A consultation seeking views on changes to the Local Government Pension Scheme (LGPS) in England and Wales has been launched by the UK’s Department for Levelling Up, Housing and Communities.
It follows a consultation from 2020 on proposals to address discrimination found by the courts in a ruling known as the McCloud judgment.
In 2014, the LGPS switched from a final salary scheme to a career-average scheme, which included transitional protection known as an ‘underpin’ for members closest to retirement.
However, the 2018 ruling by the Court of Appeal found these changes discriminated against younger members of public sector pension schemes.
The 2020 consultation outlined the government’s proposed remedy, which would see the underpin extended to an estimated 1.8m LGPS members to ensure they would not receive a lower pension because of the reforms.
Now the government is seeking views on issues relating to the McCloud remedy on issues that require further views and where the initial consultation did not address the issue. The government is also seeking views on draft scheme regulations that would implement the remedy.
Some issues that were covered in the 2020 consultation and require further views before a final decision include:
- aggregation – determining the rules applicable to decide whether a member with multiple LGPS memberships has underpin protection in some or all of these;
- club transfers – determining the rules applicable to decide whether a member with previous membership of another public service pension scheme has underpin protection in respect of their LGPS membership;
- flexible retirement – how the underpin should work in respect of flexible retirement, particularly for cases of ‘partial’ flexible retirement, where a member does not take all their accrued career average benefits;
- divorce – how the scheme’s divorce and underpin calculations interact;
- injury allowances – how a retrospective increase to a member’s pension arising from McCloud remedy may impact any injury allowances payable.
The consultation is also seeking views on issues not previously consulted on, including:
- excess teacher service – the retrospective admission to the LGPS of certain teachers who have multiple employments;
- compensation – the circumstances where a member may be paid compensation where they have suffered a loss relating to the age discrimination found in the McCloud case or the McCloud remedy;
- interest – the interest terms that will apply where payments are made later than would have been the case, due to the McCloud discrimination.
The consultation will close on 30 June 2023, and the government is intending to take steps to finalise draft regulations in early September. The final regulations are expected to come into force on 1 October.
Aon has previously called for the LGPS schemes to carry out an impact assessment to see how many of their scheme members fall into the scope of the McCloud judgement, estimating that around 1-1.5m members of the LGPS could be potentially in scope in England and Wales alone.
Virginia Burke, senior consultant at Aon, said: “The government has given a well-considered response to contentious and complex issues such as aggregation and flexible retirement.
“We welcome the fact that government is seeking further views on these areas to make sure it gets the policy right – the last thing LGPS members and administrators need are further tweaks down the line.”
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