Employment and pensions

UK Public Service Pensions Update | February 2024

Published on 26th Feb 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 a range of developments including the removal of the lifetime allowance from 6 April 2024, the latest on the McCloud remedy, consultations, investment and cyber security. We also consider some 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.

Removal of the lifetime allowance | Royal Assent and further guidance

The Finance Act 2024 received Royal Assent on 22 February 2024 and HMRC has confirmed that it plans to issue communications to schemes every two weeks on the removal of the lifetime allowance from 6 April 2024.

Since our last newsletter, HMRC has updated its December 2023 and January 2024 newsletters (here and here) and published two further newsletters (here and here).

Funds might like to read our Insight, which gives an overview of the changes and suggests actions for trustees and employers, some of which will also be relevant to public service schemes. HMRC newsletters can be found on this collection page.

McCloud and Matthews | HMRC updates and deadline

HMRC's pension schemes newsletter 156 includes an update on the tax treatment of interest arising under the McCloud remedy. It gives guidance on the tax treatment of interest on compensation, authorised pensions, authorised top-up lump sums and unauthorised payments.

Newsletter 155 contains a reminder of the information that Fire Authority schemes must supply to HMRC in order to allow HMRC to update the National Insurance Records of, and pay appropriate adjustments in relation to, retained firefighters who (following the decision in Matthews v Kent and Medway Towns Fire Authority) convert their membership and join the Fire Authorities Schemes from 6 April 2000. The newsletter confirms that Fire Authority Schemes must supply complete information by 5 April 2024 and that any information supplied after that date will not be progressed or chased.

Closed consultation | Pensions tax

HMRC, following an announcement in the Spring Budget 2023, has consulted on a draft order containing "provisions for pensionable service in specified legacy (closed) and service in a reformed (open) public service pension scheme to be combined for the purposes of calculating an individual’s pension input amount against their Annual Allowance. …This will allow the offset of pension input in a legacy scheme against input in a reformed scheme where they relate to the same employment." The consultation closed on 26 February. The order is expected to come into force on 6 April 2024 and have effect for the tax year 2023-24 and subsequent tax years.

McCloud | Police and Firefighters' pension schemes

New regulations have come into force and amended the Police Pensions (Remediable Service) Regulations 2023 and the Firefighters’ Pensions (Remedial Service) Regulations 2023 to address omissions and minor errors. The explanatory note gives an overview of the changes made.

For Firefighters' Pension Schemes, issue 77 of the Firefighters’ Pensions Schemes bulletin (January 2024) highlights the regulations and confirms the action needed.

New regulations | Firefighters' pension scheme

Regulations have been made to amend the Firefighters’ Pension Scheme (England) Regulations 2014 to provide for unpaid carer’s leave to be included in calculating pensionable service, and correct an error in the Treasury Revaluation Orders for 2021 and 2022. The regulations will come into force on 27 March 2024.

Open consultation | Judicial pension schemes

The Ministry of Justice is consulting on draft regulations to amend three sets of regulations and an order relating to Judicial pensions. The consultation is open until 14 April 2024.

Consultation response | NHS pension scheme

The Department of Health and Social Care has published the response to its October 2023 consultation on changes to the NHS pension scheme (discussed in our November 2023 newsletter).

LGPS | Scheme Advisory Board news

The LGPS Scheme Advisory Board published three news items towards the end of January. These included an update on the LGPS and Sharia law and an update on the Pensions Regulator's (TPR) general code of practice. The news item on TPR's general code of practice confirms that the board's LGPS live webinar on 6 March 2024 at 3.30pm will "focus on the Code and the requirements and challenges it presents for the LGPS" and provides a link to register.

Capita cyber incident | Cyber actions for all funds

TPR has published its regulatory intervention report on the Capita cyber security incident. The report sets out how TPR worked with Capita to assess the risk to pension schemes and their members, sets out some lessons learned and confirms the steps trustees should take in the event of a cyber security incident. The report also confirms that the "incident shows the importance of having preventative measures in place and ensuring that trustees or managers of pension schemes and their providers have robust cyber security and business continuity plans in place."

Funds should read the report and review cyber security systems and procedures in line with TPR's cyber security guidance and the cyber section of the new general code (both linked from this press release).

Investment | ESG and nature

TPR has published a blog on how pension scheme trustees can "further develop their approach to managing wider environmental, social and governance (ESG) risks and opportunities." Funded public service pension schemes might be interested in the discussion on expanding consideration to include material nature and social factors. They might also be interested in the Financial Markets Law Committee's recent report "Pension Fund Trustees and Fiduciary Duties: Decision-making in the context of Sustainability and the subject of Climate Change."

Private markets investment | New TPR guidance

TPR has also published new guidance on private markets investment. The introduction says that the guidance, which is for private sector occupational pension schemes and advisers, "may also be of interest to administering authorities in the Local Government Pension Scheme (LGPS) but does not override statutory guidance on LGPS investments from the Department for Levelling Up, Housing and Communities." This seems to acknowledge the government's intention to set a new ambition for LGPS funds to invest 10% of assets in private equity in revised guidance on investment strategy statements, and to encourage LGPS funds to consider what other private market investments outside of that ambition might be in line with their risk management and fiduciary duties.

Automatic enrolment | No change to thresholds

The Department for Work and Pensions has published the supporting analysis for its review of the Automatic Enrolment Earnings Trigger and Qualifying Earnings Band for 2024/25. The conclusion of the review is that the earnings trigger should remain at £10,000, and the lower and upper earning limits for the qualifying earnings band should remain at £6,240 and £50,270 respectively. The analysis also refers to the expected consultation on extension of the scope of automatic enrolment.

Private sector schemes | New funding requirements

The Department for Work and Pensions has published the response to its 2022 consultation on draft regulations which will form a key part of the new funding framework for private sector defined benefit pension schemes. The new framework will not apply to public service pension schemes but funded schemes might be interested to read our Insight and note the changes being introduced for private sector schemes.

Pensions Ombudsman | Recent decisions

Funds might be interested to read the Pensions Ombudsman's decision in each of the following complaints. The first decision relates to the recovery of past overpayments, and the second and third to the provision of incorrect information to members. In the second decision, the ombudsman makes a rare finding of estoppel by representation.


Complaint by a member of the Teachers' Pension Scheme in relation to recovery of past overpayments (CAS-13504-S4M0).

Why should I read the decision? It considers the available defences to recovery of past overpayments in some detail and confirms the period over which the ombudsman would normally expect recovery to be made. In the specific context of the Teachers' Pension Scheme, it considers regulation 114 of the 2010 Regulations (discretion as to whether to recover) and related Treasury Guidelines (which, the ombudsman confirmed, did not require an overpayment to be pursued regardless of the circumstances in which it arose).

Complaint by the surviving co-habiting partner of a member of the LGPS that her partner was incorrectly told she would receive a survivor’s pension in the event of his death. (CAS-50008-T7M8)

Why should I read the decision? The ombudsman found there had been an estoppel by representation with the result that a survivor's pension should be paid. He also made an award of £2,000 for severe distress and inconvenience.

Complaint by a member of the LGPS that she was (incorrectly) told on a number of occasions that she could take her benefits unreduced from her 60th birthday. (CAS-58806-H1J6)

Why should I read the decision? The ombudsman found that it was not necessary for the member to delay taking her benefits until her complaint had been resolved. If the ombudsman found that a reduction for early payment should not have been applied, it would have instructed the council to increase the benefits to the unreduced level with effect from the date they were put into payment.

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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