Public sector pensions

Public Service Pensions Update | February 2022

Published on 25th Feb 2022

In this edition, we discuss developments in a number of areas including the pensions dashboard and transfers of personal data outside of the UK. We also look at some Pensions Ombudsman decisions, including in a case in which a change in the member's employment status meant that he lost his statutory transfer right between the date he applied to transfer and the date the transfer payment was approved.

Levelling up | Paper calls for investment by LGPS funds

The Department for Levelling up, Housing and Communities has published a policy paper "Levelling up the United Kingdom". The paper sets out the next steps in the government's programme to level up the UK with a time horizon of 2030. These include a proposal that Local Government Pension Scheme (LGPS) funds "publish plans for increasing local investment, including setting an ambition of up to 5% of assets invested in projects which support local areas".  

The proposals are discussed in chapter three of the report and the LGPS Scheme Advisory Board website refers to an "expected summer consultation which we understand will also include the outstanding climate risk and reporting regulations and the pooling guidance".

The policy proposals are also mentioned in this House of Commons Library briefing paper, which looks at the framework within with LGPS funds in England and Wales make investment decisions and "how they can and should take into account environment, social and governance issues".  

 


 

Consultations | Changes to the NHS pension scheme  

The Department of Health and Social Care (DHSC) has published the response in its recent consultation on changes to member contributions. The response confirms, among other things, that the changes will be postponed until 1 October 2022 to allow for pay review and so to mitigate the impact on take-home pay. Unison has warned that "the majority of full-time employees will be worse off" and called for a pay rise that will "soften the blow".

The DHSC has also opened a consultation on a proposal to extend the suspension of three rules that place limits on the amount that NHS staff can work if they return after claiming pension benefits. 

These rules were originally suspended in March 2020 (by the Coronavirus Act 2020) to support the NHS' response to the Covid-19 pandemic by making it easier for retired and partially retired staff to return to work. The suspension is due to expire on 24 March 2022 and the proposal is to extend it to 31 October 2022 in order to continue to support the NHS. 

 


 

Pensions dashboards | More detail means it's time to act

The Department for Work and Pensions (DWP) is consulting on draft regulations which set out: (i) the requirements that pensions dashboard providers and pensions dashboard services must meet; (ii) requirements for pension schemes around co-operation, connection and provision of information; and (iii) enforcement. Schedule 2 to the draft regulations is a draft staging timetable. 

The draft regulations provide long-awaited detail and there are a number of steps that funds need to take to prepare to link up with the first pensions dashboard.

Alongside the DWP's consultation, the Pensions Dashboards Programme has published information about the scope of the standards it will set under the regulations and how it will go about setting them. 

Funds might like to ask for training on pensions dashboards and the DWP’s consultation. They should also discuss with their advisers and scheme administrators when compulsory staging to the dashboard is likely to apply to them and what actions they should take to prepare. 

We suggest actions in our interactive PDF, available to clients on request. 

 


 

Data protection | Do you transfer data outside of the UK?  

The Information Commissioner's Office has laid before Parliament an international data transfer agreement, an international data transfer addendum to the European Commission’s standard contractual clauses for international data transfers and a document setting out transitional provisions. 

If no objections are raised before Parliament, these documents will come into force on 21 March 2022.

Funds that transfer, or who have service providers and advisers who transfer, personal data outside of the UK should read our Insight. This explains what is changing and suggests actions to take.

 


 

Other developments | Q2 2022 pensions action plan

We have released our Q2 2022 pensions action plan. Each action plan is a summary of changes and proposals in pensions law and regulation over the last quarter, most of which are also relevant to public sector pension schemes.

One of the topics discussed is the increase in the normal minimum pension age from 55 to 57. This will take place in 2028 and you should have received an invitation to our webinar on the change, at 11am on Thursday 3 March. You can register now.

 


 

Webinar series | Metaverse Week

The metaverse is a virtual reality space or universe of spaces. The webinars in our Metaverse Week event include an introduction to the metaverse, and sessions on work in the metaverse, blockchain and regulation. You can view the full programme, and sign up to sessions, now.

 


 

Pensions Ombudsman | Various

The Pensions Ombudsman has handed down decisions in complaints relating to payment of a transfer value where a change in the member's employment status meant he had lost his statutory transfer right, recovery of an overpayment in a case where a member had noticed the mistake and informed the scheme, and a complaint by a member who was incorrectly advised that they could resume contributions under an added years contract after rejoining a scheme.

Armed Forces Pension Scheme (PO-11134)

Upheld – A complaint by a member of the Armed Forces Pension Scheme that it should not have allowed him to transfer his benefits to a scheme which he has since come to believe is a fraudulent arrangement.

The Pensions Ombudsman upheld the complaint. The member did not have a statutory right to transfer because he was unemployed (in receipt of jobseekers allowance) at the time the Ministry of Defence (MoD) gave final approval for the transfer and so was not an "earner" at that time for the purposes of acquiring transfer credits under the rules of another occupational pension scheme. As such, the scheme had not discharged its liability to the member. The scheme had also failed to apply the Pensions Regulator's February 2013 guidance on preventing pension scams.

The Pensions Ombudsman was of the view, on the balance of probabilities, that if the MoD had applied the Pensions Regulator's guidance and warned the member of the risks of transferring, the member would still have proceeded with the transfer. However, the fact that the member did not have a statutory right to transfer meant that the transfer value should not have been paid.

In view of this, the ombudsman directed that the MoD reinstate the member's benefits in the scheme (or, if this is not possible, provide equivalent benefits in an alternative arrangement) and pay the member £2,000 for severe distress and inconvenience.

The transfer in this case pre-dates the November 2021 changes to the rules for statutory transfers (discussed in our recent podcast). However, it is still important. This is because, in addition to checking that one of the two new conditions for paying a statutory transfer are met, schemes are still required to check whether a member is eligible for a statutory transfer under the Pension Schemes Act 1993. In this case, the problem seems to have come from the fact that the member's employment status changed from employed to unemployed between the date he made his initial transfer request and the date the MoD gave final approval for it.

Teachers’ Pension Scheme (PO-27022)

Partly upheld – A complaint by a member of the Teachers' Pension Scheme who was asked to repay an overpayment of £96,320. 

The overpayment arose because the member built up NHS Pension Scheme benefits in relation to service between 1971 and 2001, and Teachers' Pension Scheme benefits for service between 2006 and 2013.  Following a change to computer systems, Teachers' Pensions accidentally included the 1971 to 2001 service when calculating the member's Teachers' Pension Scheme benefits.

The member noticed the mistake and raised it with Teachers' Pensions in 2013. They did not complete their investigations until 2017.

The Pensions Ombudsman considered the principle that a member can only argue "change of position" as a defence to recovery of an overpayment if they acted in good faith. He noted that "bad faith is not synonymous with dishonesty. It can simply mean that, if the recipient knew or had grounds for believing that a payment had been made in error, but could not be sure, the defence would not be open" to them.

In this case, the ombudsman decided that the member had not acted in good faith. The size of the error meant that she should "not have relied upon Teachers' Pensions subsequent lack of contact as an indication that the pension being paid to her was correct". (It might have been reasonable to assume that the situation was resolved if the inconsistency had been smaller.)

The ombudsman did, however, direct that Teachers' Pensions pay the member £3,000 in recognition of the exceptional distress and inconvenience it had caused, and confirmed that he would expect it "to be generous in the length of time it allows for repayment to be made, especially given its role in allowing the overpayment to accrue".

The decision in this case is also a reminder of:

  • the fact that members will not normally be able to recover any legal costs they incur in defending a claim for repayment;
  • the different defences to recovery of an overpayment; and
  • the six-year limitation period that applies to claims for repayment of overpayments.

NHS Pension Scheme (CAS-39827-R8Q6)

Partly upheld – A complaint by a member of the NHS Pension Scheme who was incorrectly advised that they could resume contributions under an added years contract after rejoining the scheme. The member paid around £22,000 of contributions before the error was discovered.

The member provided a list of accounts to demonstrate that she made regular savings. The Pensions Ombudsman accepted that, if the member had been told at the outset she could not resume contributions under her added years contract, it was more likely than not she would have saved the £22,000 between 2016 (when she resumed payment) and 2019 (when she retired). 

Because it was not possible to say how the member would have invested the money, the ombudsman made an award of simple interest on the net contributions at the base rate for the time being quoted by the Bank of England.

Because the error was corrected when it was discovered, and because the member was offered the option of using the contributions to pay for additional pension, the ombudsman considered that the £500 already paid to the member was a suitable award of compensation for distress and inconvenience. 

 


 

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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