LGPS employer contributions see sharp fall
Author: LAPF Investments | Published: May 27, 2026
Employer contributions in the LGPS have fallen sharply between 2022 and 2025, with the majority of employers easing their pension contribution rates.
The analysis – from Pensions UK – suggests the average employer contribution rate fell from 21.3% to 16.6%, while 85 funds recorded lower rates in 2025 – with this fall visible across the board.
In 2022, employer contributions ranged from 10.5% to 32.1%; by 2025, both ends of the spectrum moved noticeable lower – ranging now from eight percent to 24.2%.
Funding also strengthened sharply, rising from 105% in 2022 to 122% in 2025. These improvements are visible in the number of funds above full funding – increasing from 61 to 79 over period, leaving just eight funds below 100% in 2025.
Additionally, 79 funds have improved their funding position since 2022.
These boosts have been attributed to a lower valuation of liabilities as discount rates rose – reflecting higher gilt yields and updated long-term return assumptions – supported by resilient asset performance over the period.
This coincided with a reduction in deficits – with, in many cases, surpluses having emerged – meaning funds have been able to cut the “secondary” element of employer contributions in the LGPS, often using surplus policies and buffers to smooth changes. This has reduced employer rates, while keeping the core future-service cost broadly stable.
Pensions UK policy lead for the LGPS Maria Espadinha said: “These figures underline the long‑term health of the LGPS. Funding levels have strengthened significantly since 2022, with the vast majority of funds now above full funding, and employer contribution rates, on average, materially lower than they were three years ago.
“That strength reflects a resilient and well‑managed scheme. Higher discount rates, updated long‑term assumptions and strong asset performance have reduced liabilities and improved funding positions across England and Wales, reinforcing the solidity of the scheme at the 2025 valuations.
“Crucially, this improved funding position is now feeding through into lower employer contribution requirements.
“Funds have had greater flexibility to reduce overall rates – particularly deficit recovery contributions – while keeping future service costs broadly stable, demonstrating the LGPS’s ability to deliver sustainable outcomes for employers over the long term.”
