Public Service Pensions Update: October 2026

This month's update covers developments regarding the government's review of the plans for local government reorganisation and Pensions UK's report on assessing change in the Local Government Pension Scheme (LGPS), as well as developments in governmental reform relevant to all schemes. Several recent Pensions Ombudsman determinations are also examined.

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Local government reorganisation | Timings in previous MHCLG guidance no longer applicable

In the September update, it was reported that the Ministry of Housing, Communities and Local Government (MHCLG) had announced a review of the plans for local government reorganisation, involving the withdrawal of decisions for some areas and pausing the plans for others. 

MHCLG has written to LGPS administering authorities to confirm that the timings set out in its 30 July guidance for LGPS funds considering changes to their administering authority no longer apply. The letter promises updated guidance once the review is concluded and a new timeline for local government reorganisation is established. It also encourages administering authorities to continue reviewing their governance and structures, stating that this "includes Single Purpose Pension Authorities" (SPPAs).

The Scheme Advisory Board has published a statement on the review, which makes it clear that it supports proposals for SPPAs where they will be effective. The board confirms that it "will continue to press the government for clarity on the implications of the wider LGR [local government reorganisation] review for administering authorities, and for updated LGPS guidance to be issued promptly once the revised LGR timetable is known".

Pensions UK report | Assessing change in the LGPS

Pensions UK has published its report, "Outcomes over structures: A framework for assessing change in the LGPS", which aims to provide a practical, evidence-based and neutral framework for judging future LGPS reform. The framework focuses on eight outcomes: sustainability and reliability of benefits, pension adequacy, service quality, affordability, governance and fiduciary decision-making, member and employer representation, collaboration, and adaptability and resilience.

Local Government Pensions Committee | Opinion published on backdated payments 

The Local Government Pensions Committee (LGPC) has published a legal opinion prepared for the Local Government Association on dealing with complications arising from a backdated benefit payment made under the LGPS (Member Benefit) Regulations 2026. 

The paper advises administering authorities on how to approach payments of backdated benefits to an estate or to a beneficiary in complicated cases that arise following the Local Government Pension Scheme (Miscellaneous Amendments) (Member Benefits) Regulations 2026. These backdated payments relate to survivor equalisation and death grants in respect of members who died after the age of 75.

LGPS funds | Statistics released on income and expenditure

The Ministry of Housing, Communities and Local Government has published a statistical release on LPGS funds for England and Wales 2025-2026. Total LGPS expenditure increased by £0.9 billion to £20 billion for the period. However, total LGPS income increased too, by £1.1 billion to a total of £22.9 billion. The release states that the market value of LGPS funds at the end of March 2026 was £437.9 billion, which represents an increase of £35.6 billion or 8.8% compared to the end of March 2025.

All schemes

Pensions tax | Change to terminal illness definition 

Professional Pensions magazine reports that the Department for Work and Pensions is set to amend the definition of terminal illness to help seriously ill people access their pension savings more easily. At present, payment of a serious ill health lump sum is permitted under the Finance Act 2004 if a member is expected to live for less than one year. The proposal is to change the test to whether death can reasonably be expected within 12 months. In practice, this shift from life expectancy to the possibility of death may make satisfying this test more straightforward for the seriously ill. 

Governmental reform | New national collective pension scheme for care workers

Yvette Cooper, the secretary of state for health and social care, announced at the Labour Party Conference on 30 September that the government will introduce a new national collective pension scheme for care sector workers. 

The only collective defined contribution (CDC) scheme currently active in this jurisdiction is the Royal Mail Collective Pension Plan. The launch of a sector-wide CDC scheme for care workers represents a new step in the government's approach to retirement planning. 

Civil Service Pension Scheme | Calls for clarification on death benefit payment rules

The chair of the House of Commons Public Accounts Committee, Sir Geoffrey Clifton-Brown, has written a letter requesting the government's clarification so that what he describes as a "death tax" will not be "levied on the families" of deceased civil servants.

The letter to the minister for the Cabinet Office, Louise Haigh MP, refers to lump sums payable upon the death of a member of the Civil Service Pension Scheme. These lump sums are usually tax-free when paid within two years of the notification of death. However, after two years have passed, income tax is payable at the recipient's marginal tax rate. Sir Geoffrey refers to "chaos" due to maladministration of the scheme and asserts that death benefit payments are therefore unlikely to be paid within the two-year time limit, triggering unnecessary tax charges. 

Sally Jameson MP, parliamentary secretary, responded that beneficiaries will not be left out of pocket due to administrative delays, even though neither "the Cabinet Office nor the scheme administrator has statutory discretion under tax law to alter or waive these tax charges".

Teachers' pensions | Department for Education consultation closing

As noted in the August newsletter, the Department for Education (DfE) is consulting on draft regulations to amend the Teachers’ Pension Scheme (England and Wales). The consultation closes on 30 October.

NHS pensions | LGPC Bulletin correction regarding trivial commutation lump sum death benefit

As noted in the September update, LGPC Bulletin 282, prepared by the Local Government Association, clarifies that, when a further payment is due to a survivor following a review under the McCloud remedy, the £30,000 limit for a trivial commutation lump sum death benefit (TCLSDB) applies to the combined value of the original TCLSDB and any McCloud top-up in relation to that payment – not in relation to each separate payment.

Further to this, LGPC Bulletin 283 corrects an error in LGPC Bulletin 276. Bulletin 276 stated that administering authorities do not need to take account of any trivial commutation lump sum death benefit (TCLSDB) paid previously when assessing the maximum amount that can be paid as a TCLSDB. Bulletin 283, however, clarifies that any previously paid TCLSDB must be included when determining whether the total value of TCLSDB payments remains within the £30,000 limit.

Department for Work and Pensions | Call for evidence on state pension deferral

The Department for Work and Pensions has published a call for evidence on the reasoning and experience of people who choose to defer their State Pension. This call for evidence closes on 1 December.

Pensions dashboards | Updates to guidance

The Pensions Dashboards Programme (PDP) has added a new example to its supplementary guidance on benefit illustrations which relates to a McCloud remedy public service pension with income and lump sum values on both legacy and new bases.

The PDP has also published a blog on its updated reporting standards for reporting operational data to Money and Pensions Service. 

The Pensions Administration Standards Association (PASA) Dashboards Working Group has published guidance on resolving possible matches, which are intended to help connect users with pensions that are potentially theirs where the data available in the dashboard ecosystem is incomplete.

Farley v Paymaster | Appeal regarding the threshold of seriousness for data protection claims

The UK Supreme Court heard argument on 7 and 8 October in Farley and others v Paymaster (1836) Limited (trading as Equiniti). This case relates to the claims for damages under the General Data Protection Regulation (GDPR) brought by more than 400 affected members in respect of the distress they allegedly suffered as a result of Equiniti mistakenly sending their pension benefit statements to out-of-date residential addresses.

Equiniti was granted permission to appeal the Court of Appeal's judgment to the Supreme Court on a single issue: whether a minimum threshold of seriousness applies in England and Wales to damages claims brought under the GDPR and the Data Protection Act 2018.

If the Supreme Court upholds the Court of Appeal's ruling that no minimum threshold of seriousness applies to data protection claims, this may result in a significant increase in relatively low-value data protection compensation claims against data controllers, compounded by the growing prevalence of AI-generated claims and letters before action.

Pensions Ombudsman | Blog for Ombuds Day

The Pensions Ombudsman has published a blog post for Ombuds Day, which discusses the ombudsman's recent achievements in the face of rising demand for his services. 2025/26 was the ombudsman's most productive year on record for the second year running: 10,793 pensions complaints were resolved. 

Pensions Ombudsman | Recent decisions likely to be of interest to all schemes

Incorrect deductions 

The Pensions Ombudsman has partly upheld a complaint brought by a member (Ms T) against the Department for Education regarding incorrect deductions from her salary. CAS-103063-F7X7

The member had made voluntary contributions to purchase added years in the scheme. The DfE refunded the overpaid contributions – however, Ms T held that she had suffered loss because of the missed opportunity to invest this money elsewhere in the past. The ombudsman held that Ms T had not demonstrated, on the balance of probabilities, that she would have used these overpaid contributions to enhance her pension, and therefore did not award interest on them. However, the ombudsman did award £1,000 in respect of the distress and inconvenience caused by the incorrect deduction of contributions from the member's salary.

Although Ms T argued that she would have most likely made additional contributions to her pension with this money, she also listed other ways she could have spent it, including on heating, groceries, petrol and meals out. The ombudsman cited this list in his explanation of why he did not find that Ms T discharged the burden of proof to demonstrate that she would have put the extra net salary towards her pension, stating: "I will not make awards for potential or perceived financial losses." 

Overpayment recovery

The Pensions Ombudsman did not uphold a complaint from a member (Mr E) of the Devon and Cornwall Police (DCP) Pension CARE Scheme, who challenged recovery of an overpayment of £55,650.31. CAS-68653-Q9H7

Mr E argued that he accepted his retirement benefit quotations in good faith and that DCP should therefore write off the outstanding overpayment. The adjudicator's opinion, with which the ombudsman agreed, was that Mr E had "Nelsonian knowledge" of the overpayment. 

"Nelsonian knowledge" refers to knowledge which a person ought to have had in their circumstances but deliberately avoided – the term arises from Lord Nelson apparently putting a telescope to his blind eye in battle, so as to "not see" a signal ordering him to retreat. In this case, because Mr E had been provided with significantly different retirement quotations in 2013 and 2015, the ombudsman's view was that he should have made enquiries at the time – which he did not. 

A member with Nelsonian knowledge is not acting in good faith, and change of position and estoppel defences are therefore unavailable. The determination states that "It is important to highlight that, in these circumstances, a lack of ‘good faith’ is not synonymous with dishonesty. It can simply mean that if the recipient of the overpayment had grounds for believing that the payment had been made in error, but could not be sure and failed to make reasonable enquiries, the defence would no longer be open to them." 

Pensionable pay calculation

The Pensions Ombudsman did not uphold a complaint from a member (Mr H) of the LGPS who complained about the calculation of his pensionable pay. CAS-106177-R9W2

Mr H complained that his weekend enhancement was not used correctly to "gross up" his final pensionable pay, arguing that he was therefore discriminated against as a part-time worker. He worked for Essex Police (EP) at weekends only. He based his submissions on the employer guide. However, the ombudsman considered whether EP had acted in accordance with the relevant LGPS regulations, and concluded that there had been no maladministration.

Pre-2021 statutory transfers: due diligence

The Pensions Ombudsman and the Deputy Pensions Ombudsman have recently dismissed two complaints relating to the due diligence required of scheme administrators and trustees when processing pre-2021 statutory transfers. CAS-54779-M1K4 and CAS-92580-Y9D4

Both of these decisions confirm the ombudsman's previous approach (see CAS-81940-Z2S8), which is that a transferring scheme was only obliged to satisfy the statutory requirements for processing transfers under the Pension Schemes Act 1993 for pre-2021 transfers. There was no general duty on transferring schemes to undertake additional due diligence unless the trustee or administrator voluntarily assumed such responsibility. Based on these decisions, a similar approach can be expected in future cases regarding pre-2021 statutory transfers.

House of Commons Library | New and updated briefing papers

Recent House of Commons Library briefing papers of interest include:

• What is the Budget? 
• AI regulation in the UK 
• Pensions dashboards policy