Scotland’s local government pension funds face growing pressure to pool assets, yet one fund has already built the blueprint. Lothian Pension Fund, with £11.5 billion in assets and a remarkable 157% funding ratio, is managing money for other Scottish schemes, running sophisticated in-house strategies, and proving bigger does not always mean better.
Lothian is not waiting for Holyrood to force pooling. It is already living it.
Pooling Already Happening – The Lothian Way
While England’s eight LGPS pools battle teething problems and high transition costs, Lothian quietly manages equity and fixed income portfolios for two other Scottish funds – Scottish Borders and Falkirk.
In 2025, the fund went further. Working with an unnamed global manager, Lothian’s in-house team designed a bespoke sterling investment-grade bond mandate that baked in responsible investment criteria and attracted two more Scottish funds at preferential fees.
Chief investment officer Emmanuel Bocquet told journalists in Edinburgh: “We designed the mandate ourselves. The manager was chosen because they gave us the flexibility we demanded.”
This is pooling without the politics – and without the pain felt south of the border.
The In-House Edge That Others Envy
Lothian remains one of the few UK LGPS funds with an FCA-regulated in-house investment team. That status lets it negotiate like a £50 billion asset owner while keeping costs close to passive levels.
Fifty-five per cent of the portfolio sits in actively managed global equities – but not the usual tech-heavy mix. The team deliberately avoids overstretched US growth stocks, focusing instead on defensive, high-quality companies with strong dividends and lower volatility.
The result? A 10% annualised return over three years with significantly less risk than the broader market.
Bocquet is blunt about the strategy that delivered today’s 157% funding level.
“Ten years ago consultants were pushing everyone into leveraged gilts. We said no. We kept a high equity allocation but chose lower-risk equities. Today’s surplus is the direct result of that decision.”
Only 15% now sits in index-tracking gilts.
Why Lothian Rejects Net Zero Theatre
Unlike many peers rushing to announce 2050 net zero targets, Lothian has refused to join the race.
Bocquet calls such pledges “empty gestures that can drive the wrong behaviours.”
Instead, the fund integrates responsible investment across every decision, maintains a detailed exclusions list, and uses its active managers to engage directly with companies.
Being active also avoids the passive trap – where a fund suddenly discovers it owns a controversial stock simply because it entered the index.
Infrastructure and Property: Local Impact, National Scale
Twenty per cent of assets sit in real assets – mostly infrastructure and direct property, almost entirely run in-house.
The infrastructure book targets mid-single-digit returns with zero leverage. Around 80% is invested in UK and Scottish projects.
The team buys secondary funds or co-invests alongside managers, giving full visibility on assets and avoiding blind-pool risk.
Direct property is even rarer among LGPS funds. Lothian’s in-house team targets high single-digit returns from UK commercial assets, deliberately avoiding London-centric deals in favour of regional opportunities with genuine local impact.
The Next Valuation – And The Pooling Question
Lothian’s next triennial valuation falls in March 2027. The current surplus means contributing employers – councils and public bodies across Edinburgh and the Borders – have already seen contribution holidays or sharp reductions.
Bocquet expects the strong funding position to continue, though the equity allocation could fall by 5 percentage points depending on the review.
On pooling, his message to the Scottish government is clear.
“If pooling is mandated tomorrow, we are already there in many respects. We manage money for other funds, we design mandates that attract other schemes, and we deliver active performance at passive cost.”
Multiple sources confirm Holyrood officials are watching England’s pooling experiment with “increased interest” and may launch formal consultation in 2026 or 2027.
When that happens, one Scottish fund will not need years of painful transition.
Lothian Pension Fund has spent the last decade building a model that already works – proving that collaboration does not need coercion, and scale can be achieved without surrendering control.
For thousands of public sector workers across Scotland, that quiet confidence delivers something priceless: the certainty that their pensions are in some of the safest hands in British public finance.
What do you think – should Scotland follow England’s mandatory pooling model, or has Lothian already found a better way? Share your views below.
