Public Service Pensions Update: August 2026
Published on 26 August 2026
Welcome to the August edition of the UK Public Service Pensions Update
This month's update covers new guidance and an investment update for Local Government Pension Scheme (LGPS) funds, as well as normal minimum pension age, inheritance tax and pensions, pensions dashboards, family law and a number of other developments relevant to all public service schemes. We also look at two Pensions Ombudsman decisions relevant to all schemes, including one considering Fair Deal and early retirement rights on transfer of employment.
If you would like to discuss anything in this newsletter, please contact one of the experts listed at the end.
Focus on the LGPS
Local Government reorganisation | MHCLG publishes guidance on choosing a new administering authority
With the current round of Local Government reorganisation potentially requiring the designation of a new administering authority (AA) for the affected LGPS funds, the Ministry of Housing, Communities and Local Government (MHCLG) has released guidance for officers and councillors choosing a new AA for their fund during the process.
The guidance covers the key considerations when choosing a new AA or establishing a single purpose pension authority (SPPA), reaching a decision, and submitting a proposal to MHCLG.
Any proposal for a SPPA must be received by MHCLG by 15 February 2027. For proposals to move the AA to a unitary authority, there are two deadlines (1 March 2027 and 30 September 2027), depending on whether the AA can submit a proposal before the election of shadow authorities.
Investment | Advisory Board update
The LGPS Advisory Board has published a news item on investment duties and international human rights law. It notes that the previous Local Government Minister's reply on investment in conflict zones "did not address the key point about whether the government accepts the legal arguments about the AA function being sufficiently connected to the state to require it to have regard to international human rights law duties engaged by the ongoing conflict in Gaza". It reports that the board has written to the new local government minister to seek an urgent meeting on this question and suggests what AAs should do in the meantime.
All schemes
Rise in normal minimum pension age | HMRC consults on rules to protect under-57s who become entitled to pension benefits before 6 April 2028
The NMPA is the youngest age at which the pensions tax rules allow a member to access registered pension scheme benefits unless they are in ill health.
On 6 April 2028 the NMPA will increase from age 55 to age 57*.
The transitional rules are intended to protect those who have reached age 55 or 56 and become entitled to, or taken steps to access, pension benefits before 6 April 2028, but do not actually receive payment until after that date. Without these rules, the payments could breach the pensions tax rules and attract extra tax charges because the member is under the age of 57.
For the time being, funds might find it useful to discuss the draft transitional rules with their scheme administrator. Assuming that the regulations are finalised soon, it would also be helpful to agree what to say about them as part of broader communications with members about the NMPA change.
*Some members might have a "protected pension age" and the 2028 increase in the NMPA will not apply to the "uniformed services pension schemes" as defined in the Finance Act 2004.
Inheritance tax and pensions | HMRC update
In its July pension schemes newsletter, HMRC provided an update on upcoming regulations on the inheritance tax and pensions changes and confirmed that a second technical note will be published "later this summer". The note will include "information on withholding and payment notices, scenarios to illustrate the new inheritance tax on pensions process and address common queries raised by industry stakeholders."
The newsletter also provides an email address through which readers can submit feedback on the technical notes and suggest topics for HMRC to cover in future editions.
Pensions dashboards | PASA publishes FAQ for schemes replying to member queries
The Pensions Administration Standards Association has published interim guidance on responding to member enquiries about pensions dashboards.
The guidance aims to help schemes to respond to member enquiries about pensions dashboards clearly and consistently. It sets out frequently asked questions (FAQs) and suggested responses.
The FAQs and answers currently covered include what pensions dashboards are, who they are for and what they will show, when they can be accessed, what users will be able to do and whether personal data will be secure. PASA may update the guidance as the launch date of the first dashboard MoneyHelper approaches.
Funds might also be interested in this blog by the Pensions Dashboards Programme on maintaining connection to the dashboard ecosystem.
Family law | Government consults on support for a fairer end to relationships and greater rights for surviving co-habiting partners
The government has consulted on a fairer end to relationships, covering possible changes to the financial remedies available on divorce and dissolution of a civil partnership, to the law applying to co-habiting couples on separation, and to the law applying to co-habiting couples where one partner dies without leaving a valid will.
The proposals include introducing qualifying nuptial agreements to provide "greater certainty and autonomy for couples who wish to make their own financial arrangements in the event of divorce or dissolution. These would be subject to a requirement to meet “needs” such as housing, capital, income and pension.
They also include the proposed introduction of "a specific obligation on the court to consider pensions accrued during the marriage" and the pensions needs of both parties when making financial orders on divorce, reforming the law for co-habiting couples on separation including in relation to pensions, and changes to the intestacy rights of co-habiting couples.
Artificial intelligence | New governance guidance
The Society of Pensions Professionals (SPP) has published guidance on pension scheme governance in the age of artificial intelligence (AI).
The SPP notes that AI is already in use in schemes and across the pensions industry, with the result that the question is not whether to use AI, but how to govern its use.
The governing bodies of public service pension schemes might like to consider this new guidance note alongside the Pensions Regulator's AI plan, which sets out the regulator's initial expectations for how scheme governing bodies should govern the use of AI.
The Pensions Regulator is expected to publish further guidance on the responsible adoption of AI this year.
Cyber risk | GAD suggests five key actions to improve digital resilience
The Government Actuary's Department has published a blog confirming the importance of preparing for, and being able to respond to and recover from IT disruptions, "whether it’s a cyber-attack, data breach, system outage or…simple human error."
The blog suggests five key actions every pension scheme should consider. It should be considered alongside the Pensions Regulator's expectations around cyber controls and the regulator's guidance on the practical steps governing bodies can take to meet those expectations.
Judicial pensions | Ministry of Justice consults on proposed changes
The Ministry of Justice is consulting on a series of proposed amendments to judicial pensions legislation. The changes relate to pension arrangements for fee-paid sitting in retirement in Scotland, pension entitlement for fee-paid tribunal offices in Northern Ireland, changes relating to the implementation of the O’Brien 2 remedy, payments in lieu of pension, updating early retirement factors, and clarifying that "fee-paid earnings give rise to pension benefits from the point they are paid, not from the date the related service or sittings took place".
The consultation is open until 22 September.
Teachers' pensions | Department for Education consults on draft amending regulations
The Department for Education (DfE) is consulting on draft regulations to amend the Teachers’ Pension Scheme (England and Wales).
The consultation paper provides further detail of the changes, which are intended to "rebalance member contribution tiers following the recent scheme valuation, clarify and align regulations with established [DfE] policy where the current drafting does not clearly reflect the intended operation of scheme rules, or make corrections to wording to ensure those rules operate as intended, [and] address minor administrative processes and procedural updates."
The consultation is open until 30 October. The response will be published in spring 2027.
Police pensions | Home Office consults on removing ill-health retirement exclusion
The Home Office is consulting on whether regulation 36 of the Police Pensions Regulations 2015 should be removed. Regulation 36 permits the exclusion of an officer from the payment of ill-health benefits when the risk of retirement on grounds of permanent medical unfitness is assessed as disproportionately high. Excluded officers pay a reduced contribution rate.
The consultation paper explains that it "is focusing on those police officers currently active and contributing to the pension scheme and how to address their contributions and access to benefits in the future." It notes that, depending on the outcome, a second consultation may be launched to focus on "retrospective remedies of affected police officers, including those who are no longer working and are drawing from the pension scheme."
The consultation is open until 17 September.
Police pensions | Government confirms alignment of CARE revaluation date with start of tax year
The Home Office has published the response to its recent consultation on a proposal to align the Police Pension 2015 career average revalued earnings (CARE) scheme revaluation date with the start of the tax year, a step already taken by some other public service pension schemes.
The current revaluation date is 1 April each year. The government will proceed with its proposal to change it to 6 April to avoid distortion of annual allowance calculations, which are based on the tax year running from 6 April to 5 April. The change will take effect from the 2027 to 2028 scheme year and the consultation response confirms arrangements for the transitional year.
Pensions Ombudsman | Recent decisions likely to be of interest to all schemes
The Pensions Ombudsman has partially upheld a complaint by a member (Mr D) of the LGPS (Merton Pension Fund) about his application for ill-health retirement from deferred status. CAS-85393-R3C9
As part of the decision, the ombudsman confirmed that the member's ability (or inability) to travel to his former place of work was "not a relevant consideration" in deciding whether he was permanently incapable of his former role for the purpose of regulation 31. "Travelling to work is not part of ‘the duties of his former employment’ and…[the] test in regulation 31 of the 1997 Regulations is about the member’s physical and mental capabilities and whether they would prevent him discharging efficiently the duties of their former employment". Similarly, whether "such former employment or a similar role is available within a reasonable commuting distance is not part of the test".
The Pensions Ombudsman has upheld a complaint by a member (Miss S) of the Principal Civil Service Pension Scheme (PCSPS) raising points relating to Fair Deal and the Transfer of Undertakings Protection of Employment (TUPE) regulations. CAS-81525-Z2D8
Miss S's employment was transferred from His Majesty's Prison and Probation Service (HMPPS) to G4S in 2011.
While employed by G4S, Miss S accrued benefits in a broadly comparable scheme in line with the protection afforded by HM Treasury guidance "A Fair Deal for Staff Pensions" June 1999 , or the "Old Fair Deal".
In 2019, and having reached age 55, Miss S accessed the benefits in the broadly comparable scheme without any early retirement reduction.
Shortly after in 2019, Miss S's employment was transferred back to HMPPS. Miss S was told that she did not have "pre-fresh start reserved rights" and that, if she wished to take the preserved benefits she had built up in the classic section of the PCSPS before the 2011 TUPE transfer to G4S, an early retirement reduction would apply if benefits were taken before age 60. Following an earlier complaint, the Court of Appeal had ruled that the compulsory transfer of Miss S’ employment constituted a "resignation" for the purposes of the relevant scheme rules.
The Pensions Ombudsman concluded that the 2019 transfer of employment fell within HM Treasury's revised "Fair Deal for staff pensions" guidance issued in October 2013, or the "New Fair Deal", and considered the impact this might have. However, the ombudsman decided that, because Old Fair Deal and New Fair Deal are policies rather than legislation, it could not give a direction in respect of compliance with them.
The position with TUPE was different. The Pensions Ombudsman considered the case law on the transfer of early retirement (but not normal retirement or "old age") benefits under TUPE and concluded that the right for "pre-fresh start" prison officers to "draw their accrued pension unreduced at age 55 subject to remaining an active member of the [PCSPS] until retirement on or after age 55" was an early retirement benefit that had transferred under TUPE.
The fact that the rules of the PCSPS define "pension age" for these officers as age 55 is not enough to make 55 their normal retirement age. It is important to look at the substance of a rule, rather than the label given to it, and to read scheme rules as a whole to understand the retirement structure of a scheme. In this case, the rules would change the pension age for these members to 60 if they resigned or opted out of the scheme and "within the structure of the 1972 section…the end of an employee's normal working life or old age is age 60".
The ombudsman said: "For Pre-Fresh Start prison officers, “pension age” or “normal pension age” is defined as age 55 as also provided in rule 2.27. However, because rule 2.27 is subject to rule 3.12 and rule 3.12 provides that preserved benefits are only available from age 60 for Pre-Fresh Start prison officers, the structure of the Scheme is that even for Pre-Fresh Start prison officers the expected end of their working lives is age 60 and not the age defined as “pension age” in the Rules (because that is not the age at which they can access benefits unreduced if they resign or opt out).
"As such, the right to retire at 55 is exceptional within the Scheme and, even for Pre Fresh Start prison officers who have that right, it is contingent: it is only available to those who remain active members of the Scheme until actual retirement. In my view, these are the characteristics of an early retirement right. That the Scheme defines “normal pension age” as age 55 does not mean it is the age the Scheme treats as old age or the expected end of the member’s working life because it does not permit them to access their benefits at that age if they are deferred members.
"I also consider that the end of an employee’s normal working life within the structure of the Scheme for TUPE purposes must be a single age. Even if it can be different ages for different groups of members within the same scheme, for any category of member, it must be a single age. It cannot be an age that changes or that is different before and after a TUPE transfer, otherwise it would be impossible to distinguish old age benefits from early retirement benefits. It must be the age at which benefits can be accessed irrespective of consents, conditions or circumstances. Or as provided in New Fair Deal, the age at which deferred benefits are payable."
The Pensions Ombudsman found that HMPPS was liable to fund the "early retirement benefit shortfall" as described in paragraphs 112 and 113 of the decision. That liability had transferred to HMPPS under TUPE because of the decisions in Beckmann v Dynamco Whicheloe Macfarlane [2002] 64 PBLR and Martin v South Bank University [2003] 85 PBLR. There was also an award of £500 for distress and inconvenience.
This newsletter covers developments relating to public service pensions in England and Wales with a focus on the Local Government Pension Scheme.
