UK Public Service Pensions Update | November 2023

This month, the developments we consider include the pensions announcements in the Autumn Statement 2023, new guidance on the Procurement Act 2023, points to note in relation to Fair Deal and the first Pensions Ombudsman decision on the 2021 Transfer Regulations.

If you would like to discuss any of the items in this newsletter, please contact one of the experts listed at the end.

King's Speech and Autumn Statement 2023 | Pensions

The King delivered his first King's Speech at the state opening of Parliament on 7 November 2023. The speech confirmed that, as expected, the Economic Activities of Public Bodies (Overseas Matters) Bill has been carried forward to the new parliamentary session. The Data Protection and Digital Information Bill has also been carried forward. However, there were no proposals for a Pensions Bill.

The chancellor of the exchequer delivered Autumn Statement 2023 on 22 November 2023. He confirmed that the lifetime allowance will be abolished from April 2024 and that the state pension triple lock will be honoured for increases in April 2024. The chancellor also made a series of announcements to confirm next steps in the July 2023 Mansion House pensions reforms. These announcements were accompanied by a raft of consultation responses and new calls for evidence.

The UK pensions-related announcements in the Autumn Statement 2023 can be found in our Insight. There were three announcements specifically relating to public service pension funds. These were as follows.

• The response to the Department for Levelling Up, Housing and Communities' (DLUHC) consultation on next steps in investment was published alongside the Autumn Statement. The chancellor confirmed that guidance for the Local Government Pension Scheme (LGPS) "in England and Wales will be revised to implement a 10% allocation ambition for investments in private equity, which is estimated to unlock around £30 billion. The government is also establishing a March 2025 deadline for the accelerated consolidation of LGPS assets into pools and setting a direction towards fewer pools exceeding £50 billion of assets under management."
• "Public Service Pension Schemes (PSPS) are in the process of finalising outcomes of the 2020 valuations, which will determine employer contribution rates for PSPS from April 2024 onwards. These valuations are based on the revised Superannuation Contributions Adjusted for Past Experience (SCAPE) discount rate. Following a review of the SCAPE methodology, and the latest OBR forecast of expected long-term GDP growth, HM Treasury confirmed the new SCAPE discount rate of 1.7%+CPI p.a. on 30 March 2023. The government has committed to providing funding for the increased cost of employer contributions from April 2024 for centrally funded employers."
• "The government will legislate in the Autumn Finance Bill 2023 to modify how the pensions tax framework applies to certain redress payments made from the Parliamentary Contributory Pension Fund, the Members of the Senedd Pension Scheme, and the Assembly Members’ Pension Scheme. This will align scheme members’ tax treatment with that of the wider public sector in relation to the McCloud judgment."

Fair Deal | Recent developments

The Government Actuary's Department (GAD) has updated its guidance note Staff transfers: public service pension schemes to include a link to the new actuarial assumptions which will be used by GAD for broad comparability assessments covering accrual from 1 April 2022 for staff transferring between public service pension schemes under the Fair Deal 2013 policy and Fair Deal 2004 policy. The new assumptions will be used for all cases processed by GAD on or after 1 October 2023.

LGPS funds should note that the LGPS Scheme Advisory Board has confirmed that its chair has written to the DLUHC to ask for an update on the 2019 consultation on the strengthening of Fair Deal protections. As we reported at the time, the last development in this area was in September 2022, when the DLUHC published a short consultation response saying that it was "reconsidering its approach to Fair Deal in the context of the Local Government Pension Scheme and will take account of representations made in response to the earlier consultation in its next consultation."

McCloud | Resources for LGPS funds

The Local Government Association (LGA) has released a guide for Local Government Pension Scheme (LGPS) administering authorities on how underpin protection works in the LGPS following McCloud. This joins a number of other resources on the LGA's website relating to the McCloud remedy.

Pensions dashboards | Draft guide for LGPS funds

The LGA has also released a draft pensions dashboard connection guide for LGPS administering authorities. The draft guide is intended to help authorities to create a project plan to implement pensions dashboards. It also includes two checklists, a detailed checklist of actions and a checklist setting out a suggested approach to value data.

Academy conversions | LGPS

The LGPS Scheme Advisory Board has also confirmed that it has released guidance on "common actuarial approaches adopted by LGPS funds on a local authority school’s conversion to academy status". The guidance covers topics such as conversion methodologies, treatment of surpluses on conversion and factors influencing the methodology adopted.

Procurement Act 2023 | New guidance and infographic

The Cabinet Office has published guidance for contracting authorities on the Procurement Act 2023. The guidance includes a list of training and guidance resources available to contracting authorities.

The Government Commercial Function has published a new collection page which includes a short guide to the Act for senior leaders, a short guide for suppliers and a series of animations and videos. These materials have been published to "provide a high level overview of the key features of the Procurement Act, timelines for implementation and next steps for Contracting Authorities and Suppliers."

Funds might also be interested in our infographic, Procurement Act 2023 - top 10 takeaways.

NHS Pension Scheme | Open consultation

The Department of Health and Social Care is consulting on changes to the NHS Pension Scheme.

The changes are to:

• Implement the second phase of member contribution reforms from 1 April 2024 (views are sought on additional changes, not those already consulted upon).
• Replace the current employer contribution rate with a new rate of 23.7% effective from 1 April 2024.
• Permanently remove the abatement rules for special class status members. (These members can retire on unreduced pension at age 55 instead of 60 but, if they return to work between age 55 and 60, their pension will be reduced if their pension plus salary exceeds their pre-retirement income. The abatement rules have been suspended for some time now to encourage retired and partially retired staff to return to work or increase their working commitments. The government has already committed to permanently remove the rules and is consulting on timing and approach.)
• Amend for the new right to unpaid carer's leave and the abolition of the lifetime allowance.
• Make changes to partial retirement.

The consultation is open until 7 January 2024.

Recovery of past overpayments | Court of Appeal decision

The Court of Appeal has confirmed in The Pensions Ombudsman v CMG Pension Trustees that a court order is required when seeking to recoup overpaid pension from members, a determination by the Pensions Ombudsman alone is not sufficient to recoup a disputed sum. (You can read more about this decision in our Insight.)

Ill health retirement | Court of Appeal decision

The Court of Appeal has also confirmed (Campbell v NHS Business Services Authority) that where, on termination of employment, a payment is made in respect of leave not taken, then regulation C2(5) of the 1995 section of the NHS Pension Scheme means that the member must be treated as remaining in pensionable service for a period equal to the period of leave for which payment is made. In this case, the result was that the member could not be treated as retiring "from pensionable employment" for the purposes of receiving an ill health pension until that additional period of pensionable service had expired. The fact that she died between the date she physically left employment and the date her pensionable service was deemed to come to an end meant that benefits must be paid on the basis that she died in service, not whilst in receipt of an ill health pension.

Pensions Ombudsman | First decision on the 2021 Transfer Regulations

The Pensions Ombudsman has not upheld a complaint by a pension scheme member who argued that pension scheme trustees had unnecessarily delayed his transfer by requiring him to attend a MoneyHelper safeguarding advice appointment because the amber flag of “overseas investment” was present.

This is the first Pensions Ombudsman’s decision on the 2021 Transfer Regulations and it will be relevant to public service schemes who receive requests to transfer to schemes which need to meet the second condition in the regulations.

In the decision, the ombudsman acknowledges that the definition of the overseas investment flag in the regulations and the “intended practical application” of that flag “may not be aligned”. More importantly, the ombudsman supports the cautious approach taken by the trustees: “[H]aving regard to the information provided to the Trustee, and also that the Trustee sought legal advice... [it] was entitled to decide that there were overseas investments in the Receiving Scheme, and its literal interpretation of the Transfer Regulations is not unreasonable.”

The Pension Scams Industry Group has issued interim guidance in relation to both the amber overseas investment and red incentives flag. Funds might like to consider, with their scheme administrators, whether their approach to those flags reflects the interim guidance

ESG knowledge update and Q1 2024 Pensions Action Plan

Funds might be interested in our environment, social and governance (ESG) knowledge update. The October edition is here and you can sign up to receive future editions using the link on the right hand side of the page.

We have also released our Q1 2024 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.

Topics covered in the Q1 2024 Pensions Action Plan include:

• Consultation on a draft guide “intended to provide… the tools to identify and monitor social risks and opportunities and develop consensus in approaching these across the pension investment landscape."
• Update on pensions dashboards.
• The new UK-US data bridge.

To receive your copy of the Action Plan, please ask your usual Osborne Clarke contact.

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:

• Autumn Statement 2023: a summary.
• Autumn Statement 2023 and Finance Bill 2023-24.
• The Armed Forces Compensation Scheme.
• Armed Forces Compensation Scheme: Quinquennial review 2023.
• State pension triple lock.

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