Employment and pensions

UK Public Service Pensions Update | September 2024

Published on 26th Sep 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 the Pensions Regulator's pensions dashboards compliance and enforcement policy and actions schemes need to take, the latest news in relation to the McCloud remedy, and a number of developments affecting the Local Government Pension Scheme and police pensions. 

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.


Pensions dashboards | TPR urges schemes to 'act now so that we don't have to'

The Pensions Regulator has shared a blog post in which it reminds schemes what they need to do to prepare to connect to the dashboard architecture and confirms that it "will be engaging with hundreds of schemes this autumn, asking them to account for how they are measuring and improving their data [and] may take regulatory action where trustees or scheme managers are failing to meet our expectations."

The blog post publicises the release of the final version of the Pensions Regulator's pensions dashboards compliance and enforcement policy. This policy sets out the key risk areas the regulator will focus on, what the regulator expects schemes to do or to have done (including in the areas of governance and audit trails and record-keeping), how it will monitor compliance, and how it will respond to non-compliance. It also sets out a number of scenarios (for example, missing the connection deadline for your scheme) and says what action the regulator might take in each of those situations).

The "connect by date" for all public service pension schemes is just over a year away (31 October 2025). Funds should consider the blog post and the new compliance and enforcement policy and review their project plan for dashboard connection to ensure it is complete, up to date, and running to time.

The Pensions Dashboard Programme has recently confirmed that pensions dashboard users will verify their identity with GOV.UK One Login, and shared an updated code of connection and updated technical standards


Tax and economy | Budget Responsibility Act becomes law

In our last newsletter we reported that the chancellor of the exchequer, Rachel Reeves, had confirmed that she will "hold a Budget on October 30th alongside a full economic and fiscal forecast from the Office for Budget Responsibility".

With 30 October approaching, The Budget Responsibility Act 2024 has received Royal Assent and become law. The Budget Responsibility Act delivers on the Labour Party manifesto commitment to introduce a "‘fiscal lock’, requiring [a] fiscal event which makes significant and permanent changes to taxation or spending to be subject to an independent assessment by the Office for Budget Responsibility…[to] ensure there will always be scrutiny of the Government’s fiscal plans.”  The fiscal lock is intended to avoid a repeat of the September 2022 “mini budget”. You can read more about the legislation here.


McCloud remedy | New and updated HMRC guidance

In a recent newsletter, HMRC confirms that its "calculate your public service pension adjustment service" is available to use again. The newsletter sets out the changes that have been made to the service, confirms what information schemes might need to provide to members and to HMRC, and lists a number of actions for scheme administrators. It is accompanied by an appendix containing guidance for members on tax on interest, an updated guide for members on how to use the "calculate your public service pension adjustment service", and updated guidance for schemes on how to calculate pension input amounts and how annual allowance charges are affected by the remedy.


McCloud remedy | Annual benefit statement exemption

New regulations have been made to relax the requirement for Local Government Pension Scheme (LGPS) administering authorities to include estimated calculations relating to the McCloud remedy in members’ annual benefit statements (ABSs) for the 2023/24 scheme year, and to give administering authorities the ability to determine that the McCloud remedy will not be reflected in ABSs for the 2024/25 scheme year.

The regulations have been introduced to give LGPS scheme administrators more time in which to complete remedy calculations and update members' records. The explanatory memorandum accompanying the regulations says that the relaxation for the 2023-2024 scheme year "will have effect retrospectively to 1st October 2023 … in order to ensure that authorities will not at any point have been required to include the McCloud remedy calculations in those statements, because … legislation requires that they must be issued by 31st August 2024 and therefore some authorities may already have issued them before these Regulations have been made. Where an administering authority has already issued ABSs for 2023-24 and has been able to include McCloud remedy calculations in them, these Regulations allow the authority to determine that the disapplication does not apply (in order to ensure that those authorities will still be compliant with the legislation). Where an administering authority does not think that it will be in a position to include McCloud remedy calculations in the ABSs for 2024-25 (which must be issued by 31st August 2025), then these Regulations also allow them to extend the disapplication for a further year if the authority considers that it is reasonable to do so in all the circumstances of that case."

LGPS administering authorities should consider the regulations with their scheme administrator and make, and record, any decision (determination) needed – deadlines apply. The regulations also say that any decision not to include McCloud remedy calculations in the ABSs for 2024-25 must be notified to the members to which it applies in the ABS in respect of the scheme year ending on 31 March 2025.


LGPS | Payment of a death grant to a genealogy or tracing company

We have advised the Local Government Association (LGA) on whether LGPS administering authorities can pay a death grant to a genealogy or tracing company for onward payment to a potential beneficiary. The LGA has published the opinion on its website.


LGPS | Scheme Advisory Board statement on fiduciary duties and lobbying

The LGPS advisory board has published a statement to provide guidance to LGPS administering authorities as they face "increasing levels and extreme forms of lobbying about how LGPS funds are invested".

The statement discusses the fiduciary duty of administering authorities, factors that can, should and should not be considered when taking investment decisions, expected behaviour at pension committee and other official meetings, and the need to "clearly define the process for officers or elected members to raise concerns when inappropriate behaviour or language are directed against them".

On fiduciary duty, more generally, it confirms that the Scheme Advisory Board (SAB) "is seeking an opinion from Counsel as to whether there is a need to update the previous advice received".

The SAB hopes that the statement will be helpful to pension committee and board members, LGPS officers, advisers, scheme members and others involved in lobbying activity.

Another news item on the same page confirms that the SAB "is aware of a letter sent to administering authorities on behalf of the Palestine Solidarity Campaign and is also seeking legal advice on the contents on behalf of the scheme but cannot guarantee when this advice will be available. Therefore, administering authorities in receipt of the letter should still seek their own legal advice in relation to their specific circumstances and investments."


LGPS | Call for evidence on asset pooling and investment

The government has invited feedback on a number of questions to inform the first phase of its pensions review (discussed in our August newsletter).The questions include several relating to the LGPS, and the call for evidence confirms that the answers the government receives to them will guide "stakeholder engagement with more targeted questions [then] being considered with particular stakeholder groups."

The call for evidence (which closed on 25 September 2024) sought feedback on the following questions in relation to the LGPS:

  • "To what extent has LGPS asset pooling been successful, including specific models of pooling, with respect to delivering improved long-term risk-adjusted returns and capacity to invest in a wider range of asset classes?"
  • "What is the potential for a more consolidated LGPS and workplace DC market, combined with an increased focus on net investment returns (rather than costs), to increase net investment in UK asset classes such as unlisted and listed equity and infrastructure, and the potential impacts of such an increase on UK growth?"
  • "What are the main factors behind changing patterns of UK pension fund investment in UK asset classes (including UK-listed equities), such as past and predicted asset price performance and cost factors?"
  • "Is there a case for establishing additional incentives or requirements aimed at raising the portfolio allocations of … LGPS funds to UK assets or particular UK asset classes, taking into account the priorities of the review to improve saver outcomes and boost UK growth? In addition, for the LGPS, there are options to support and incentivise investment in local communities contributing to local and regional growth. What are the options for those incentives and requirements and what are their relative merits and predicted effectiveness?"

The document notes that asset pooling policy in the LGPS in England and Wales was consulted on in 2023 and confirms that, as part of the current review, the government "will engage extensively on next steps with regard to LGPS consolidation, with funds, pools and representative groups including the LGA and trade unions."

The LGPS SAB has shared its response to this call for evidence.


Police pensions | Employer contribution rate

Regulations have been made to allow the employer contribution to police pensions in England and Wales to be determined by the secretary of state on advice from the scheme actuary.

The explanatory memorandum for the regulations says that: "As the employer contribution rate is written into the regulations governing the police pension schemes, any change … needs to be reflected in those regulations. While the simplest amendment would be to update the percentage in the regulations to 35.3%, we are changing the approach in the drafting of the regulations to allow the Secretary of State to set the employer contribution rate, after taking advice from the scheme actuary. This will have the same result, because the advice from the scheme actuary (i.e. the valuation report) is that the rate should be 35.3%. This change will also future proof the scheme regulations, so future changes in the employer contribution rate, as assessed by the scheme actuary, will not require a change in regulations.

These amendments will mirror the set up on employer contributions in the Firefighters’ Pension Scheme regulations, as the police are most similar to fire and rescue authorities in terms of the administrative and governance arrangements around pensions. Other public service pension schemes (e.g. those for teachers and civil servants) also have similar rules to allow the employer contribution rate to be set by the Secretary of State further to advice from the scheme actuary."


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.

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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