Your guide to the LGPS investment strategy statement guidance
Author: LAPF Investments | Published: June 30, 2026
In the second of a three-part series reviewing the government’s statutory guidance for the LGPS, we reflect on its investment strategy statement expectations.
While all are pressing causes for concern, perhaps the most pressing of the three pieces of guidance is the investment strategy statement.
For months, we have heard one persistent message from the pools to its “try and be as comprehensive as possible”. So, will the government’s guidance help or hinder this, and what does it say on the most controversial topic across the pensions ecosystem – government intervention.
Roles and responsibilities
After, frankly, a few sections, however necessary, pointing out the obvious (i.e. the point of the investment strategy in the first place), the guidance moves on to the slightly meatier topic of who’s responsible for what.
It’s a who’s who of the old and the new of LGPS governance. The LGPS senior officer is responsible for ensuring the investment strategy statement is drafted “in accordance with legislation and guidance”, with the independent person expected to support the development of the strategy.
The independent person is also required to monitor the pool’s performance in implementing the strategy, and whether the collective pool oversight process is meeting the requirements of the administering authority.
The Local Pension Board, meanwhile, should be engaged in the construction of the strategy during its formulation – with its involvement occurring ahead of the formal consultation.
As for the pension committee, it’s responsible for signing off the strategy.
Finally – and once again returning to pointing out the obvious – the pool is responsible for implementing the investment strategy provided by the LGPS fund.
Investment objectives and strategy construction
As for the strategy’s objectives – there are four aspects it must detail – all of which kind of do what they say on the tin.
- A returns objective: The return required to pay benefits over the long term
- A risk objective: The acceptable level of risk in the long term
- A cash flow objective: The income or liquidity to pay benefits in the short term as they fall due
- A local investment objective: A high-level objective on local investments, including a target range for those investments preferably expressed as a proportion of the total value of the pension fund
Additionally, and when setting its high-level investment objectives, authorities should consider things like their risk appetite and the current and expected maturity of their fund, and should set out their overall approach to investment risk.
Strategic asset allocation
As part of this, and once again in an exercise in pointing out the obvious, funds are required to include details of their strategic asset allocation (SAA) – with authorities able to either instruct their pool to set the SAA on their behalf or set it themselves.
In terms of what authorities are expected to include, the strategy statement should have the SAA as a percentage and the tolerance range (±%) in each of the following:
- Credit (including credit instruments of investment grade quality, including – but not limited to – corporate bonds and non-UK government bonds)
- Other alternatives (investments which do not fit into the other asset classes)
Implementation choices – for example the split between actively and passively managed assets and the geographical region of the investment – are made by the pool and are not shown in the strategic asset allocation.
The LGPS investment strategy statement should set out the rationale for the asset allocation, and identify the risks associated with it.
Responsible investment
So important is responsible investment deemed by government, it has a whole section of its guidance dedicated to it.
As part of this it says that – when setting out its approach to responsible investment – authorities may include a preference for investments that have a “positive non-financial impact” as well as an acceptable financial return. They are expected to consider member and employer views on their approach.
Additionally, where responsible investment strategies of all partner funds at a pool cannot be aligned, pools and administering authorities should work together to form a limited number of groups of partner funds which each have an aligned approach, and the pool should develop an appropriate responsible investment option for each group of partner funds.
Authorities are also expected to set out their objectives on stewardship – including engagement with investees and the exercise of voting rights and compliance with the Stewardship Code – in their strategy statement.
And, as with the responsible investment approach, authorities should seek to maximise the alignment between their approach and that of partner administering authorities and align as far as possible with the approach of the pool.
Ultimately, stewardship activities should be delivered by the pool on behalf of partner funds, and should be carried out in line with a pool-wide policy developed by the pool in discussion with partner administering authorities “where possible”.
Local investment
There’s not too much new to talk about here, as this is probably the most discussed aspect of the investment strategy statement, only to say that an authority must set out its approach to local investment in the statement.
When formulating this, authorities are required to take account of the local priorities of strategic authorities – including Local Growth Plans, which are set by Mayoral Strategic Authorities and the Greater London Authority to provide a 10-year strategic framework for growth in the region.
Administering authorities within Strategic Authorities, meanwhile, must consider the local growth priorities of the relevant Strategic Authority areas.
In terms of what needs to be in its strategy statement, three areas need to be covered – the target area, the returns and risk of the investment, and finally the impact an authority wishes to have on the area in question.
Review, consultation and publication
As was stated in the governance guidance article, it is the responsibility of the LGPS senior officer to ensure the draft strategy statement is prepared for consideration by the pension committee, with the authority also expected to consult with employers, scheme members and the relevant strategic authority on the statement.
This consultation should set out how the investment strategy statement meets the requirements of the funding strategy statement, and the extent to which those involved in the consultation have been taken into account.
Once the statement is approved, the statement should be published on the fund’s website and drawn to the attention of the local pension board, employers, scheme members’ representatives, the pool and other key stakeholders.
Directions by the Secretary of State
The guidance also details how the Secretary of State can make its presence felt, stating they have the “power to make a direction requiring an administering authority either make specified changes to its investment strategy, or review and if necessary revise its investment strategy to specified matters”.
The Secretary of State does have to consult the authority before issuing any direction, with its purpose being to confirm whether a breach of the guidance has taken place, establish whether there any mitigating circumstances to explain the breach, and whether the authority has plans to address the breach.
They do also have the power to carry out enquiries to obtain additional information to form a decision on whether to issue a direction, or what a direction should require.
It adds: “Administering authorities must comply with any such request. In the event that the information cannot be provided by the administering authority, a response to the Secretary of State must be provided setting out the reasons why it is not possible to provide the information.”
