What's coming up in pensions 

In force: regulations implementing the retrospective part of the McCloud unlawful age discrimination remedy came into force on 1 October 2023. Affected members (including in the Firefighters', Police, Teachers’, Civil Service, Armed Forces, NHS and (since July) the Judges’ schemes) can choose between legacy and reformed scheme benefits for relevant service (between 1 April 2015 and 31 March 2022). LGPS regulations extend a statutory underpin to eligible members (so that their relevant benefits under the reformed LGPS will not be less than the amount they would have been entitled to under the legacy scheme.)

Guidance: HMRC released an October 2023 newsletter and a series of guidance notes to assist schemes with the implementation of the remedy. The newsletter includes links to tools to allow members to check if they are affected and to calculate their public service pension adjustment. A suite of over 30 notes for administrators of public service (and affected private sector) schemes and for members address key practical, administrative and tax issues. Individual schemes have produced flowcharts and factsheets for members. Template letters and initial guidance were also published for LGPS administrators regarding the prioritisation of McCloud cases. Further regulations and guidance are expected in due course, to cover some further technical issues.

Tax: a second set of Regulations making provision for the tax treatment of the remedy changes came into force on 14 September (although many provisions have retrospective effect). These aim to put individuals in the tax position they would have been in had the discrimination not occurred, and modify administrative provisions for those whose tax liabilities have been retrospectively impacted. HMRC’s August Public service pensions remedy newsletter focussed on tax, and member guidance has been published including on retaining protections or reinstating protections lost as a result of the remedy.

TPR guidance on benefit statements: TPR’s issued guidance for public service schemes in relation to their duty to issue annual benefit statements, highlighting that over the next two years they will also need to issue remedial service statements for members affected by McCloud. Statements must be clear, accurate and accessible. Where McCloud implementation delays statements from being issued within the statutory timeframe, this should be reported to TPR.

TPR will take a risk-based, practical approach when responding, but schemes are likely to be asked to provide extra information on their plans to rectify any breaches.

The Mansion House consultation on investments and ‘accelerating and expanding’ LGPS pooling arrangements closed on 2 October; funds should look out for the government’s response. Among others, the PLSA and the LGPS Scheme Advisory Board set out their thoughts and concerns, including that the suggested March 2025 deadline for funds to transfer listed assets is unrealistic.

The LGA and LGPC also published a joint response to the proposal to abolish the Lifetime Allowance. The response expressed support for ‘any policy that simplifies the pensions tax regime and encourages people into the workplace’ but expressed concerns as to the timescales for implementing such large-scale reform by 6 April 2024 (particularly given current work on McCloud).

After a largely quiet King’s Speech for pensions, the Chancellor’s Autumn statement on 22 November may offer some further detail on these and other issues impacting public sector schemes.

The Economic Activity of Public Bodies (Overseas Matters) Bill, which aims to prevent public bodies from pursuing boycott, divestment and sanctions campaigns against foreign states, should now progress having received mention in the King’s Speech. The accompanying background notes to the Speech contains specific reference to local government pension fund investment. We will watch the Bill’s progress with interest.

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.