Employment and pensions

UK Public Service Pensions Update | April 2024

Published on 23rd Apr 2024

Welcome to the latest edition of the UK Public Service Pensions Update

Close up of people in a meeting, hands holding pens and going over papers

This month, we consider three developments relating to the McCloud remedy, the pensions dashboard "connect by" date that has now been confirmed for public service pension schemes and a range of other developments.

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


The McCloud remedy | New HMRC guidance

HMRC's pension scheme newsletter 158 (for April 2024) contains guidance on the impact the abolition of the lifetime allowance has on how the McCloud remedy is implemented for a member. The guidance (or parts of it) are relevant to all public service pension schemes.


The McCloud remedy | HM Treasury amending directions

HM Treasury has published the Public Service Pensions (Exercise of Powers, Compensation and Information) (Amendment) Directions 2024. These amend the December 2022 Treasury directions in respect of the interest to apply to corrective payments from public service pension schemes to members, and from members to schemes, under the Public Service Pensions and Judicial Offices Act 2022 (the McCloud remedy). The amendments made by the new directions are summarised in correspondence between HM Treasury and the Government Actuary's Department (GAD):

  • "The process set out in the Directions is that the [interest] rates to be applied before 14 December 2022 are set out in the Schedule to the Directions and rates to be applied after that point will be published by HM Treasury. The proposed amendment will change the process so that the interest rates to be applied will be the Direct Saver interest rates published on the NS&I website."
  • "The Directions add a new situation in which interest should be paid which was previously omitted. This is where a member transferred their remediable service rights to another pension scheme before remedy was implemented and the transfer was not a Club transfer to another remedy scheme. Some of these members will be entitled to the remedy of an additional transfer payment. Interest will be awarded on these payments at a rate of 8% simple until 28 days after the member is informed of the amount of the additional transfer payment after which the rate will be the NS&I direct saver rate."

McCloud | Judicial review

The Court of Appeal has dismissed the appeals of the Fire Brigades Union and the British Medical Association against the order made in their applications for judicial review of the Public Service Pensions (Valuations and Employer Cost Cap) (Amendment) Directions. The Court of Appeal ruled that "[t]he Directions were not made for an improper purpose, and it was open to HM [Treasury] to include the McCloud Remedy costs in the [cost control mechanism] as ‘member costs’." 


Valuations | 2020 valuation results published

The GAD has confirmed that the 2020 actuarial valuations for the public service pension schemes are complete. The valuation results are on a collection page. So far, the following results have been published for England or England and Wales schemes: local governmentpoliceteachersfirefighters, NHSJudicial  and armed forces.

For the local government pension scheme (LGPS), the scheme advisory board (SAB) has confirmed that it "will shortly be publishing the final report of the scheme cost assessment that it is required to undertake under Regulation 116 of the LGPS Regulations 2013. However, the Board has already seen the initial results and agreed that it is not minded to recommend to the Secretary of State any changes to scheme benefits through that process."


Armed Forces pensions | New regulations

The Armed Forces Pensions (Amendment) Regulations 2024 have been made and will come into force on 6 May 2024.

The explanatory memorandum accompanying the regulations explains that their purpose is "remedy the discrepancies [in the revaluation of CARE benefits] caused by the use of provisional Average Weekly Earnings (AWE) estimates in the 2021 and 2022 HM Treasury Orders to revalue pension benefits accrued" in the Armed Forces Pension Scheme 2015: "the HM Treasury Orders for the scheme years 2020/21 and 2021/22 erroneously used provisional Office for National Statistics (ONS) estimates for the AWE index, rather than the finalised figures."


Pensions dashboards | 'Connect by' date confirmed

The Department for Work and Pensions (DWP) has published its long-awaited guidance setting out the staged timetable for connecting to the pensions dashboards ecosystem. The 'connect by' date for public service pension schemes is 31 October 2025 and the starting point is that, by this "connect by" date, schemes will have connected to the pensions dashboards ecosystem and be ready to respond to requests for pensions information. The Pensions Regulator (TPR) has updated its pensions dashboards guidance.

Funds should ask the advisers who are helping them to prepare for pensions dashboard connection to help them to prepare a project plan to ensure their scheme will be ready to connect.


Removal of the lifetime allowance | Further developments

Since our last newsletter, HMRC has updated its pensions tax manual and updated its information and advice collection for scheme administrators and trustees. It continues to publish guidance for schemes.

A second set of supplementary and amending regulations (needed, among other things, to address issues affecting members with protections) will be made soon.

Funds should continue to discuss the removal of the lifetime allowance with their scheme administrators, and seek updates on the actions needed.


Equality diversity and inclusion | Actions for funds

TPR has published the results of its first trustee diversity and inclusion survey. The survey was conducted in July and August 2023 and its aims included collecting baseline data to allow TPR to measure trustee board progress in equality diversity and inclusion (EDI) over time. Funds might like to revisit TPR's guidance on EDI. The guidance for governing bodies is here, and the guidance for employers is here.

LGPS funds might also like to read this recent SAB news item on the gender pensions gap in the LGPS and consider attending the virtual event advertised.


Reminder | The Pensions Regulator's general code

TPR's general code of practice came into force on 28 March 2024.

A number of changes have been made to the code to take account of the position of public service pension schemes. Funds need to consider the final code and decide what action they need to take in order to improve governance and meet TPR's expectations for compliance with legal requirements.


House of Commons Library briefing papers | New and updated

The House of Commons Library has published or updated the following briefing papers, which might be of interest to public service pension schemes and employers.


Pensions Ombudsman | Recent decisions

The Pensions Ombudsman has upheld a complaint by a member of the NHS Pension Scheme who was told that he could pay contributions to the scheme on an exceptional basis when he had reached age 60 and continuing membership of the scheme was not permitted under the regulations.

Why should I read the decision? It contains a detailed consideration of the principles of contract and contractual estoppel, negligence and negligent mis-statement, limitation, estoppel and legitimate expectation, human rights and loss (and redress). The ombudsman also made significant award for distress and inconvenience.

The Pensions Ombudsman has not upheld a complaint by the surviving spouse of a member of the NHS Pension Scheme in relation to the benefits payable from the scheme following his husband's death ((CAS-48268-J9C2.)

Why should I read the decision? It considers the application of regulation E2A of the 1995 Regulations (ill-health retirement) in circumstances where employment is terminated but a payment is made in respect of leave not taken. It also confirms that the NHS Pensions Employers Charter "in itself … is not a legally binding document, except to the extent that in certain areas it makes clear that all parties must comply with the Regulations and other legislation".

Dr L died on 15 November 2018. His last working day was 9 October 2018 but, due to a total of 35 days outstanding annual leave from the (then) current financial year and the previous one, his last day of pensionable service was 27 November 2018. In view of this, Dr L's death was treated as triggering the payment of death-in-service benefits rather than ill-health retirement benefits.

The difficulty came from regulation E2A (ill-health retirement). This applies where a member retires from "pensionable employment". However, it also refers to the member's "employment" being terminated on health grounds.

Regulation C2(5) says that where a payment is made in respect of leave not taken “the member’s pensionable employment will be treated…as continuing for a period equal to the period of leave for which payment is made".

The adjudicator's view was that the deeming provision under Regulation C2 "was intended to prevent members from contributing and receiving pay while, at the same time and in respect of the same period, receiving pension payments."  As such, his view (with which the ombudsman agreed) was "that the scope of Regulation C2(5) is broad enough to affect the interpretation of Regulation E2A in Dr L’s case, so that he must be deemed not to have retired from pensionable employment prior to his death. As a consequence, Dr L must be deemed to have died in pensionable employment, without having become entitled to tier 2 [ill-health] benefits under Regulation E2A(2)."

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

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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