HEALTHY FINANCE: Lothian Pension Fund’s £11bn delivers strong growth for 39,000 public sector retirees 

Scotland’s second-largest local government pension scheme, Lothian Pension Fund, with over £11.1bn in assets under management, has achieved an investment return of 8.7 per cent, with three and five-year annualised returns of 5.5 per cent.

The fund, based in Edinburgh, is smaller than the Strathclyde Pension Fund, which has £33.8bn under management. This combined total of £45bn is increasingly being considered by Scottish Government policymakers as a means of unlocking more infrastructure development in Scotland.

The Lothian fund produced an absolute return of 8.7 per cent over the year to 31 March 2026, was 3.1per cent behind the benchmark return of 11.8 per cent, which represents a more cautious approach, notably lower than benchmark risk.

“2025 was another standout year for Lothian Pension Fund,” said David Vallery, the chief executive officer of fund.

“We were proud to be recognised with two major industry honours: LGC’s “Fund of the Year (Large)” and the Local Authority Pension Fund Investment “LGPS Fund of the Year (Assets over £3bn)”.

The pension fund was named LGC Fund of the Year (Large) at the 2025 LGC Awards; LGPS Fund of the Year (Assets over £3bn) at the LAPF Investment Awards 2025, and Best Public Sector or Not-for-Profit Team at the IOIC Awards 2025

Benefits paid out were £272m in pensions to 39,000 members while 5,153 new members joined. To maintain diversification of investments and take advantage of wider opportunities, the LPF invests over half of the fund in overseas markets. It has external mandates with 16 investment managers, while Northern Trust Company is a custodian of funds.

Infrastructure investments already represented 16 per cent of Lothian Pension Fund’s total assets, one of the largest allocations to infrastructure among UK Local Government Pension Scheme funds.

Within this infrastructure portfolio, the majority of assets are based in the UK, and over one-quarter is invested in renewable energy (wind, solar and hydro) and environmental services.

Over the year to 31 March 2026, the fund invested £22m in renewable energy assets. In addition, as of 31 March 2026, LPF held over £90m in commercial forestry investments.

Lothian Pension Fund now invests on behalf of around 90,850 members, including council employees in Edinburgh, Falkirk, Fife, Visit Scotland, Edinburgh College, the universities of Heriot-Watt and Queen Margaret. LPF runs the Scottish Homes Pension Fund (SHPF) for former employees of Scottish Homes (subsequently Communities Scotland), Scottish Special Housing Association and Homeless Action Scotland (HAS) (formerly The Scottish Council for Single Homeless).

LPF and SHPF (Scottish Homes) are schemes with the City of Edinburgh Council as the administering authority which means the council has the statutory responsibility for the administration of these funds. A Pension Committee of six councillors is involved in over-seeing the administration.

Furthermore, the LPFE board, chaired by Dr Deborah Smart, executive director of corporate services of City of Edinburgh Council, is made up of six directors, including Councillor Mandy Watt, and the LPFI board seven directors, which included David Vallery and Alan Sievewright. During the reporting period, the LPFI board saw the retirement of Leslie Robb, its chair.

Mandy Watt, convenor of the Pensions Committee, said: “Quite simply, 2025 has been an incredible year for LPF with significant progress made in delivering LPF’s long term strategic vision. Alongside maintaining consistently strong operational performance, we were proud to achieve three major industry awards recognising the quality and impact of our work and, more importantly, the dedication of our teams.”

“This truly demonstrates LPF’s vision: to deliver outstanding pension and investment services for the benefit of our members and employers, which is embedded in all that we do. In collaboration with the Pension Board, LPFI, and LPFE, the committee undertook a comprehensive Governance Review, with the overall aim to ensure that our governing frameworks continue to support transparent, effective decision making as we look ahead. With a particularly full programme of committee business throughout the year, we have remained focused on strengthening resilience, deepening our own capabilities to be well positioned for the future with confidence. These achievements provide a strong foundation as we enter a new year.”

“In 2026 the fund achieved an overall investment return of 8.7 per cent, making both the three and five year annualised returns 5.5 per cent. This was achieved in the context of very strong listed equity returns for the year (broad market 17.5 per cent) and lower but positive returns from index-linked Gilts (the over 15-year index return was 3.2 per cent).

Chief executive officer David Vallery leads the management and operation of LPF, supported by an experienced senior leadership team of Emmanuel Bocquet, chief investment officer, Kerry Thirkell, chief risk officer, Alan Sievewright, chief finance officer and Barry MacLennan, chief operating officer. Four of the investment team earn over £225,000 a year.