Tower Hamlets Pension Fund is bracing for significant shifts driven by Local Government Pension Scheme (LGPS) pooling reforms and new regulations taking effect from April 1, 2026. The Pension Board convened on March 2, 2026, to dissect the implications of these changes, which will fundamentally alter the fund's governance, administration, and investment strategies.
The government's 'Fit for the Future' programme is at the heart of these reforms, aiming to enhance scale efficiencies, boost UK investment, and clarify accountability. The Scheme Advisory Board has acknowledged the policy clarity but cautioned that the implementation timetable poses a material delivery risk. These reforms mandate a structural separation of pension governance from wider council finance governance and set an ambitious timeline for asset transfers to designated pools.
A key focus of the meeting was the proposed redesign of the Pension Fund Risk Register. This overhaul is essential to reflect the substantial structural and legislative changes impacting the LGPS. The LGPS (Pooling, Management and Investment of Funds) Regulations 2026 mandate that all LGPS assets must be delegated to and managed by FCA-authorised pools by March 31, 2026. Pension Funds are prohibited from investing or managing assets outside these pools, though operational cash for benefit payments may remain with them. London CIV, one of the LGPS pools, is adopting a two-phase approach to meet this deadline, involving the transfer of off-pool assets and the migration of public and private market investment management agreements (IMAs) into LCIV funds as their range expands.
The redesigned register will incorporate six principal risk categories: Regulatory & Statutory Compliance, Governance & Oversight, Funding & Employer, Investment & Pooling, Administration & Systems, and Engagement & Communications. Significant risks within these categories include potential failure to participate in a pool, non-compliance with governance strategy, delegation accountability gaps between the Fund and the pool, and issues with transition execution. The potential impacts range from regulatory breaches and reputational damage to funding deficits and financial misstatement.
Discussions also covered the broader LGPS pooling update, referencing the government's response to the 'Fit for the Future' consultation and draft 2026 Regulations. Representatives from London CIV were expected to attend to discuss their positioning within this new framework. The LGPS Pooling Guidance requires mandatory FCA authorisation, pools to act as alternative investment fund managers (AIFMs), clear conflicts policies, and annual reporting on performance, costs, and local investment impact. Administering authorities, as shareholders, must hold pools to account and may commission fiduciary reviews. London CIV is developing a model for responsible investment (RI) post-Fit for the Future, with an RI Matrix clarifying exclusion criteria. The Fund retains responsibility for ensuring sufficient operational liquidity for pension payments, while LCIV must manage investment liquidity to support the Fund's cashflow requirements.
Furthermore, the board reviewed reports on scheme engagement and communications, highlighting the importance of transparency and stakeholder involvement. An update on the Pensions Administration Report for the quarter ending December 31, 2025, detailed ongoing work on data quality initiatives, specifically the 'GMP and Pensioner Payroll Rectification project'. The live run calculations for this project were completed, with member communications issued and testing underway for system updates. A revised completion date for this project was set for February 28, 2026. Regarding member self-service platforms, the existing system has been shut down for an upgrade to a new system called 'Engage', with Pension Officers assisting members in the transition, though a specific timeline for the full transition was not provided.
The Pension Board also examined its work plan for 2025/26, which includes ongoing monitoring of administration, governance, and investment performance, alongside specific items related to LGPS consultations and the upcoming actuarial valuation. The Business Plan and Budget for 2026/27 were also on the agenda, with a focus on aligning financial planning with the risk mitigations driven by the ongoing reforms. The reform direction and ambitious timeline could cause local resourcing challenges. It would be prudent to budget for more resources and factor in potential costs from London CIV, such as regulatory capital top-ups. Engagement events are funded from existing budgets, and costs for the Annual Information Forum are expected to be modest. The new Senior LGPS Officer role requires adequate resourcing, and recruitment may face delays or capability gaps.
Cover Report for Pension Fund Risk Register Public reports pack 02nd-Mar-2026 10.00 Pension Board Pensions Administration Report LGPS Pooling - Update
