UK Public Service Pensions Update | February 2025

This month we lead with three developments relevant to the Local Government Pension Scheme (LGPS) and then move onto seven relevant to all public service pension schemes.

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.

Focus on the LGPS

Administration and governance | LGPS Advisory Board shares letter to CFOs and pension committee chairs

As budgets for the coming year are considered, the chair of the LGPS Advisory Board has written to chief financial officers and pension committee chairs at administering authorities to remind them that the "costs for the administration and governance of the LGPS should be met from the pension fund maintained by the administering authority, and not from that authority’s general fund" (such that the "acknowledged pressures on council service delivery more generally should not influence the approach taken with regard to setting the budget for pensions administration and governance") and urge them to ensure "appropriate resources are in place to ensure service delivery by the pension fund".

UK Stewardship Code | FRC confirms latest signatories and provides update on changes

The Financial Reporting Council (FRC) has announced the successful signatories to the UK Stewardship Code following the latest round of applications. The new signatories include a significant number of LGPS funds and partnerships.

The FRC's announcement also reminds signatories to review the interim changes to reporting as they prepare for their next report under the 2020 code. It confirms that the FRC's consultation on changes to the code closes on 19 February 2025, and an updated stewardship code will come into force in 2026.

Stewardship | PLSA publishes latest stewardship and voting guidelines

The Pensions and Lifetime Savings Association (PLSA) has published its 2025 stewardship and voting guidelines. The guidelines and summary are available to members in the PLSA's members area.

All schemes

Procurement | Cabinet Office publishes new national procurement policy statement

A new national procurement policy statement (NPPS) has been published replacing the previous version published in May 2024, which was withdrawn in the autumn following the change of government.

The new statement sets out the government's policy on national priorities for public procurement. All public bodies procuring goods, works or services under the Procurement Act 2023 will need to "have regard" to the new statement that sets the future priorities for public sector purchasing.

The new NPPS comes into effect alongside the Procurement Act on 24 February.

Funds might also be interested in our "Navigating the changes under the Procurement Act" microsite.

Pension Scams | TPR reminds schemes to report and opens registration for 'fighting pension fraud' webinar

The Pensions Regulator (TPR) has published an update on the action it is taking to help combat pension scams.

Actions include strategic secondments to the City of London Police and the National Economic Crime Centre to improve intelligence sharing, "strengthen collaboration between law enforcement and the pensions industry and align our approach with national fraud strategies."

The update also explains why it is so important for schemes to report suspicions (reports help to agencies to identify and disrupt scams at an earlier stage) and invites schemes to register for the Fighting Pension Fraud webinar that TPR is running with the City of London Police on Tuesday 25 March.

AVCs | Make My Money Matter releases 2025 Climate Action Report

Make My Money Matter has released its 2025 Climate Action Report. The report ranks the UK's 12 largest pension providers on their climate plans in seven areas and invites savers who are not happy with how their provider scores to contact their employer to highlight their climate performance and ask them to engage with their provider.

The pension providers considered in the report include some who provide additional voluntary contribution (AVC) arrangements for public service pension schemes. Schemes might like to consider the report and take advice on engagement (or further engagement) both with any AVC provider listed in it and with any provider not listed.

Call for evidence | Use of AI in pensions and other financial service sectors

The Treasury Committee has launched a call for evidence on how the UK financial services sectors (including pensions) can take advantage of the opportunities in artificial intelligence (AI) while mitigating any threats to financial stability and safeguarding financial consumers, particularly vulnerable consumers. The call for evidence on opportunities related to AI is open until 17 March.

Pensions Ombudsman | Employer has contractual obligation to provide mirror benefits promised 18 years ago

The Pensions Ombudsman has published a news item on its determination in a complaint by a pension scheme member who was told that his benefits would mirror those from his previous scheme when he joined a new scheme offered by his employer and transferred the benefits he had built up in the old scheme to the new one in 1998.

The member's employment was transferred to the employer as part of an internal re-organisation. To begin with, the employer was admitted to the previous scheme. Once the employer had established a replacement scheme the member was invited to join the new scheme for future service and to transfer his benefits from the old scheme on the understanding that both the future service and transferred-in benefits would mirror those in the previous scheme.

The ombudsman found that the employer had a contractual obligation to provide mirror benefits in the new scheme, and to document those benefits, and awarded specific performance of that obligation. He also found that failure to take steps to document and provide the benefits, on discovering that there had been a failure to document them, amounted to a breach of the employer's implied duty of good faith.

The directions made by the ombudsman included directions that, to the extent that any amendment to the rules or augmentation of the member's benefits under the new scheme was required to give effect to the mirror benefits promised then the employer should amend the scheme rules or augment the member's benefits, and the trustee should make back payments to the member, with interest, to address past underpayments.

The news item published by the Pensions Ombudsman explains that the employer could not rely on a limitation defence because "there was a continuing breach of contract and … limitation does not apply to an order for specific performance", and the trustees did not have a limitation defence because "the benefits were granted under the ‘transfer in rule’, allowing the member to enforce this right directly against the trustees without" such a defence.

This decision underlines the importance for employers of properly documenting benefits promised on TUPE – Transfer of Undertakings (Protection of Employment) Regulations – transfers, transfers in and scheme mergers. It also underlines the importance of understanding the feasibility and cost of providing benefits before any assurances or promises are made to employees.

Private sector DB schemes | Chancellor confirms plans to change rules relating to extraction of surplus

The UK chancellor has confirmed that the government intends to introduce "new flexibilities for well-funded Defined Benefit (DB) schemes to release surplus funds where it is safe to do so".  It will not be clear exactly what changes the government intends to make until it releases its response to the previous administration's consultation on options for defined benefits (DB) in the spring. The changes are, however, expected to relate purely to private sector DB schemes.

House of Commons library  | New and updated briefing papers

The House of Commons Library has published or updated the following briefing paper, which might be of interest to public service pension schemes and employers.

• Government consultations