Tower Hamlets Pension Board has reviewed a proposed redesign of its risk register, a crucial step in adapting to significant structural and legislative reforms within the Local Government Pension Scheme (LGPS) set to take effect from April 1, 2026.
The board met on Monday, March 2, 2026, to discuss the proposed changes, which aim to address new risks arising from mandatory asset pooling, the delegation of investment implementation, the appointment of a statutory Senior LGPS Officer, and mandatory Independent Governance Reviews. These reforms are driven by the government's 'Fit for the Future' programme, the 'Access and Fairness' and 'Access and Protections' consultations, the LGPS (Amendment) Regulations 2026, and the LGPS (Pooling, Management and Investment of Funds) Regulations 2026. These introduce mandatory full asset pooling, delegation of investment implementation to London CIV, and the appointment of a statutory Senior LGPS Officer and an Independent Person.
The redesigned register categorises risks into six principal areas: Regulatory & Statutory Compliance, Governance & Oversight, Funding & Employer, Investment & Pooling, Administration & Systems, and Engagement & Communications. This new framework is designed to reflect the evolving LGPS operating environment, incorporating risks related to statutory duties, shared accountability between the fund and its pool, structural governance changes, and increased regulatory scrutiny.
During the meeting, board members were presented with the proposed structure, which includes a new dimension to assess where control resides – with the Fund, the Pool, or Shared. This aims to provide a clearer understanding of accountability in the new regulatory landscape. This 'control resides' dimension is applied to each risk category to clarify responsibility, even when implementation is delegated. For instance, under 'Regulatory & Statutory Compliance', risks like 'Secretary of State direction to Fund' are designated 'Fund', while 'Secretary of State direction to Pool' is 'Shared (strategic)'. This framework will be integrated into quarterly reporting, including pool implementation assurance and governance compliance monitoring.
The report highlighted that while investment implementation will be delegated to asset pools, such as London CIV, the ultimate accountability remains with the administering authority. This necessitates a fundamental redesign of the risk register to capture delegated implementation, enhanced governance obligations, and the potential for central intervention powers. These enhanced obligations include the mandatory appointment of a statutory Senior LGPS Officer, an Independent Person, and mandatory Independent Governance Reviews (IGRs). Administering authorities must also set target investment ranges for local investment and hold pools to account as shareholders.
The board was also informed about the ongoing LGPS pooling reforms, including the ambitious timeline for mandatory asset transfers to pools by March 31, 2026. This transition is happening concurrently with the 2025 actuarial valuation and the implementation of McCloud remedy changes, presenting a complex operational period. This confluence of major reforms creates 'timeline pressures' and presents a 'material delivery risk', increasing administrative complexity in managing data, member communications, and onboarding processes.
Key risks identified within each of the six principal areas include: Regulatory & Statutory Compliance (e.g., failure to participate in a pool, non-compliance with governance strategy); Governance & Oversight (e.g., failure to appoint a Senior LGPS Officer, delegation accountability gaps); Funding & Employer (e.g., funding strategy misalignment, employer contribution instability); Investment & Pooling (e.g., pool implementation failures, loss of tactical flexibility); Administration & Systems (e.g., mandatory administration strategy non-compliance, systems integration issues); and Engagement & Communications (e.g., failure to conduct proper consultation on the ISS, miscommunication of local investment objectives).
If these new risks are not adequately managed, the Tower Hamlets Pension Fund could face regulatory breach and reputational damage, Secretary of State intervention, financial consequences such as underperformance and funding deficits, and legal exposure. Member detriment could also occur due to incorrect benefit calculations or miscommunication.
The 'central intervention powers' that could be exercised are primarily 'Secretary of State backstop direction powers'. These can be invoked under circumstances such as failure to comply with pooling requirements, failure to comply with investment strategy, or adverse Independent Governance Review findings.
The proposed redesign was presented in conjunction with reports on LGPS Pooling updates and the Pension Fund Business Plan and Budget for 2026/27, ensuring alignment with reform-driven risk mitigations. Further details on these reports can be found in the LGPS Pooling - Update and the Pension Fund Risk Register.
