Public Service Pensions Update | June 2022

Report | Future-proofing the LGPS

The Pensions and Lifetime Savings Association (PLSA) has published its report "The Local Government Pension Scheme: Today's challenges, tomorrow's opportunities". The report considers four themes (the LGPS regulatory and operating environment, LGPS employers, LGPS scheme members, and operational sustainability – systems and people) and makes a series of recommendations around each. There is an executive summary document.

The PLSA intends to "work with its members and other bodies involved in supporting the delivery of the LGPS, to build on this programme of work to continue to help future-proofing the LGPS".

McCloud remedy | Threat of legal action over immediate detriment cases

The Fire Brigades Union (FBU) is threatening legal action against Fire and Rescue Authorities (FRAs) which do not process immediate detriment cases. This follows a letter from the National Fire Chiefs Council (NFCC) to chief fire officers in which the NFCC recommends that fire and rescue services "review their current policy to reflect the latest correspondence from the HM Treasury dated 23 March 2022 that clearly advises services not to be applying Immediate Detriment prior to legislation being in place”.

"Immediate detriment cases" refers to members (in this instance, of the Firefighters' Pension Scheme) who take their benefits before the McCloud remedy legislation is implemented in October 2023. The aim of processing immediate detriment cases is to put the member into the position required by the McCloud decision, without the member having to wait until October 2023.

An immediate detriment framework for firefighters was agreed between the Local Government Association (on behalf of FRAs) and the FBU in October 2021 and set out in a joint memorandum.

In our April 2022 newsletter, we reported that the Local Government Association (on behalf of FRAs) and the FBU had written a joint letter to HM Treasury and the Home Office in which they referred to the possibility of legal action unless something was done to support FRAs in processing immediate detriment cases. The letter explained that the "withdrawal of … Home Office Guidance and the position of HM Treasury, … of opposing any possible solution for scheme members other than waiting for final regulations in October 2023" created uncertainty for FRAs in this area.

The FBU is concerned that the NFCC's recent letter to chief fire officers "places another barrier in the way of firefighters" receiving adjusted benefits under the framework before October 2023.

Survivor's pension | 1987 scheme rule does not violate Convention rights

The High Court has dismissed a claim that Regulation C9 of the Police Pensions Regulations 1987 (which says that a survivor's pension will stop if the surviving spouse or civil partner marries, forms a civil partnership with or starts to live with a new partner) has become "unjustifiable and unlawful in human rights terms".

The claim was brought by three survivors. The judge ruled that there was no violation of their Convention rights under Articles 12 (right to marry), 8 (right to respect for private and family life), or 14 (prohibition of discrimination), as read with A1P1 (protection of property). He granted the claimants permission to appeal. Green & others v Metropolitan Police Commissioner and another.

HMRC | Requirement to register 'express trusts' before 1 September

The law now requires the trustees of "express trusts" to register with, and provide specified information to, HMRC. Some trusts (for example, registered pension schemes) are exempt from this new requirement. However, many trusts are caught by it.

Examples of trusts that will need to register include a trust set up to hold death benefits on trust for a child (or someone else), a trust set up because a death benefit was not paid out within two years, unregistered pension schemes, and trusts providing uninsured death or other benefits. We anticipate that the first two categories will be most relevant for those involved with public service schemes.

The deadline for registration will usually be on or before 1 September 2022, in the case of a trust which was established before 4 June 2022, or within 90 days of the trust being set up for trusts established on or after 4 June 2022. If any of the information changes, the trustees must tell HMRC within 90 days.

This will also be a good time for the trustees to check that they are complying with record-keeping and information requirements introduced in 2017.

Please contact your usual Osborne Clarke contact, or one of the authors listed below, for help if you are not sure whether or how this new requirement might affect you.

Administration | HMRC starts to update manual for NMPA change

In previous newsletters, we have reported that the normal minimum pension age (NMPA) will increase from 55 to 57 on 6 April 2028. (NMPA is set by the Finance Act 2004. If a scheme pays benefits to a member before the NMPA, they will be making unauthorised payments which attract significant tax charges.)

All funds need to think about whether and how this change will affect their members and decide what to say to members, and when.

Following its January 2022 newsletter, HMRC has started to update the pensions tax manual to take account of this change.

Administration | TPR publishes guide to reporting pension scams

The Pensions Regulator has posted a blog entry on the subject of pension scams. Among other things, the entry highlights a new guide to reporting pension scams.

All funds should review the guide with their administrators and consider whether they need to make any process changes.

Pensions Dashboards | TPR guidance and webinar

The Pensions Regulator has warned trustees that they must start to prepare for their pensions dashboard staging deadline. It has also published initial guidance for trustees and is now calling for trustees, scheme managers and administrators to attend a pensions dashboard webinar on 28 July at 2.30pm.  

The guidance note has eight sections and includes a "preparing to connect" checklist, with suggested timings for key steps.

Funds might also like to note that a Private Members' Bill has been introduced to Parliament "to make provision about prohibiting the trustees and managers of pension schemes from being indemnified in respect of penalties imposed under pensions dashboards regulations".

Pensions Ombudsman | Various

The Pensions Ombudsman has handed down decisions in two complaints by members of the Local Government Pension Scheme (LGPS), and one complaint by a member of the Police Pension Scheme (1987). The complaints related to active member ill health early retirement, the discretion to allow transfers-in, and the inclusion in a pension estimate of a lump sum  to which the member was not, in the end, entitled.

Local Government Pension Scheme (CAS-44132-Q4C5)

Not upheld – a complaint by a member of the LGPS about her (now former) employer's decision not to award her an active member ill health early retirement pension.

The Pensions Ombudsman found that the employer had made its decision in the correct way. They also confirmed that there is no requirement under the LGPS regulations for the member to have a face to face assessment with the Independent Registered Medical Practioner (IRMP). "It is for the IRMP to decide, based on all available evidence, whether a face to face assessment is required."

The member said that her condition had deteriorated since her application was considered. The employer had to base its decision on the medical evidence which was or could have been available at the time. However, the member does have the option of applying for early payment of her deferred benefits on ill-health grounds.

Local Government Pension Scheme (CAS-47820-W7N7)

Not upheld – a complaint by a member of the LGPS about a decision by his (now former) employer not to exercise a discretion to allow him to transfer-in benefits from a previous scheme.

At the time the member joined the fund, the LGPS regulations allowed active members to request a transfer-in at any time. In 2004, the rules changed to permit transfers within 12 months of joining. Once 12 months had passed, transfer-in was at the discretion of the employer and administering authority.

The member claimed that he had requested a transfer within 12 months of joining (in 2001). He also complained about two decisions to refuse to exercise the discretion to allow a transfer-in, one taken in 2008 and one taken in 2017.

The complaints about the events in 2001 and 2008 were time-barred and the Pensions Ombudsman rejected the complaint about the decision taken in 2017. The employer  had "acted in accordance with the regulations and its decision was reasonable given the circumstances of the case".

Before the ombudsman reviewed the case, the Adjudicator had decided that, because of the way the Disclosure Regulations were drafted, the previous scheme had been responsible for telling the member about the regulation change.

Police Pension Scheme (1987) (CAS-32925-V0X2)

Not upheld – a complaint by a member of the Police Pension Scheme (1987) that a former scheme administrator incorrectly told him, in a 2014 pension estimate, that he would be entitled to payment of an additional lump sum of around £4,500 when he reached age 55.

The additional lump sum would only have been payable if a particular condition (relating to the pay figure used to calculate benefits) was met. In the event, the pay figure condition was not met and the member was not entitled to the payment.

The Pensions Ombudsman decided that the former scheme administrators had been right to include the additional lump sum figure in the 2014 estimate, and that there had been no need for them to explain, in the estimate, why the lump sum had been included. The document made it clear that it was an estimate, giving a broad outline of the benefits that could be payable, and the benefit provisions of the scheme were complex – "it is not always feasible to explain all aspects in a quotation".

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:

• Levelling Up and Regeneration Bill 2022-23
• Pensions: defined benefit superfunds
• Northern Ireland Protocol
• Northern Ireland Protocol Bill 2022-2023
• Sanctions against Russia

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