What's coming up in pensions

As part of the pensions tax announcements at the Spring Budget, the Government stated that ‘open and closed public service pension schemes for a given workforce will be considered linked’ for the purposes of calculating Annual Allowance (AA) charges, allowing members to ‘offset any negative real growth… in legacy public service pension schemes against the [AA]’. Relevant legislation is due ‘later this year.’

The Government also announced at the Budget that it would ’work closely with industry and regulators to bring forward an ambitious package of measures by the autumn’ to unlock DC fund investment into ‘the UK’s innovative firms.’ As part of this, it plans to:

• challenge the LGPS ‘to move further and faster on consolidating assets – a forthcoming consultation will propose LGPS funds transfer all listed assets into their pools by March 2025, and set direction for the future’
• consult on requiring LGPS funds to ‘consider investment opportunities in illiquid assets such as venture and growth capital… to unlock some of the £364 billion of LGPS assets into long-term productive assets’.

The Government’s implementation of the McCloud unlawful age discrimination remedy continues:

• A number of consultations on draft regulations implementing the retrospective part of the remedy (for relevant service between 1 April 2015 and 31 March 2022) have now been published: Civil Service, Firefighters', Police and Armed Forces Pension Schemes consultations close during May, and the Teachers’ and NHS Pension Scheme in June.
• The response to consultation on the Judges’ scheme was published on 12 May, with some amendments being made to the draft. The regulations will now be laid, with the options exercise (allowing judges to make a retrospective choice of pension scheme membership) to commence once the regulations are in force. Further communications will be issued ‘in due course.’
• The Government has released its response to its 2020 consultation on amendments to the statutory underpin for the LGPS (alongside related regulations). The response confirms the proposals to extend the underpin protection to younger members, with a further consultation expected in the coming months on draft regulations to implement the changes. Final regulations should come into force on 1 October 2023. A factsheet summarising the remedy for scheme members has been published. Administering authorities should ensure they have sufficient resourcing in place to implement the remedy.
• The LGPS Scheme Advisory Board published further guidance for administering authorities on data and notional service issues in relation to the remedy, and GAD's Retirement Calculator is now live for 12 different organisations.
• Regulations which modify pensions tax legislation in relation to those impacted by McCloud and aim to put affected members in the tax position they would have been had the discrimination not happened came into force on 6 April.
• The Judicial Review into HMT’s inclusion of McCloud costs in the cost control mechanism, brought by the FBU and BMA, was dismissed, but there is a possibility of appeal.

In response to Covid-19, legislation was created to allow NHS staff to return to (or increase their) work without negative effect on their pensions.

Further changes designed to help retain experienced NHS clinicians and remove barriers to returning to work from retirement (introducing partial retirement flexibilities and pensionable re-employment, among other things) came into force from 1 April, with more to come on 1 October this year: see the DHSC’s consultation response.

In addition, on 3 May, a new consultation was issued, on changes to the NHS Pension Scheme Regulations 2015 concerning uplifts to member contributions in 2023/24 in line with the ‘Agenda for Change’ pay award.

• Climate change: We await the coming into force of regulations (which had been expected by April 2023) implementing proposals on governance and reporting of climate change risks for the LGPS. These aim to ensure that climate change risks and opportunities are incorporated in an administering authority’s decision-making process, and that they report on these annually, in line with the recommendations of the Taskforce on Climate-related Financial Disclosures. The first reports are likely to be required by December 2024.
  
  TPR’s review of climate-related disclosures by occupational pension schemes sets out its feedback to industry on early examples it has received. The observations may be useful for LGPS funds ahead of the implementation of the requirements.In the meantime, some funds have noted an increase in requests for information about the responsible investment policies of administering authorities. Seek support from your advisers in how to respond to these requests, especially if they become onerous or vexatious. Funds should consider having a proactive publication scheme in place for climate data and their stewardship activities.

• The LGPS revaluation date has been changed from 1 to 6 April, with the aim of avoiding scheme members being exposed to annual allowance charges due to inflation. (A similar change was made for the NHS scheme).
• On 11 May, the DLUHC published a response to its January consultation on amendments to the LGPS cost control mechanism. The changes aim to ensure the cost management processes are generally aligned with other public sector pension schemes. The relevant regulations come into force on 1 June 2023. (A new policy paper gives further detail on the operation of the Cost Control Mechanism across public sector schemes generally, for 2020 valuations onwards, including the interaction with the McCloud remedy).

• TPR’s new ‘General code’ is expected imminently. Speak to us about the steps you need to take and how we can help.
• Pensions Dashboards: be prepared. While the DWP has announced a ‘reset’ of the Dashboards timeline (and so a staging date of 30 September 2024 for all public service pension schemes is no longer confirmed), schemes should still continue to prepare for connection. The PDP has produced FAQs on the revised timeline, TPR's guidance (including its ‘preparing to connect’ checklist) has been updated, and PASA has issued new advice including on ‘what to say to savers’. A ‘connection guide’ for the LGPS is remains awaited.
• Transfers: The Pension Scams Industry Group’s new interim practitioner guide helps schemes apply 2021 regulations on protecting members from scams. PSIG’s code itself will be updated once the regulations have been, following the DWP’s imminent review. Make sure you are aware of our recommended actions in light of the new publication.