2025 LGPS valuation: employer options
LGPS employers in England and Wales have received, or will soon receive, their 31 March 2025 triennial valuation results.
Funding levels have improved across the board, which for most employers will mean lower contributions. However, employers should understand their options and engage early with their fund to ensure the outcome supports their pension scheme objectives.
The Government Actuary’s Department (GAD) reported that most schemes had a funding level of over 100% at the 2022 valuation date, with an aggregate funding level of 106% as at 30 March 2022.
Favourable market movements have driven large increases in funding levels in 2022 and there have been further improvements since the 2025 valuation date.
It is important to consider how much this positive post valuation experience has been factored into the latest valuation results.
For many this significant increase in the funding level will mean lower employer contributions from April 2026, but the reduction could be less than employers might expect.
Our latest webinar is for employers participating in one of the LGPS funds in England & Wales, who want to understand their options in relation to the 31 March 2025 valuation results.
Our Head of Corporate & Public Sector, Alistair Russell-Smith, and Actuarial Consultant,
Sean Campbell discussed:
- An overview of the improvement in funding positions between 2022 and 2025.
- What the improvement in funding means for employer contribution levels from April 2026.
- Actions to take to reduce your employer contributions and better utilise LGPS surpluses.
From valuation results to action
Building on the themes covered in our webinar, the broad timeline for the 2025 valuation process is set out below. It shows when results are issued, when to engage with your fund and when any changes to contributions will take effect.
The key time for employers to engage with funds is the last quarter of 2025 and first quarter of 2026. Funds want more engagement from employers, and the outcome will drive your contributions from April 2026 to March 2029, so get involved!
What LGPS employers should be doing now
If you want to challenge the level of contribution proposed by your Fund or better utilise your current level of LGPS surplus, consider the following points:
Even if you have yet to receive your valuation results you can still use these top tips to know your position and prepare your response.
1. Check your current funding position
Consider if crystallising the current funding position is achievable and desirable. Contributions are typically set assuming ongoing participation in the fund, and therefore build in the risk of surpluses reducing in the future, thereby meaning current surplus levels are not fully recognised. Exiting the fund or shortening the participation period enables better utilisation of current surplus levels.
2. Consider the impact of time horizons on costs
Check the time horizon being used by the fund. With strong funding positions, longer time horizons can increase cash costs because the risk of returning into deficit over the time horizon increases. Shorter time horizons could reduce your cash costs, and may be justifiable depending on your membership profile.
3. Understand exit credit policies and over-funding risks
You might be more relaxed about continuing to pay contributions into a well funded arrangement if you have certainty that any over-funding will be refunded with an exit credit payment on eventual cessation.
But funds have discretion over this, so understanding how they will apply this discretion in your circumstances is crucial. If you don’t have certainty that you will recover any over-funding, then it’s even more important that you don’t overpay contributions now.
Act early, engage strategically
Don’t wait until decisions are made for you, proactive involvement can ensure your voice is heard and your contributions are aligned with your goals.
The 2025 LGPS valuation presents a critical opportunity for employers to take stock of their position and make informed, strategic decisions. With most funds in strong funding health, now is the time to actively engage with your fund.
Whether you’re exploring surplus utilisation, reviewing time horizons or need clarity on exit policies. We will help you navigate your options with confidence.
