Public Service Pensions Update: September 2025
Published on 29th September 2025
Welcome to the latest edition of the UK Public Service Pensions Update
This month we look at four developments relevant to the Local Government Pension Scheme (LGPS), including the amendments made to the LGPS-related provisions in the Pension Schemes Bill at committee stage. We also look at eight developments relevant to all public service pension schemes and two recent Pensions Ombudsman decisions.
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
The Pension Schemes Bill | Amendments made to the clauses relating to the LGPS
The Pension Schemes Bill completed the House of Commons committee stage this month. The following amendments to the clauses relating to the LGPS were approved by the Public Bill Committee and added to the bill.
Following a formal request from the Scottish government, clause 1 (asset pool companies), clause 2 (asset management) and original clause 4 (scheme manager governance reviews) have been amended to extend them to LGPS Scotland and make the relevant regulation-making powers available to the secretary of state in relation to the LGPS England and Wales, and to the Scottish ministers as regards LGPS Scotland.
To support the planned power for the government to direct a scheme manager to participate (or cease to participate) in a particular asset pool company, a power to direct an asset pool and its participating scheme managers to comply with that direction has been included.
The planned power for the government to direct an asset pool company "to take, or not to take, a specified decision in carrying out any specified investment management activities" has been removed on the grounds that it was never the government's intention to intervene in specific investment management decisions.
A requirement for the government to consult specified persons (for example, scheme managers and the relevant asset pool company) before issuing directions under clause 1 has been added.
The definition of "asset pool company" has been updated.
A new clause, "additional powers for certain scheme managers", has been inserted. This is a power to make regulations to give LGPS administering authorities that are not local authorities (such as the Environment Agency) certain powers that most administering authorities will already have by virtue of being local authorities. (If needed, the government may request that this provision is amended to include Scotland.)
An amendment that would have replaced original clause 3 of the bill (exemption from public procurement rules) with new wording intended to have the same effect but to "move the LGPS exemption directly into…the Procurement Act 2023, thereby future-proofing it against changes to the Procurement Act" was not taken forward. However, it seems likely that it will be raised again at report stage.
The insertion of the new clause "additional powers for certain scheme managers", means that the new version of the bill published on 18 September now includes eight clauses relating to the LGPS, rather than seven.
'Fit for the future' | Legal advice on pooling and conflicts of interest
The LGPS Advisory Board has shared "high-level" legal advice "to help administering authorities consider practical ways of working that [are] consistent with the government’s Fit for the Future proposals on pooling while managing conflicts of interest." The news item explains that it is intended that the advice "will help inform the development of wider pooling governance guidance that might be issued, in so far as that addresses the issue of conflicts of interest."
Investment | LGPS Advisory Board updates
The LGPS Advisory Board has published two updates in relation to a letter and position paper that some funds will have received from the Palestine Solidarity Campaign.
Investment | International Court of Justice shares landmark opinion on state obligations in respect of climate change
The International Court of Justice has given its advisory opinion on the obligations of states in respect of climate change. Although the opinion is not directly enforceable, it holds significant legal weight and is expected to have far-reaching implications not only for states and international organisations but also for the global community as a whole. It could prompt more robust climate-related policies and regulation and serve as an inspiration for a fresh wave of international climate litigation, including inter-state actions as well as actions brought by individuals, groups and non-governmental organisations challenging state inaction.
All schemes
The Pension Schemes Bill | New version published as amended in Public Bill Committee
The Pension Schemes Bill completed the House of Commons committee stage this month. In addition to the changes made to the clauses relating to the LGPS (reported at the beginning of this newsletter), some other amendments were approved by the Public Bill Committee. These include the insertion of new provisions (clauses 100 to 107 of the updated version of the bill published on 18 September) intended to help schemes to address the impact of the Court of Appeal's decision, in the Virgin Media case, on the validity of amendments made to schemes that were formerly contracted-out on the reference scheme basis where a section 37 actuarial confirmation was needed but not obtained.
No changes were made to the provisions in the bill that will change the statutory conditions to be satisfied before it is possible to exercise a charge, lien or set-off against a member's benefits in any case where the member disputes “the amount of the monetary obligation in question”. As such it should still be the case that, once the relevant provisions in the bill are in force, it will no longer be necessary to obtain a favourable Pensions Ombudsman decision and apply to the county court where a member disputes set off (recovery of past overpayments from future payments). A Pensions Ombudsman decision will suffice.
McCloud remedy | Mandatory scheme pays deadline moved to 6 July 2027
HMRC has confirmed that, in recognition of the fact that some schemes are still issuing statements relating to the McCloud remedy, ministers have "agreed to move the mandatory scheme pays deadline to 6 July 2027 to align with the deadline for pensioner members. This will apply to all members that have already submitted a scheme pays election to HMRC as part of the [McCloud] remedy for the tax years 2019 to 2020 through to 2022 to 2023 where they missed the original deadline for mandatory scheme pays of 6 July 2025." Regulations will follow and guidance will be updated in due course, but schemes should "treat the deadline as 6 July 2027 from now on".
Pensions tax | HMRC publishes guidance on returning tax-free lump sums
With the 2025 Autumn Budget approaching, HMRC has added to its original guidance on the tax position if members take – but later ask to return – pension commencement lump sums (or uncrystallised funds pension lump sums) that they took because of speculation about changes that might be announced in the Budget.
Inheritance tax and pensions | New inquiry and call for evidence
The House of Lords Finance Bill sub-committee has launched an inquiry on the draft Finance Bill 2025–26. As part of its inquiry, the sub-committee will consider the draft provisions to bring unused pension funds and death benefits into scope for inheritance tax for deaths on and after 6 April 2027.
A call for evidence, open until 7 October 2025, asks a number of questions. These include:
- Has the government sufficiently taken into account the impact of the measure on personal representatives and pension schemes administrators?
- How aware of the proposals are those who may be affected by the proposed change? What more should the government do to raise awareness ahead of April 2027?
- What are your views on the proposed timetable for the introduction of this measure? Do you think there should be any transitional provisions?
Funds might like to consider whether they would like to respond to the call for evidence.
Pensions dashboards | PASA guidance on use of 'warning' and 'unavailable' codes
The Pensions Administration Standards Association has published a toolkit to support the consistent use, by schemes, of "warning" and "unavailable" codes in situations when the administrator or provider cannot provide complete and accurate value data immediately.
The accompanying press release explains that the toolkit offers clarity on:
- When to apply specific unavailable codes (for example, pending calculations, outstanding transactions, new joiners, additional voluntary contributions or schemes in wind-up).
- Good practice in the use of warning codes (for example, deferred benefits, scheme pays adjustments, earmarking and sharing orders, underpin benefits).
- Supporting savers where value data cannot be updated immediately, including alignment with regulatory 3/10-day service level agreements.
- Ensuring communication strategies anticipate and explain dashboard delays or exceptions.
Administration | TPR calls on schemes to protect members against impersonation risk
The Pensions Regulator has published a blog in which it warns schemes that they must tighten their security and take action to protect their members against the increasingly sophisticated impersonation tactics being used by fraudsters. In addition to giving examples of two threat areas (fraudsters impersonating savers, or impersonating organisations that members trust), the blog post lists actions for trustees and administrators, and suggests a warning for schemes to give to members.
Governance | TPR consults on a new enforcement strategy
The Pensions Regulator is consulting on a new enforcement strategy that reflects its "evolution into a more proactive, prudential regulator."
The consultation is open until 11 November. The related blog explains that the regulator plans to publish the final strategy and a summary of consultation responses in early 2026, before going on to review its published policies to ensure they align with the new strategy.
Public procurement | Consultation on further reform closes
A government consultation on further reforms to public procurement closed on 5 September. The intention behind the reforms is to "strengthen the UK's economic resilience and support British businesses". It believes that by "strategically leveraging [the UK's] annual public procurement spend, we can protect our supply chains, open up new opportunities for local small businesses and social enterprises, create good local jobs, and deliver greater value for taxpayers". You can read more about the consultation in our Insight.
The Pensions Ombudsman | Recent decisions
Telephone assurance that estimate of benefits statement was correct overrode disclaimer (CAS-63587-P0K4)
The Pensions Ombudsman has upheld a complaint by a member of the Teachers' Pension Scheme who, after receiving an estimate of benefits statement showing additional years of service in 2014, telephoned Teachers' Pensions (TP), was assured that the figures were correct and was given a plausible explanation of where the additional service had come from.
The member complained after it became clear, when he applied to take his pension in 2020, that the figures were incorrect. The estimate of benefits statement had contained a disclaimer but the ombudsman found that, once the member had referred in the telephone call to relying on the figures in the statement, his "reliance had become explicit" and he was not warned, during the call, that "he should not be relying on the information, or that his pensionable service record would need a final verification check at point of retirement". As such, TP had assumed "responsibility for reliance on the statement that Mr E was entitled to the extra five years reckonable service, and in those circumstance it was reasonable for Mr E to rely on the assurances given to him."
The decision contains a careful consideration of the relevant legal principles.
Recovery of overpayments - Ombudsman considers the defence of laches – (CAS-37350-K2Y4)
The Pensions Ombudsman has partly upheld a complaint by a member of the Teachers' Pension Scheme in relation to recovery of past overpayments. The decision includes consideration of the defence of laches to equitable set off (recovery by deduction from future payments).
This newsletter covers developments relating to public service pensions in England with a focus on the Local Government Pension Scheme.
