The research, based on 2025 valuation reports from all 86 Local Government Pension Scheme funds in England and Wales, found the average employer contribution rate fell from 21.3 per cent in 2022 to 16.6 per cent in 2025 — a reduction of 4.7 percentage points.
Almost every fund recorded a reduction in employer rates over the period, with 85 of the 86 funds seeing lower contributions in 2025. Only one fund reported a marginal increase.
The funding levels of these schemes have also improved markedly. Average funding across 87 LGPS funds in England and Wales rose from 105 per cent in 2022 to 122 per cent in 2025, while the number of funds in surplus increased from 61 to 79. Just eight funds remained below full funding at the latest valuation.
Pensions UK said the improvement reflected a combination of higher discount rates, updated long-term assumptions and resilient asset performance, which together reduced liabilities and strengthened funding positions.
The range of employer contribution rates also narrowed over the period. In 2022, rates ranged from 10.5 per cent to 32.1 per cent, but by 2025 the range had shifted to between 8 per cent and 24.2 per cent .
Under the LGPS structure, employer contribution rates are set locally by fund actuaries through the triennial valuation process rather than nationally. The valuations assess investment assets, projected pension liabilities and assumptions including inflation, investment returns and longevity.
According to Pensions UK, improved funding positions have enabled many funds to reduce the “secondary” element of employer contributions used for deficit recovery, while maintaining relatively stable future service costs.
The organisation said this had created “meaningful budget headroom” for participating employers at a time when councils and other public sector bodies continue to face financial pressure.
Maria Espadinha, policy lead for the LGPS at Pensions UK, said the figures demonstrated the scheme’s resilience. “These figures underline the long-term health of the Local Government Pension Scheme,” she said.
“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.”
She adds: “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.”
