition risk, governance failures, social licence issues that affect the cost of capital), the committee is required to consider them. This is settled law and is not in dispute.

Two: Divestment as a financial decision is permitted. Where the committee judges that divesting from a sector or company is in the long-term financial interest of the fund (for example, because of regulatory risk to a sector, or a clear strategy of capital reallocation toward higher-return alternatives), the committee can divest. The decision must be documented, justified on financial grounds, and capable of being defended.

Three: Divestment as a political statement, with no financial justification, is on much weaker legal ground. The Palestine Solidarity Campaign case held that LGPS funds cannot adopt boycott policies that are inconsistent with the financial interests of beneficiaries purely as expressions of political position. The same logic applies to politically-motivated opposition to ESG integration that is not grounded in a financial analysis. Both directions of pressure are constrained by the same principle.

Where this becomes operationally complex is in the middle ground: a sector or company that has both a political dimension and a credible financial case. Tobacco, fossil fuels, and weapons manufacturers have all been subject to LGPS-level debates on this basis. In each case the practical question for the committee is whether a fiduciarily-defensible financial analysis supports the policy. It usually does in some form; the strength of the financial case sets the legal margin within which the committee operates.

The 2026 elections and the governance shift

The May 2026 local elections changed the political composition of many English pensions committees. Local Government Chronicle and Room151 reporting through the spring tracked councillor turnover at the fund level, and Responsible Investor’s 11 May 2026 piece characterised the result as creating “competing pressures from both sides” on LGPS funds: newly-elected councillors in some areas pushing to roll back ESG integration, councillors in other areas pushing to deepen it. In some London funds, new exclusion-tier policies are reportedly under consideration under the pooled regime.

At the same time, the 2026 governance shift moves the practical implementation of investment policy away from the fund and toward the pool. A pensions committee can adopt a policy in its Investment Strategy Statement, but giving effect to that policy now runs through the pool’s investment process, which is governed collectively across all partner funds. The Scheme Advisory Board has flagged this as a potential dilution of fund-level fiduciary control, and the practical implications will become clear over the next two to three years as policy changes flow through to portfolio composition.

For councillors newly elected to a pensions committee, the operating reality is this. You have genuine authority over the Investment Strategy Statement, asset allocation, and the fund’s policy direction on stewardship and responsible investment. You do not have authority to pick individual stocks, to bind the pool to a specific strategy it rejects, or to make investment decisions for purely political reasons. The fiduciary framework limits the legal space for any policy, in any political direction, that cannot be financially justified. Your route to influence is through the ISS, through engagement with the pool’s governance, and through the committee’s ongoing dialogue with the fund’s officers and advisers.

How members can engage

Ordinary LGPS members (the public sector workers contributing to the scheme, plus retired members drawing benefits) do not have a direct vote on investment decisions. The system is one of representative governance: councillors, who are themselves elected, sit on the committee. That said, there are four substantive routes for an LGPS member who wants to engage with how their fund’s assets are invested.

1. Read the Investment Strategy Statement. Every fund publishes its ISS on its website. It is the single most useful document. Reading it tells you what your committee’s actual policy is, rather than what political messaging around the committee suggests.
2. Write to your pensions committee. Pensions committees receive correspondence from members. Substantive, specific points about the ISS or the fund’s stewardship policy are taken seriously by officers. Generic political statements are less effective than precise observations on specific paragraphs of the published policy.
3. Attend the committee’s meetings. Pensions committee meetings are public meetings. Members can attend and (subject to the committee’s procedural rules) submit questions. Some councils allow members to address the committee directly during a public participation segment.
4. Engage via member-representative seats. Most pensions committees include trade union nominees as employee representatives. From October 2026, each investment pool is also required to include member representation in its governance structure. If you are an LGPS member with a strong interest in investment governance, the route into that conversation is via these seats as well as via your fund’s committee.

Common questions

Pension Plain’s take

The political debate about LGPS investment policy is usually framed in maximalist terms: a fund either embraces ESG or rejects it; a council either divests or insists on continued investment. The legal framework is much more constrained than either side of that debate often acknowledges. Pensions committees operate inside a fiduciary box. The size of the box has been set by decades of regulation, case law, and ministerial guidance, and the box does not move depending on which way the political wind is blowing. What moves is the policy choices a committee makes within the box, and those choices have to be capable of being defended in writing, in the Investment Strategy Statement, on long-term financial grounds.

The October 2026 governance shift makes this constraint operationally tighter. Decisions that used to be implemented by the fund’s own investment team are now implemented by the pool, which is itself accountable to a wider partnership of funds and not just to one council’s pensions committee. A committee that wants to shift the fund’s policy direction now has to do it through the ISS and through engagement with the pool, rather than by direct instruction to a fund-level investment team. That is, on balance, a stronger system: it makes politically-motivated decisions harder to push through without proper financial analysis, in any direction.

For members, the most underrated piece of advice is read your fund’s ISS. It tells you what is actually happening. It is the document a committee is legally required to defend. It is much more informative about what your fund does with your pension money than the local political coverage of pensions committee decisions usually is.

Key official sources

• LGPS Scheme Advisory Board (responsible investment guidance, briefing papers).
• LGPS (Management and Investment of Funds) Regulations 2016 (legislation.gov.uk).
• Pension Schemes Act 2026 (legislation.gov.uk).
• The Pensions Regulator (guidance on fiduciary duty and responsible investment).
• Pension Plain: LGPS guide (member benefit structure).
• Pension Plain: LGPS six megafunds and what changes in October 2026 (pooling structure).
• Pension Plain: LGPS for councillors and mayors (eligibility for councillors to join the scheme themselves).
• MoneyHelper (free, impartial pension guidance).

Fact-checked: 1 August 2026 · Last reviewed: 21 May 2026