The eight new funds, each of at least £25bn, are being created from mergers among the present 89, and the government has encouraged them to look at infrastructure investments.
Unison has also said that the five million LGPS members should be represented on the new funds’ boards.
The union does not oppose the new funds, but is concerned that ministers have said they may require them to invest in accordance with UK foreign policy.
General secretary Dave Prentis said: “Ministers have created uncertainty by saying it is for LGPS funds to decide how they invest while reserving the right to intervene.
“It is unprecedented for the government to interfere in funds and is a breach of EU law, which clearly says member states shall not require institutions to invest in particular categories of assets.”
Signatures from 105,771 people on a petition forced a parliamentary debate on the subject earlier this week.
The government’s response to the petition said councils should compare their investments in infrastructure “against the example set by leading global pension fund investors“ but must continue to invest in members’ best interests.
It said: “The government has no intention of setting targets for infrastructure investment or removing the right of individual pension fund authorities to make their own decisions about strategic asset allocation.
“However, [larger schemes] will improve their capacity to invest in infrastructure, as well as achieving significant cost savings, while maintaining returns.”
It said it had consulted on a power of intervention if it appeared a pension fund authority was acting unreasonably and unlawfully.
