Public Service Pensions Update: July 2026
Published on 30th July 2026
Welcome to the July edition of the UK Public Service Pensions Update
This month's update covers statutory guidance and draft tax legislation for Local Government Pension Scheme (LGPS) funds, as well as McCloud remedy developments, civil service pension scheme amendments, inheritance tax and pensions regulations, and Pensions Ombudsman developments relevant to all schemes.
If you would like to discuss anything in this newsletter, please contact one of the experts listed at the end.
Focus on the LGPS
Fit for the future | MHCLG publishes core guidance documents
The Ministry of Housing, Communities and Local Government (MHCLG) has released statutory guidance on fund governance to help LGPS administering authorities and asset pool companies in complying with the knowledge and understanding, LGPS senior officer, independent person and independent governance review (IGR) requirements of the LGPS (Amendment) (Governance) Regulations 2026.
MHCLG has also released statutory guidance to support compliance with the asset pooling requirements in the LGPS (Pooling, Management and Investment of Funds) Regulations 2026, and statutory guidance to help administering authorities to prepare and maintain the investment strategy statement required by those regulations.
The pooling and governance requirements have been introduced under sections 1 to 8 of the Pension Schemes Act 2026, which were made following the government's LGPS "fit for the future" consultation.
In a statement, the LGPS advisory board welcomed the publication of the guidance and said it would arrange an event to support discussion about how administering authorities can approach their first IGR. The event has been scheduled for 1 October.
Pooling | HMRC publishes draft legislation for time-limited stamp duty land tax relief
HMRC has published draft legislation for inclusion in the Finance Bill 2026-27. This includes draft legislation and a policy paper relating to a time-limited relief from stamp duty land tax on transfers of property from administering authorities into qualifying pooled investment vehicles established by LGPS asset pool companies.
Announced at Budget 2025, the relief from additional tax costs resulting from mandatory pooling will apply to "land transactions which take place between Budget Day 2026 and 31 March 2032".
All schemes
McCloud remedy | Fourth set of pensions tax regulations made
A recent HMRC newsletter confirms that a fourth set of pensions tax regulations, (The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2026), has been made in connection with the McCloud remedy and explains the changes made by the regulations.
The newsletter also includes confirmation in relation to transitional tax-free amount certificates.
McCloud remedy | Amending directions made
HM Treasury has made directions amending the Public Service Pensions (Exercise of Powers, Compensation and Information) Directions 2022.
The 2022 directions set rules and requirements in relation to the McCloud remedy. The 2026 amendments relate to judicial scheme interest calculations.
Civil service pensions | Scheme rule amendments published
The Cabinet Office has published the Principal Civil Service Pension Scheme (Amendment) Scheme 2026.
Schedule 1 amends the rules of the Principal Civil Service Pension Scheme (PCSPS) to bring it into line with the Public Service (Civil Servants and Others) Pensions Regulations 2014, known as the Alpha regulations, with some reflecting amendments made to that scheme by The Public Service (Civil Servants and Others) Pensions (Amendment) Regulations 2018.
Schedule 2 amends the rules of the PCSPS to implement necessary changes following the judgment of the Supreme Court in Walker (Appellant) v Innospec Limited and other [2017] UKSC 47 and make other changes to the survivor benefit arrangements.
Inheritance tax and pensions | Information-sharing regulations become law
Following a consultation in May and June, the government has finalised and made regulations setting out the new information-sharing requirements that will apply to scheme administrators and personal representatives once the new inheritance tax and pensions rules start to apply next April.
The regulations amend the Registered Pension Schemes (Provision of Information) Regulations 2006 to introduce new, or make changes to existing, requirements:
For scheme administrators and insurance companies to provide information to a deceased member's personal representatives (PRs) to help them to value the member's estate for inheritance tax (IHT) purposes and decide whether an IHT account is needed.
For scheme administrators and insurance companies to provide information to PRs who do have to complete an IHT account.
For scheme administrators to provide information to PRs after making lump sum death benefit payments to help the PRs to understand how much of a deceased member's lump sum and death benefit allowance has been used.
For PRs to give information to HMRC where the deceased member's lump sum and death benefits allowance is exceeded.
For scheme administrators to respond to a withholding notice.
For scheme administrators to inform beneficiaries about a withholding notice.
For scheme administrators to tell a beneficiary when IHT has been paid following a beneficiary's payment notice.
For scheme administrators to tell PRs when IHT has been paid following a beneficiary's payment notice.
For scheme administrators to tell PRs when IHT has been paid following their own payment notice.
For scheme administrators to tell beneficiaries when IHT has been paid following a PR's payment notice.
The new regulations will also amend the Registered Pension Schemes and Overseas Pension Schemes (Electronic Communication of Returns and Information) Regulations 2006 to update the rules on how event reports must be submitted to HMRC. At present, only some types of reportable events are required to be reported electronically using an approved method. Once in force, the new regulations will extend this requirement to all reportable events.
Pensions Ombudsman | New factsheets
The Pensions Ombudsman has refreshed four of its factsheets, covering incorrect information about pensions, death benefit lump sums, ill health pensions and how to complain about a pension.
The factsheets set out the approach the Pensions Ombudsman is likely to take to certain complaints. Sharing the relevant factsheet with a member who has made a corresponding type of internal dispute resolution procedure complaint might help them to understand why a particular decision has been reached.
Pensions Ombudsman | No need to apply to the County Court to recover overpayments
Readers may recall a recent Court of Appeal decision that suggested, where a member disputed a scheme manager's decision to recover past overpayments of benefits by recoupment (equitable set off in the case of public service pensions), the scheme manager could not recoup or set off the overpayments without a Pensions Ombudsman's decision and referral to the County Court.
Funds might therefore like to note that section 121 of the Pension Schemes Act 2026 took effect at the end of June. For new decisions, section 121 has now removed the need to refer to the County Court.
Pensions Ombudsman | Recent decisions
The Pensions Ombudsman has not upheld a complaint by a member of the LGPS about his employer's decision to grant him a "Tier 3" ill health early retirement pension. The ombudsman found that the employer’s decision "was supported by the available evidence, and it: applied the law and scheme rules/regulations correctly; asked itself the right questions; and only took into account relevant factors."
The decision to uplift the member's benefits to "Tier 2" following the mandatory 18-month review did "not mean that the initial decision to award him Tier 3 was incorrect. It just means that the expected course of his condition/symptoms based on the available treatments was not borne out. The views provided by the [independent registered medical practitioners] are made on the balance of probability. So, there will always be an element of uncertainty about prognosis." CAS-52188-D3K5
The Pensions Ombudsman has handed down its decision in two complaints relating to early, unreduced, retirement under NHS pension scheme "Special Class Status". One complaint was fully upheld CAS-79253-K3Y1 and the other partly upheld CAS-118205-Z8C1.
House of Commons Library | New and updated briefing paper
A recent House of Commons Library briefing paper of interest covered:
This newsletter covers developments relating to public service pensions in England and Wales with a focus on the Local Government Pension Scheme.
