Public Service Pensions Update: May 2025

This month we lead with three developments relevant to the Local Government Pension Scheme (LGPS) and then move on to five more relevant to all public service pension schemes.

If you would like to discuss any of the items in this newsletter, please contact one of the experts listed at the end of the update.

Focus on the LGPS 

New 'access and fairness' consultation | MHCLG launches the first of two consultations focused on ensuring the LGPS continues to deliver 

The Ministry of Housing, Communities and Local Government (MHCLG) has opened a new consultation "LGPS in England and Wales: Access and fairness". The consultation seeks views on draft regulations to make a number of changes to the LGPS to improve "equality, fairness, integrity, efficiency, accuracy and reward…hard work." These proposals build on the government’s wider "make work pay" agenda and the consultation is the first of two expected this year. 

The suggested changes include four in the area of survivor benefits and death grants. The first would ensure that the "survivor pension payable to the survivor of a marriage or civil partnership with a member is calculated in the same way, regardless of the sex or sexual orientation of the member or survivor" with equalisation being "to the highest level of entitlement currently available (given the date of the marriage or civil partnership)" and being backdated. At the moment there are cases where survivors of same-sex marriages and same-sex civil partnerships are eligible to receive a more generous pension entitlement than survivors of opposite-sex marriages and opposite-sex civil partnerships. 

The three other proposals in this area are to remove the "requirement for a signed nomination form in the case of qualifying cohabitee survivors, retrospective for any individual who stopped being a member between 1 April 2008 and 31 March 2014", to remove "the age 75 cut-off on eligibility for death grants, backdated for all deaths on or after 1 April 2014", and to remove "the requirement on administering authorities to pay the death grant to the personal representative where it hasn’t been paid within the 2-year limit, applicable for all death grants yet to be paid." 

There are also four further reforms proposed to help address the gender pensions gap. These are making authorised unpaid absences under 31 days automatically pensionable, updating the rules on buying back pension lost in an unpaid break of over 30 days, making additional maternity leave, additional adoption leave and shared parental leave during which no pay is received automatically pensionable with the cost to be met by the employer, and making gender pension gap reporting mandatory in the LGPS. 

There are proposals to "make it mandatory for administering authorities to collect and report data on…members opting out of the scheme" so that the government can understand who is opting out and why, and for a number of changes "to make the forfeiture process work better and fix known issues" in this area. 

MHCLG also suggests "further McCloud-related changes to the LGPS Regulations…to address issues with the operation of the underpin that have only been identified now that administering authorities are working their way through remedy calculations". 

And it proposes various "technical changes to the LGPS Regulations…intended to fix known issues raised by administering authorities and administrators". These include an "update to Regulation 64 of the 2013 Regulations, to clarify the current regulations on exiting employers and deferred debt agreements", removing the requirement that where a member transfers their main pension benefits out of the LGPS they must also transfer out any balance in their AVC account, and updates to the LGPS regulations to reflect the removal of the lifetime allowance (LTA) "and LTA charge, provide clarity on the definition of Benefit Crystallisation Events…and define the approach to pension commencement excess lump sums". 

The consultation is open until 7 August and funds might consider whether they would like to respond. The questions asked include ones on the impact the proposed changes will have on administration, and on whether any of the proposals are "significantly more complex and would benefit from a later implementation date". MHCLG is also asking for comments on its proposed approach to cost. (The government "does not propose to cover any additional cost generated by the proposals in this consultation." Rather, the costs "would be chargeable to the LGPS pension funds".) 

The LGPS Advisory Board has confirmed that it is aiming to sign off its response to the consultation at its meeting on 21 July. It has also flagged a related written ministerial statement, which gives more detail about the reasons for the proposed changes, thanks the Advisory Board and others for their continued support, and confirms that the current consultation "will be followed by a further consultation this year, on further issues of fairness, equality, integrity and efficacy in the scheme." 

LGPS 'Fit for the Future' | LGPS Advisory Board asks to meet with government ministers 

The LGPS Advisory Board has shared a copy of the letter it has sent to the pensions and local government ministers to ask for meeting to "discuss the proposed course of action set out in the recent letters sent to the eight LGPS investment pools as part of the Government’s flagship Pensions Review." 

The letter explains that the Advisory Board "shares the objectives of the government in relation to closely managing investment costs and generating strong, long-term returns from the assets which we are responsible for stewarding", but believes "that more time will be needed to realistically implement the government’s proposals and not put the Scheme at risk." It asks for the opportunity to meet "to start a dialogue about some of the constraints and difficulties that are being experienced on the ground now, and try to reach agreement on an alternative, mutually acceptable, plan for the future". 

The investment pool proposals come from the recent "Fit for the Future" consultation. The government's response to this consultation, together with its final report on phase one of the Pensions Review, is expected imminently. We are expecting any primary legislation needed to support the final proposals to be included in a draft Pension Schemes Bill to be published this summer. 

Changes to the Wales Pension Partnership, one of the eight existing LGPS investment pools, are reported here. 

Investment in UK businesses and major infrastructure projects | UK government announces 'Mansion House Accord' to boost private market investments 

Under the "Mansion House Accord" announced on 13 May, 17 of the UK's largest workplace pension providers have agreed to invest at least 10% of their defined contribution default funds into private markets by 2030. Half of this investment will be allocated to the UK. 

All schemes 

The McCloud remedy | HM Treasury publishes amending directions 

HM Treasury has published The Public Service Pensions (Exercise of Powers, Compensation and Information) (Amendment) Directions 2025. The 2025 directions make "minor technical amendments" to the December 2022 Treasury directions, which specify how the McCloud remedy powers under the Public Service Pensions and Judicial Offices Act 2022 are to be used by public service pension schemes. 

Pensions dashboards | New guidance and data privacy impact assessment published 

The Pensions Administration Standards Association has published guidance for schemes with more than one administrator or provider that needs to connect to the dashboards central digital architecture (CDA) where, despite best efforts, those administrators or providers are not able to connect on the same date. This would include a situation where one party is connecting for main scheme benefits and another party is connecting for additional voluntary contributions, but it is not possible for both to connect to the CDA on the same date. It would also include a situation where more than one integrated service provider is being used but one has still to connect to the CDA. The guidance sets out the responses received from the Pensions Regulator (TPR) and the Financial Conduct Authority. 

The Pensions Dashboard Programme (PDP) has published supplementary guidance on reporting. This includes (but is not limited to) guidance on reporting requirements, "where, once connected, less than 100% of relevant membership records per provider or scheme (at holdername GUID level) are initially connected." 

The PDP has also published its data privacy impact assessment (DPIA) in relation to "the processing of personal data by the Money and Pensions Service in accordance with its function to deliver the Pensions Dashboards Programme (PDP), building and running the CDA and related services that make pensions dashboards possible, and connecting pension providers and schemes and dashboards to it." TPR's guidance confirms that funds need to consider the need for data mapping and a DPIA and funds might find the PDP's example a helpful reference point for the preparation of their own DPIA. 

Volatility | TPR issues guidance on market volatility 

In the last edition we noted that members might be concerned about the impact of recent stock market volatility on their pension, and that pension scammers might seek to take advantage of any uncertainty. 

We suggested that administering authorities might like to discuss with scheme administrators and additional voluntary contribution (AVC) providers whether it would be helpful to remind members that defined benefit (or CARE) pensions are not linked to stock market performance but are set out in statute, of the risks of making hasty decisions in relation to any defined contribution AVC savings, and of the risk of pension scams. It could also be helpful to remind members of sources of advice and guidance. 

TPR has now issued guidance for defined benefit and defined contribution schemes in this area. Funds might like to consider the guidance and agree what action to take.

Innovation | TPR launches innovation support service 

TPR has launched a new support service to "help support innovation in savers' interests and potentially boost economic growth." It has also announced the first of its planned innovation events. 

The listed focus areas look to be more relevant to private sector schemes, but Funds might like to sign up to an event to learn more, or look out for further developments in this area. 

Transfers out | TPR updates the guidance applying to applications for more time 

TPR has published updated guidance on making a third-party application. For public service pension schemes, this guidance is most likely to be of interest in the context of applying to TPR for an extension of the time limit for completing the transfer of a member's benefits. However, it also applies to a number of other applications, including to appoint an independent trustee, to revoke a prohibition order prohibiting a person from acting as a trustee and to revoke a suspension order preventing a person from acting as a trustee. This press release explains the changes made.

This newsletter covers developments relating to public service pensions in England with a focus on the Local Government Pension Scheme.