Proposed changes to how employers winning local authority work participate in the LGPS

Why are changes proposed to the LGPS?

The most interesting proposed change from an employer perspective is the application of New Fair Deal to outsourcing of services involving staff in the LGPS.

The removal of broadly comparable schemes as an option, other than in exceptional circumstances, is in line with the adoption of the 2013 Fair Deal guidance by central government schemes and would also simplify pension requirements for outsourcing bodies and service providers which will hopefully lead to more security for members (think about all those admission agreements that do not get signed) and competitive pricing by bidders (they no longer have to think about expensive bonds or exit debts) as well as fewer employers in the scheme which should reduce administrative and actuarial costs.

The proposal reflects the procurement reality that bidders wish to pay a fixed contribution employer rate for the life of the contract or pay the contributions within a certain range, in order that pension costs can be priced into their bid. Under that model, the funding risk largely remains with the contracting authority who then retains responsibility for any shortfall in contributions as well as the opportunity for any surplus (and most LGPS funds are currently in significant surplus).

To encourage further use of such risk-sharing, the Government proposes a revised route for service providers to access the LGPS, called the ‘deemed employer’ or ‘Fair Deal employer’. The intention is for it to apply to all future contracting and re-awards. This means the contracting authority would be the Fair Deal employer for LGPS purposes but not the employer in employment law. Admission body status would no longer be permitted for future contract outsourcing and/or re-awards.

The draft regulations allow protected transferees to transfer their final salary pension from broadly comparable schemes into the LGPS and ultimately preserve the value of those benefits. Any future pension accrual within the LGPS would still be on a CARE basis.

As is the case now, it would be for the relevant contractor and Fair Deal employer to decide commercially if the contractor contribution rate would be fixed (set at the rate of the most recent valuation at time of contract agreement) or floating (based on an agreement between relevant contractor and Fair Deal employer).

What’s next?

Consultation closed on 22 December 2025 and the Government is currently considering the responses.

Draft regulations for two of the proposals – LGPS access for mayors and councillors and New Fair Deal – were published alongside the consultation. Draft regulations for the other two proposals – Normal Minimum Pension Age and applications for directions – will be published for consultation later in the year.

The Government also intends to update the relevant sections of the Model Services Contract to ensure it aligns with the updated New Fair Deal proposals for the LGPS.

Contracting authorities and contractors will wish to review any current LGPS admission agreements arrangements and procurements on the horizon in advance to understand where the changes might impact.

If you need legal advice on the changes to the LGPS, or advice on other pensions matters, see how our specialist team can help.