What's coming up in pensions

• Further updates have been made in respect of the McCloud unlawful age discrimination. The Finance Act 2024 contains provisions to modify how the tax framework applies to certain public sector redress payments, to align schemes in relation to the judgment. The Public Service Pensions (Exercise of Powers, Compensation and Information) (Amendment) Directions 2024 amend 2022 directions in respect of the interest to apply to corrective payments from public service schemes to members, and from members to schemes, under the McCloud remedy.

• HMRC's newsletter 158 contains guidance on the impact of the abolition of the LTA on McCloud remedy implementation. Newsletter 159 explains that the tax treatment of interest guidance in earlier newsletter 156 has been supplemented: where interest payment is required by HMT or a Tribunal, in respect of late payment of a benefit, this interest payment will be authorised.

• The House of Commons library has updated its McCloud briefing paper, and a detailed paper on implementing the remedy for the Police Pension Scheme was published on 20 May.

• The Fire Brigades Union (FBU) is seeking permission to appeal to the Supreme Court in relation to the Government's proposed method of paying for the costs incurred by the McCloud ruling. The FBU and British Medical Association’s judicial review of the method was dismissed by the High Court in 2023, which ruled in favour of HMT on all grounds. Their appeal was dismissed by the Court of Appeal in April 2024, which ruled that the Directions had not been made for an improper purpose, and that it was open to HMT to include McCloud remedy costs in the cost control mechanism as ‘member costs’.

• In the wake of improved market conditions and funding levels, SAB has issued a statement on the topic of fund surpluses which aims to provide assistance to LGPS fund officers, employers, committee and board members, as well as advisers and scheme members. It covers topics such as funding strategy, contribution rates and partial termination.
• SAB has published a report it had commissioned on the LGPS and Sharia law compliance. The report concluded that as a part of the contractual arrangement between employer and employees, Muslim employees can continue to contribute to, and benefit from, ‘the excellent benefits offered by the LGPS’ while remaining Sharia compliant.
• Academy conversions: in response to a recommendation in the 2019 fund valuations report from GAD, the SAB has prepared guidance on common actuarial approaches adopted by LGPS funds on local authority schools’ conversion to academy status. The guidance covers topics such as conversion methodologies, treatment of surpluses on conversion and factors influencing the methodology adopted, and a guide to terminology.

Regulations in force from 1 October implement partial retirement changes, with the aim of helping retain experienced NHS clinicians and remove barriers to returning to work from retirement. The regulations amend both the legacy NHS pension scheme (1995 and 2008 sections) and the 2015 reformed scheme. An initial round of changes took effect on 1 April.

A new consultation has been launched seeking views on proposed changes to the NHS Pension Scheme to have effect from 1 April 2024. Proposals include delivering further changes to the member contribution structure, introducing a new employer contribution rate, permanently removing abatement for certain members, changes to the scheme access and carer’s leave policies, and further changes to some death in service benefits. The consultation closes on 7 January 2024.

Amendments to the Firefighters’ Pension Scheme came into force on 1 October. These allow for an options exercise giving certain categories of individuals employed as retained firefighters between 7 April 2000 and 5 April 2006 the opportunity to purchase additional pension entitlement in respect of pre-1 July 2000 service, following the Employment Tribunal decision in Matthews v Kent and Medway Towns Fire Authority. The regulations also deal with the interaction between the Matthews and McCloud remedies. Fire and Rescue Authorities are expected to commence the options exercise as soon as practicable. An indicative implementation timetable is discussed.

The latest valuation of the Teachers’ Pension Scheme has confirmed the need to increase the employer contribution rate by 5% (from 23.6 to 28.6%) from 1 April 2024. While the DfE will fund the increases in respect of state schools, independent schools that participate will face additional costs.

HMT has published the Public Service Pensions (Valuations and Employer Cost Cap) Directions 2023, which allow for the reform of the cost control mechanism as well as other changes required for the 2020 valuations, such as updated actuarial assumptions. This follows the GAD consultation.