Educational, not advice. Pension Plain explains how public sector pensions work. Nothing here is financial advice, and we are not authorised or regulated by the Financial Conduct Authority. For decisions about your own pension, speak to a regulated financial adviser or use MoneyHelper, the free government-backed guidance service.
What this article covers
- Does: Explain the 2025 LGPS valuations for England and Wales: the 122% aggregate funding level, the £72.9 billion surplus, why employer contribution rates are falling from April 2026, why none of that changes your pension or your own contribution rate, and the caveats behind the headline.
- Doesn’t: Cover how the LGPS works day to day (that lives in the full LGPS guide), the pooling and megafunds story, or Scotland, which runs its own scheme on its own timetable (see the LGPS Scotland guide).
- If you need advice: Speak to a regulated financial adviser, or contact MoneyHelper for free, government-backed guidance.
The Local Government Pension Scheme in England and Wales has just published its healthiest set of valuation results in a generation. The LGPS funding level, assets measured against the pensions promised, has climbed from 107% to 122% in three years, and the aggregate surplus has more than trebled to £72.9 billion. Employer contribution rates are falling from April 2026 as a result. If you’re one of the scheme’s 7.2 million members, the obvious questions follow: does a surplus mean a bigger pension? Lower contributions? And if not, what does it actually mean? The short answers are no, no, and quite a lot for your employer’s budget. This piece walks through the 2025 valuation results, what a funding level does and does not tell you, and the caveats the headline number hides.
In short
- The 2025 valuations put the England and Wales LGPS at 122% funded in aggregate, up from 107% in 2022, with a surplus of £72.9 billion. All but six funds improved.
- Your pension does not change. LGPS benefits are set by regulations, not by investment performance. A surplus does not raise them and a deficit would not cut them.
- Your contribution rate does not change either. Member bands (5.5% to 12.5% of pay) are set nationally. Only employer rates move with valuations, and those fall from 1 April 2026 for three years.
- The average total employer rate falls from 21.1% to 16.5% of pay on the Scheme Advisory Board’s figures, an easing the Board says “was welcomed” given pressure on employer budgets.
- Caveats: the 122% is an aggregate that hides a wide spread (eight funds are still under 100%), several funds valued McCloud costs on carried-forward estimates rather than final data, and the number is a 31 March 2025 snapshot in a market that has been anything but calm since.
- The thing to watch is not your pension. It is how surpluses get used: one London council has already cut its employer contribution to zero.
What the 2025 LGPS valuations found
Every three years, each of the LGPS’s 87 funds in England and Wales gets a full financial check-up called an actuarial valuation. An independent actuary compares what the fund holds against what it owes in future pensions, and sets what each employer must pay in for the next three years. The 2025 round valued every fund as at 31 March 2025, and the Scheme Advisory Board (the scheme’s national oversight body, usually shortened to SAB) published its summary of the results on 14 July 2026.
The headline numbers, on the SAB’s figures: aggregate funding up from 107% to 122%, the combined surplus up from £22.1 billion to £72.9 billion, membership up from 6.6 million to 7.2 million, and all but six funds reporting an improvement. The average total employer contribution rate falls from 21.1% to 16.5% of pay. The Board’s own words on those falling rates: “We continue to see participating employers under cost pressures so this easing of rates was welcomed.” A separate industry analysis by Pensions UK reads the same story a fraction differently (21.3% to 16.6%, with 85 of 87 funds paying less), which tells you the direction is beyond doubt even when the decimals depend on who is counting.
What the LGPS funding level actually measures
A funding level is a ratio: the fund’s assets divided by the value today of all the pensions it has promised to pay, decades into the future. At 122%, the scheme holds £1.22 for every £1 of promised pension, valued on the actuaries’ assumptions.
That last clause is doing a lot of work. Future pensions have to be converted into a single today-value using an assumed investment return, called the discount rate. Assume higher future returns and the same promises look cheaper today; assume lower returns and they look dearer. Which means a funding level is not a fixed fact like your bank balance. It’s an estimate that moves with markets and with the assumptions behind it.
You can see this inside a single fund. Greater Manchester, the largest LGPS fund, reports its 2025 funding level as 128% on its own assumptions, but 125% on the standardised basis all funds also calculate so the SAB can compare them. Same fund, same day, two defensible numbers. Neither is wrong; they answer slightly different questions. Keep that in mind whenever a single percentage is presented as the whole truth.
Why the funding level jumped 15 points
Three things moved between 2022 and 2025, and the biggest is the least intuitive. The SAB’s summary says the improvement was “largely driven by an increase in the discount rates used at the 2025 valuation, and secondary contributions paid by employers over the intervaluation period”. In plain English: gilt yields and expected investment returns are higher than they were in 2022, so actuaries now assume fund assets will grow faster, which shrinks the today-value of the liabilities. On top of that, employers spent three years paying deficit-recovery money into funds, and asset returns really were strong. Pensions UK’s LGPS policy lead, Maria Espadinha, summarised it the same way: “Higher discount rates, updated long-term assumptions and strong asset performance have reduced liabilities and improved funding positions.”
So the jump is partly a real story about strong assets, and partly a valuation-methodology story about promises looking cheaper when assumed returns rise. Both are legitimate. But the second one can reverse: if assumed returns fall at a future valuation, the funding level falls with them, without a penny leaving the fund.
Why your pension does not change
The LGPS is a defined benefit scheme set out in regulations. Since 2014 you build up pension at a rate of 1/49th of your pensionable pay each year (the accrual rate), and each year’s slice is revalued in line with the Consumer Prices Index. Membership before 2014 keeps its final-salary link. None of those rules mention the funding level, because the promise doesn’t depend on it. As Greater Manchester’s fund puts it to its own members: “your pension doesn’t rely on investment performance, instead, your pension is based on a calculation set out in the regulations of the scheme.”
The guarantee chain runs like this: your benefits are fixed by law; your employer is legally required to pay whatever the actuary certifies is needed to fund them; and LGPS employers are overwhelmingly councils and other public bodies with taxpayer-funded budgets behind them. That’s why a deficit doesn’t cut pensions. It also works the other way round: a surplus doesn’t raise them. The scheme was 107% funded in 2022 and 122% in 2025, and your accrual rate was 1/49th on both dates.
Your contributions: set nationally, unmoved by the valuation
Member contribution rates are set by national regulations in nine pay bands, from 5.5% to 12.5% of pay. The bands’ salary thresholds move each April with September’s CPI, but the rates themselves take no notice of valuations, fund performance or surpluses. These are the 2026/27 bands for England and Wales:
| Actual pensionable pay | Contribution rate (main section) |
|---|---|
| Up to £18,400 | 5.5% |
| £18,401 to £29,000 | 5.8% |
| £29,001 to £47,300 | 6.5% |
| £47,301 to £59,800 | 6.8% |
| £59,801 to £84,000 | 8.5% |
| £84,001 to £119,100 | 9.9% |
| £119,101 to £140,400 | 10.5% |
| £140,401 to £210,700 | 11.4% |
| £210,701 and above | 12.5% |
What does change: what your employer pays
Employer rates are where valuations bite. Each fund’s actuary certifies rates for every participating employer, and the 2025 round sets them for the three years from 1 April 2026 to 31 March 2029. On the SAB’s figures the average primary rate (the ongoing cost of benefits building up now) falls from 19.8% to 17.7% of pay, and the average total rate from 21.1% to 16.5%, with many funds’ secondary adjustments turning negative: refunds of past over-payment, in effect. The spread is wide, though. On Pensions UK’s analysis, employer rates in 2025 run from 8% to 24.2% of pay depending on the fund, against 10.5% to 32.1% three years earlier.
Greater Manchester again makes it concrete: its funding level rose from 104% to 128%, its primary rate falls from 18.9% to 17.4%, and its certified secondary rate is minus 2.2% of pay in each of the three years. For a council with a stretched budget, a lower pension bill is real money for services, which is exactly why the SAB framed the easing as welcome. For members, it changes nothing about the promise; it changes who has spare cash in the meantime.
The caveats behind the 122%
The aggregate hides a wide spread
An average of 87 funds is not your fund. On Pensions UK’s count, 79 funds are now above 100% funded, up from 61 in 2022, which still leaves eight funds below 100%, and a handful of funds went backwards against the national tide. If you want your own fund’s position, its 2025 valuation report is a public document: search your fund’s name plus “2025 actuarial valuation”, or ask its administering authority.
McCloud is still an estimate in some valuations
The McCloud remedy gives eligible members the better of two benefit calculations for 2014 to 2022 service, and it costs funds money that the valuations must allow for. Some funds did that on carried-forward estimates rather than final member-level data. Greater Manchester’s actuary allowed for McCloud “in line with the 2022 valuation”, putting the cost at £117 million of liabilities. West Yorkshire’s report is blunter: the administering authority “has not been able to supply McCloud data for the 2025 valuation”, so the actuary re-used the 2022 approach. The sums are small against a £72.9 billion surplus, but they mean a slice of the headline number is a placeholder that will be trued up when real McCloud data lands.
Surpluses tempt people
A surplus creates choices, and not all of them are made by actuaries. The live example is the Royal Borough of Kensington and Chelsea, whose pension fund was so well funded (164% at its last full valuation, with mid-2024 estimates over 200%) that the council cut its employer contribution to zero for 2025/26, saving itself around £9 million in a year. Member benefits are untouched, just as the mechanics above predict. But actuarial commentators flagged the discomfort: contribution holidays taken at the top of the market have hurt this scheme before. Funds that eased off contributions in the 1990s spent many of the following years paying extra to rebuild, and nobody who lived through that cycle uses the word surplus casually. Watch how widely the zero-contribution idea spreads; it’s the one part of this story where decisions taken now could still be felt decades from now.
It’s a snapshot, and markets haven’t been quiet
Every figure here is as at 31 March 2025. Greater Manchester’s own valuation report carries the warning in the actuaries’ words: “recent conflicts in the Middle East have led to increased volatility in markets. In general, short-term volatility in the funding position is to be expected”. Different measurement bases move differently too. Isio’s index, an industry tracker that measures the scheme on a deliberately cautious low-risk basis (a different calculation from the valuations, not an update of them), drifted from 147% to 145% over a single quarter as gilt yields moved. The 122% is true, dated, and mobile.
A note for Scotland
This piece covers England and Wales only. Scotland runs its own LGPS under separate regulations, overseen by the Scottish Public Pensions Agency, with 11 funds on a different valuation timetable, so its results are not part of the 2025 round discussed here. The LGPS Scotland guide covers how that scheme works.
Frequently asked questions
Is my LGPS pension going up because of the surplus?
No. LGPS benefits are set by regulations: 1/49th of pay a year since 2014, revalued with CPI, plus any pre-2014 final-salary-linked membership. The funding level does not appear anywhere in that calculation. Annual increases continue to follow CPI in the normal way, surplus or no surplus.
Will my own contributions fall now the scheme is 122% funded?
No. Member rates sit in nine nationally-set bands from 5.5% to 12.5% of pay, and only the salary thresholds move each April, in line with CPI. Valuations change what employers pay, not what members pay.
Can my council spend the pension fund surplus?
Not directly: the fund’s money stays in the fund. What a well-funded position can do is reduce, sometimes to zero, the contributions the council must pay in, which frees up money in the council’s own budget. Kensington and Chelsea did exactly that for 2025/26. Whether that is prudent is debated by actuaries; either way, member benefits are unaffected.
What if my fund is one of the eight below 100%?
Your pension is unchanged, for the same reasons a surplus does not raise it. A below-100% fund simply means the actuary certifies higher employer contributions to close the gap over time. That is the system working as designed, not a warning sign for your benefits.
Does 122% mean the LGPS is holding too much money?
Not necessarily. The figure depends on assumed future investment returns, and it is an average across 87 funds with very different positions. Actuaries also build in a margin because markets, longevity and inflation all move. Anything above 100% acts as a buffer, and how big a buffer is sensible is a judgement: exactly the debate the zero-contribution decisions have opened.
When is the next valuation?
The cycle is three-yearly. The 2025 valuations set employer rates for 1 April 2026 to 31 March 2029, and the next full valuation will look at the position as at 31 March 2028, with new rates from April 2029.
Pension Plain’s take
This is genuinely good news, provided we’re clear about who it’s good news for. Members were always going to get their pensions; that was true at 107% and it’s true at 122%. The people who gained something tangible this month are employers, and through them local budgets and council taxpayers, who get three years of materially lower pension bills. The number we’d watch is not the funding level but the behaviour it licenses. A zero-contribution employer at the top of a market cycle is a decision the 1990s already graded, and the scheme spent years paying for it. Healthy funds and steady contributions got the LGPS to 122%; it would be a strange lesson to draw that the steady contributions were the dispensable part.
Information, not advice. This article explains published valuation results and scheme rules as at 22 July 2026. It is general information, not financial advice, and Pension Plain is not authorised or regulated by the Financial Conduct Authority. For decisions about your own circumstances, speak to a regulated financial adviser.
Key official sources
- LGPS Scheme Advisory Board: 2025 Actuarial Valuations Board Summary (14 July 2026)
- Greater Manchester Pension Fund: 2025 actuarial valuation report (Hymans Robertson)
- West Yorkshire Pension Fund: 2025 actuarial valuation report
- lgpsmember.org: New contribution bands from April 2026
- Greater Manchester Pension Fund: How safe is my local government pension
- LAPF Investments: LGPS employer contributions see sharp fall (Pensions UK analysis)
- LCP: Councils reducing their LGPS contributions, why and what’s next