What's coming up in pensions

The Government had announced at the Spring Budget that it would 'work closely with industry and regulators to bring forward an ambitious package of measures by the autumn' to unlock investment into ‘the UK’s innovative firms.' The Mansion House proposals that followed in July provided the detail. Among other things, a consultation was issued that seeks views on proposals relating to LGPS investment, including ‘accelerating and expanding’ pooling arrangements (with a March 2025 deadline), increasing investment in ‘levelling up’ projects and high growth companies, applying CMA requirements on investment consultants and requiring greater transparency from administering authorities on investments. The Government states that it ‘will consider action if progress is not seen, including making use of existing powers to direct funds.’ The consultation closes on 2 October.

The Finance (No 2) Act 2023, which covers the first tranche of changes to pensions tax legislation stemming from the Spring Budget, received Royal Assent in July. Legislation to allow ‘open and closed public service pension schemes for a given workforce to be considered linked’ for the purposes of calculating Annual Allowance charges is awaited.

Draft Finance Bill 2023-24 provisions have now also been published, including for the abolition of the Lifetime Allowance from 6 April 2024.

The Government’s implementation of the McCloud unlawful age discrimination remedy continues as the 1 October 2023 target date approaches:

• Final regulations implementing the retrospective part of the remedy (for relevant service between 1 April 2015 and 31 March 2022) have now been published for the Firefighters', Police and Teachers’ Pension Schemes, with the Civil Service, Armed Forces and NHS Pension Scheme awaited.

• Remedy regulations for the Judicial Pension Scheme came into force on 5 July 2023, with the options exercise (allowing judges to make a retrospective choice of pension scheme membership) to follow.

• In relation to the LGPS, the Government launched the promised further consultation seeking input on matters relating to the underpin such as multiple memberships, club transfers, flexible retirement, divorce and injury allowances, and on draft regulations to implement the remedy. The consultation closed at the end of June, with the Government hoping to finalise the regulations in early September, before their coming into force on 1 October 2023. It plans to ‘establish a guidance working group’ with the LGPS Scheme Advisory Board (SAB) to consider what guidance is required.

• An HMRC McCloud newsletter notes that further guidance for schemes should be published in the autumn, and called for volunteers to test that guidance in advance. However, feedback generally is that schemes are concerned about the time available to prepare to administer the solutions. A recent survey highlighted resourcing pressures faced by the LGPS.

• Following on from the McCloud remedy tax legislation, which came into force on 6 April, further regulations were issued for consultation in late May addressing some additional complexities, with guidance on the tax implications of the remedy following in June. Regulations have now also been made to exempt compensation payments from National Insurance Contributions (as well as income tax); these come into force on 9 August 2023.

• Permission to appeal has been granted in relation to the Judicial Review into HMT’s inclusion of McCloud costs in the cost control mechanism, brought by the FBU and BMA. Further detail is awaited.

• The Economic Activity of Public Bodies (Overseas Matters) Bill, which can prevent public organisations from pursuing boycott, divestment and sanctions campaigns against foreign states, continues its progress. The Bill contains specific reference to LGPS funds’ investment decisions, and give TPR the power to enforce the ban against them. This comes in the wake of the Palestine Solidarity Campaign ruling in 2020. The SAB has noted that as far it is aware, ‘there is no evidence that any LGPS fund has instituted inappropriate politically motivated boycott or divestment policies.’

• Regulations originally expected in early 2023 to implement proposals on governance and reporting of climate change risks for the LGPS are now confirmed to be delayed at least until the next financial year. These will aim to ensure that climate change risks and opportunities are incorporated into administering authorities’ decision-making processes, and that they report on these annually, in line with the recommendations of the Taskforce on Climate-related Financial Disclosures. Initial reporting is now expected by December 2025.

• The Department for Education has extended its 2013 LGPS academy trusts guarantee to include outsourced contracts (such as catering and cleaning contracts). Accompanying guidance has been published. Such guarantees enable LGPS administering authorities to treat academies like local authority maintained schools rather than high risk employers.

• The Pensions and Lifetime Savings Association (PLSA) has released two new resources for LGPS funds: a ‘Best practice’ guide for employers participating in the LGPS, identifying areas where good practice could be strengthened and where action could be taken to address the ever-increasing regulatory and environmental challenges facing the scheme’, and a regulatory map to help members and external stakeholders ‘understand and navigate the complexities in which the LGPS operates’. Other PLSA publications, such as its resource for schemes to use to help support members through the cost of living crisis may be of interest to public sector schemes generally.

• NHS Pension Changes: regulations came into force on 31 May 2023 making changes to the NHS Pension Scheme Regulations 2015 in relation to uplifts to member contributions in 2023-24 (in line with the ‘Agenda for Change’ pay award.)

• Armed Forces and Firefighters' Pension Schemes: HMT has released a statement highlighting a discrepancy in Treasury Revaluation Orders figures. The Government intends to correct this discrepancy via regulations to be consulted on ‘as quickly as is feasible’.

• Welsh Firefighters: a new consultation sets out proposed amendments to firefighters' pension schemes in Wales that seek to extend access to pensions for ‘Retained’ firefighters, and to ensure that compensation schemes fairly cover work under secondary contracts and are calculated based on full service. The consultation closes on 6 October.

• War widows: The Ministry of Defence has updated its guidance on War Widows'/Widowers' Pensions to state that a one-off lump sum payment is available for eligible spouses who forfeited their pensions prior to 2015.