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LGPS Bulletin – August 2018

29 August 2018

Welcome to our LGPS bulletin that aims to help you to understand more about what is happening in the pensions industry. It includes issues that are impacting local government, as well as the ongoing changes to regulations and legislation being considered and introduced by the Government and industry regulators that affect pensions.

Our focus this month is on data, an important area of focus for most schemes. This can be driven by a number of factors, for example GDPR, compliance with TPR requirements or launching self-service portals. To find out more on the importance of data please click here. Or if you would like to hear what The Pensions Regulator really thinks about scheme data quality, register here for our upcoming webinar.

To read more, select from the links below: 

Election for early payment of deferred benefits at age 55 for leavers before 1 April 1998

At the June Technical Group meeting, The Ministry of Housing, Communities and Local Government (MHCLG) were questioned as to the policy intention with regard to voluntary early retirement for those who left active membership of the scheme prior to 1 April 1998.

MHCLG have provided the following.

What was the intention? 

As stated in the 2016 Consultation Document, our policy intention has been and remains to remove the requirement for persons aged between age 55 and 60 to obtain their employer’s consent before drawing their benefits early. This intention was restated in the Government response published earlier this year. There we said that we proposed to remove the need for an employer to give consent when a member aged between 55 and 59 chooses early payment of benefits to members who left the Local Government Pension Scheme (LGPS) with deferred benefits prior to 1 April 2008. 

Although it does not appear to have had this effect, our intention was that Regulation 24 of the 2018 Amendment Regulations should modify the LGPS Regulations 1995 (as preserved) to provide that this option is extended to members from the age of 55 who left the LGPS with a deferred benefit prior to April 2008.

What was the impact?

The impact is that the Regulations do not allow deferred members under the 1995 Regulations to take early retirement between age 55 and 60.

MHCLG statutory guidance on investments – appeal outcome

In a recent judgement, the Court of Appeal overturned a High Court decision that the Secretary of State had exceeded his regulation making powers in MHCLG’s statutory guidance on preparing and maintaining investment strategy statements. 

What is the impact?

The Palestine Solidarity Campaign, may seek permission to appeal the Court of Appeal’s decision. In the meantime, the statutory guidance, as amended by MHCLG last July following the High Court decision to remove the foreign boycott provision, remains in force. 

Scheme Advisory Board (SAB) obtain QC’s opinion on scheme employer wholly owned companies (EOC)

The opinion is available on the legal opinions page here  and addresses the following: 

What is the impact?

Whether the Best Value Authorities Staff Transfers (Pensions) Direction 2007 applies to the transfer of employees from a local authority to a Scheme Employer Wholly Owned Company (EOC). 

  • Whether the Best Value Authorities Staff Transfers (Pensions) Direction 2007 applies to the transfer of employees from a local authority to a local authority EOC. 
  • Whether the non-statutory Fair Deal guidance issued by HM Treasury in October 2013 applies to the transfer of employees from an academy to an academy EOC. 
  • Whether EOCs meet the requirements of paragraphs 5 or 6 of part 2 of schedule 2 of the LGPS Regulations 2013. 
  • The protections available to employees transferring under Transfer of Undertakings (Protection of Employment) regulations (TUPE) in relation to pensions, and the obligations placed on employers with regard to the provision of pensions. 
  • The situation were an employer to offer different schemes to different employee groups.  In this regard the point was made that ‘This would be highly likely to contravene equal pay legislation. EOC employees would be comparators with each other and with the authority’s retained employees’.

Local Government Authority (LGA) understand this does not mean that an employer would automatically be contravening equal pay legislation if it offered the staff it employed directly a different pension scheme to the staff it employed via an EOC. The usual potential defences could still apply, such as the material factor defence and whether a comparator is still a valid one in the particular circumstances of the case.

LGA and CWG publish member leaflet on LGPS (Amendment) Regulations 2018

(This is related to the Data Quality and Section 13 Roadshows, not the changes brought in by the 2018 Amendment Regulations). 

What is the impact?

The Secretariat, in conjunction with the national Communications Working Group (CWG), have produced a leaflet to assist administering authorities when communicating the material changes to the scheme made by the LGPS (Amendment) Regulations 2018 to scheme members. 

An email was circulated to LGPC contacts regarding this on 18th June 2018 and the leaflet entitled Employees can be found under guides and sample documents.

Updates to timeline regulations following LGPS (Amendment) Regulations 2018

Following the issue of the LGPS (Amendment) Regulations 2018 by MHCLG in April, the timeline regulations pages have been updated to reflect the amendments made.

What is the impact?

LGPS Regulations 2013: 

 LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014:

Updates to guides and websites following LGPS (Amendment) Regulations 2018

The national LGPS member website (both desktop and mobile versions) have been updated to incorporate the changes made by the LGPS (Amendment) Regulations 2018. In addition, the following guides have also been updated - clean and tracked versions are available under guides and sample documents on

What is the impact?

The Documents are:

Pension fund accounts 2017/18

Ahead of the publication of next year’s scheme annual report by the England and Wales Scheme Advisory Board, LGA request funds to email their 2017/18 annual report to Liam Robson when it is finalised. 

What is the impact?

As and when received, funds’ annual reports will be uploaded to the Board website.

HMRC - Launch of Manage and Register Pension Schemes service

HM Revenue and Customs (HMRC) launched the first phase of their new service on 4th June. This will eventually replace Pension Schemes Online for the ongoing management and registration of all UK registered pension schemes.

What is the impact?

Following a newsletter about Manage and Register Pension Schemes which was published in April, HMRC have issued another newsletter explaining what its plans are for the service. LGPC Secretariat’s understanding is that the new service is currently only operational for ‘registering new schemes, and for registering new administrators who want to register a new scheme’. A second release of phase one is planned for later in 2018, which will introduce new features for users of the new service. The rollout to existing users of Pension Schemes Online is due to take place in 2019 and 2020 as part of phase two. More details on HMRC’s plans for the rest of phase one and for phase two are contained in the two newsletters linked above.  On 8th June, the LGPC Secretariat circulated an email to LGPS administering authorities inviting them to volunteer to attend two workshops on the development of the new service. The deadline for responding was Wednesday 20th June.

HMRC - Scheme Reconciliation Service (SRS) communications issued by HMRC

A number of emails from HMRC regarding the scheme reconciliation service (SRS) were circulated to administering authorities by the LGPC Secretariat in June.

What is the impact?

The text of the emails sent is provided, and any queries regarding these should be sent to  

The Pensions Regulator - Proactive engagement with LGPS funds planned for 2018 and 2019

The Pensions Regulator’s (TPR) Corporate Plan for 2018-2021 (page 18) includes three new Key Performance Indicators (KPIs) directly related to public service pension schemes and TPR has chosen the Local Government Pension Scheme as a cohort for proactive engagement throughout 2018 and 2019.

TPR has chosen Local Government schemes because they feel the results of the 2017 Governance & Administration Survey show that improvements in governance & administration standards have slowed when compared to other public service pension schemes. 

What is the impact?

Over the coming months, all LGPS scheme managers will receive written communications from TPR (and others involved with LGPS may also hear from TPR). These will cover governance and administration matters including:

  • the main risk areas scheme managers should already be focusing on 
  • what TPR’s expectations are 
  • how those responsible for managing and running schemes can identify and mitigate such risks 

TPR have asked LGA to convey the message below to all LGPS administering authorities:

“We highly recommend that scheme managers and pension board members carefully consider the messages given. It is essential to have robust governance and administration in place for your scheme. However, it must be noted that there are no new expectations from us. All of the areas are already covered in TPR’s Code of Practice 14 for Public Service Pension Schemes, and the associated guidance. 

If you haven’t already, we recommend that you complete TPR’s Public Service toolkit to learn about managing public service pension schemes and to increase your knowledge and understanding. 

We will engage further with a small number of scheme managers to undertake deeper regulatory engagement into each risk area, to understand what the current status is, the challenges scheme managers face, the extent of mitigation and improvement plans and how they are being implemented. 

Good scheme governance and administration is a key factor to achieving positive outcomes for members. TPR will use its discretion in deciding whether it is appropriate to carry out further investigations and use its powers in situations where failings are identified.”

GDPR – updated template full privacy notice (version 3)

The update to the template of the full privacy notice to include other LGPS administering authorities in the section that sets out with which organisations LGPS funds share data, has been completed, and version 3 is now available.

What is the impact?

LGA consider that a member does not need to provide their consent for an administering authority to share details of their scheme membership with another authority. LGPS administering authorities process personal data on the basis that they need to do so in order to satisfy their legal obligations as scheme managers. Details of previous scheme membership is necessary to determine, amongst other things: 

  • the right to benefits under the scheme where the member leaves with less than two years’ membership. 
  • if automatic aggregation should occur. 
  • the death grant that should be paid in certain circumstances. 
  • if a refund is applicable where the member leaves without the right to a deferred benefit. 
  • to determine the statutory right to a CETV.

Burgess and others v BIC UK Ltd judgment – time limits for recovering overpayments

A judgment handed down by the High Court in April 2018 clarified that pensions overpayments recovered by way of adjustments to future payments are not subject to the statutory six year time limit on recovering overpaid amounts.

Mr Justice Arnold stated that the equitable right to recoupment was not subject to the six year limitation period in the Limitation Act 1980 (or indeed any other limitation period in that Act). This meant that the only possible limitation to reclaiming an overpayment by equitable recoupment was the equitable doctrine of laches, i.e. that a legal claim will not be allowed if there is a long delay in making that claim that has prejudiced the other party. The judge confirmed that as some sort of detrimental reliance is usually an essential ingredient in the equitable doctrine the court could not determine the question of whether laches could apply on a group basis as each pensioner’s individual circumstances would need to be considered.”

What is the impact?

Where a pension scheme seeks to adjust future benefits to take into account prior overpayments and this approach is disputed by the recipient, an order by the County Court would be necessary to enforce the pension scheme’s approach. This is in accordance with s91 of the Pensions Act 1995.

Department for Work and Pensions (DWP) consultation on clarifying and strengthening trustees’ investment duties

The consultation covers trust based schemes, seeking views on the draft Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2018, but SAB intend to respond.

What is the impact?

The proposed regulations would amend the required content of the Statement of Investment Principles (SIP), and the steps which trustees need to take when revising it, or preparing it for the first time. They would also require trustees of schemes offering money purchase benefits, subject to certain limited exceptions, to publish the SIP, and publish an annual report on how they implemented it, and tell members of its availability via the annual benefit statement. 

The consultation closed on 16th July 2018.

DWP commence consultation on protecting defined benefit pension schemes

This consultation focusses on improving the Pensions Regulator’s powers with a view to better protecting private sector defined benefit schemes.

What is the impact?

The Government hope the proposals will create a stronger Pensions Regulator which can be more proactive and get involved earlier when employers make changes which could affect their pension scheme. 

The consultation closed on 21st August 2018.

PSIG publishes updated version of code of practice on scams

The Pension Scams Industry Group (PSIG) has published version 2.0 of its code of practice on combatting pension scams.

What is the impact?

The first version of the voluntary code was published in 2015 and set out key steps trustees, providers and administrators could take to identify possible scams. 

The new version builds upon the content of the first but now: 

  • includes guidance on how schemes can talk to members about their transfer, 
  • recommends schemes refer insistent members to The Pensions Advisory Service (TPAS), 
  • makes it easier for schemes to report suspected scams to Action Fraud, and 
  • includes case studies portraying real cases.

European Court of Justice (ECJ) ruling on transgender rights

The ECJ has ruled in favour of a transgender woman who was refused payment of her UK state pension in 2008 at age 60 (on the grounds that she did not have a Gender Recognition Certificate (GRC)).

What is the impact?

The woman was refused payment of her pension because, on changing her gender, she had not annulled her marriage. Under the Gender Recognition Act 2004, it was not possible to obtain a GRC unless the applicant had annulled their marriage (where applicable) upon changing their gender. 

This was changed by the Marriage (Same Sex Couples) Act 2013, meaning that transgender people no longer need to annul their marriage to obtain a GRC. However, the change was not introduced retrospectively. The ruling by the Grand Chamber of the European Court of Justice found that this meant UK legislation (in relation to individuals who changed gender prior to the introduction of the 2013 Act) treated a person who changed gender after marrying less favourably than it treated a person who had retained his or her birth  gender and was married. On these grounds, it was found that the UK legislation constituted direct discrimination based on sex. 

The LGPC Secretariat will provide further information regarding the impact of this case for the LGPS in a future bulletin.

Pensions dashboard – results of feasibility study delayed

DWP were due to publish the results of their feasibility study to explore the options for delivering the dashboard at the end of March 2018.

What is the impact?

The findings of this feasibility study have still to be published and given it is now less than a year until the dashboard was originally due to launch (in April 2019), this would appear to make these timescales increasingly difficult to achieve.

Minutes of June 2018 LGPS technical group meeting published

The national LGPS technical group meeting was held on 8 June 2018.

What is the impact?

Minutes of the meeting have now been published. Apart from Point 1 in this update, other items of significance listed below:

CEP reclaim on Transfer

Transfer to another registered pension scheme rather than refund may necessitate reclaim of Contributions Equivalent Premium’s (CEP).

What is the impact?

This does not apply on Interfund as CEP cannot be reclaimed but the receiving scheme will need to authorise any reclaim and it was thought that this authorisation could be included with the transfer forms. It will be discussed in depth at the September national LGPS technical group meeting.

Communication on Early Payment of Deferred Benefits from age 55 

How should members be advised?

What is the impact?

Approaches varied from a ‘soft touch’ without too much publicity, newsletter directing individuals to use an on-line service to obtain an estimate for their deferred benefits where paid early, writing personally to those individuals affected and including the information on the Annual Benefit Statements (ABS).

Displaying benefits available to be paid on and after age 55 on ABS 

Should the ABS show amounts for early retirement benefits.

What is the impact?

MHCLG opined that whether or not to show the actuarially reduced benefits a member may be paid on and after age 55 on ABS, should be a matter for discussion and agreement by Local Pension Boards. 

Disclosure – communication of a material change 

LGPS (Amendment) Regulations 2018 [SI 2018/493] 

What is the impact?

The group agreed that each individual affected by a material change brought about by the Amendment Regulations should be personally informed of those material changes and how they affect them. 

Taxation position of Exit credit 

The group queried as to the tax position of exit credits. 

MHCLG confirmed that they have been trying for several months with HMRC to determine the position concerning such payments. 

Another member of the group (Actuarial - Hymans Robertson) noted that the tax charge appears to be determined by the ‘type’ of employer to which the exit credit is paid, under relevant legislation. 

LGA offered to assist MHCLG obtain an outcome from HMRC and requested that the relevant legislation be sent to the LGA so that it can be reviewed.

What is the impact?

On 24 July 2018, LGA confirmed in an email to administering authorities that HMRC have made the pronouncement below in relation to exit credits payable to former scheme employers: 

“I can now confirm that there will be no tax charge on the payment and that there is no requirement for the scheme administrator of the pension scheme (or sub-scheme administrator of the sub-scheme) to report the payment to HMRC”.

Pension Credit benefit payment from age 55

If the member left active membership before 01/04/2014 adjustment to the text in Bulletin 171 is needed

What is the impact?

The text of the notes in Bulletin 171 needs adjusting to say “where the debited member left active membership of the scheme prior to 1 April 2014 and the pension credit was awarded after 31 March 2014 in respect of pre 1 April 2014 membership)”.

Backdated Admission Agreements 

The practicalities surrounding the change to the paragraph 14 of Schedule 2 of the LGPS Regulations 2013. 

What is the impact?

The discussion surrounded as to whether or not an administering authority would: 

  • accept contributions before the admission agreement had been completed, 
  • pay death benefits in the event that a person dies before the admission agreement is completed, but the admission agreement is backdated upon completion, to a date before the person died. 

Some would accept contributions before the admission agreement had been completed on the understanding that should the admission agreement not come to fruition the contributions would be refunded, other members of the group would not accept the contributions. 

Payment of death benefits would not be made until the admission agreement was completed and the person must be listed in the schedule at the back of the admission agreement. 

It is was noted that the provision to back date an admission agreement is an administering authority discretion.

HMRC urged to extend GMP reconciliation deadline by a year

The government should extend its support for schemes seeking to reconcile guaranteed minimum pension (GMP) records until October 2019, Willis Towers Watson (WTW) has said.

What is the impact?

The consultancy warned potential capacity bottlenecks, insufficient data, slow turnaround times, and complex cases arising from discrepancies means many schemes may not be able to reconcile the data by October this year.

This will be when HM Revenue & Customs (HMRC) switches off its scheme reconciliation service, which has been in operation since April 2014 and allows schemes to submit bulk queries for data and challenge HMRC's responses to queries.

There is a fear that a failure to complete reconciliation by the deadline due to insufficient data will lead to some members receiving lower pension payouts than they are entitled to. This could also be due to HMRC applying a GMP with which the scheme disagrees.

Automatic aggregation where member’s date of birth is not verified 

There are an increasing number of interfund adjustments where administering authorities are refusing to make payments because the member’s date of birth has not been verified and/or the administering authority has not had sight of an original birth certificate/certified copy of a birth certificate. 

What is the impact?

The group recommended that if both the paying administering authority and the receiving administering authority hold the same date of birth, then the Interfund Adjustment (IFA) should be paid. 

The majority of documents accepted include reference to the person’s date of birth. Given that the document must be checked for validity, it is difficult to understand how a member’s date of birth cannot be verified by the documents held by the former employer. Administering authorities may wish to review their processes when paying an IFA to include valid documents of this nature. 

The Crown’s Bona Vacanti - a list covering unclaimed estates and when it is appropriate for use 

Who to pay if personal representatives not paid within 2 years.

What is the impact?

Section 46(2)(vi) of the Administration of Estates Act 1925 covers where there are no personnel representatives or known relatives to which a death grant may be paid and states “In default of any person taking an absolute interest under the foregoing provisions, the residuary estate of the intestate shall belong to the Crown or to the Duchy of Lancaster or to the Duke of Cornwall for the time being, as the case may be, as bona vacantia, and in lieu of any right to escheat”. 

Section 30 makes clear that it is the Treasury Solicitor that should be paid.

Therefore, where an administering authority is required to pay an amount within 2 years to the personal representative, the personal representative in bona vacantia cases is the Treasury Solicitor 

Elmes v Essex 

MHCLG are waiting for the full judgement before they consider as to what/if any changes need to be made to the LGPS regulations. 

What is the impact?

LGA reiterated that their email of 8 May 2018, simply clarified that it was the view of the LGA that administering authorities did not have to wait for MHCLG to make any changes to the regulations, before they could start making payments co-habiting partners. Clearly, this is an administering authority decision call but if an administering authority waits for MHCLG before doing anything, they may find themselves subject to legal challenge. 

For further information or to contact us:      

Contact John Kakatsos, Equiniti Relationship Manager
T +44 (0) 7436 561 610| E | W

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