UK Public Service Pensions Update | March 2025

This month we lead with seven developments relevant to the Local Government Pension Scheme (LGPS) and then move on to five more and some Pensions Ombudsman decisions 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

'Fit for the future' | Pensions minister confirms all relevant LGPS assets to be transferred to asset pools by March 2026

In a speech to the Pension and Lifetime Savings Association Conference 2025, the minister for pensions confirmed that he would be meeting each of the different LGPS investment pools in the coming weeks. He said that the government would confirm the timeline of March 2026 so that, by this time next year, the LGPS "will be made up of large pools of professionally managed capital, accountable to authorities via robust governance structures and delivering for members and their communities."

The minister added that the government will complete the final report on phase one of its pensions review (which includes the LGPS pooling and governance changes) "in the coming weeks" and that the report and the wider changes promised in the Kings Speech will form the basis of a Pensions Bill which the minister aims to introduce to Parliament before the summer recess.

Funding | MHCLG warns that regulation 64A is not a tool for managing surplus outside of the triennial valuation cycle

The LGPS scheme advisory board (SAB) has shared a letter from the Ministry of Housing, Communities and Local Government (MHCLG) to LGPS administering authorities in which MHCLG confirms that regulation 64A of the LGPS Regulations 2013 "is not intended to allow administering authorities to modify contribution rates for scheme employers as a way to manage pension fund surpluses or deficits outside of the triennial valuation cycle" and that the government intends to consult on changes to the regulations to bring the "actual and intended" use of regulation 64A into line.

Regulation 64A sets out a process for revising a rates and adjustments certificate. The next triennial valuation of the LGPS is expected to take place as at 31 March and to set employer contribution rates to come into effect for the 2026-27 financial year.

Reform | LGPS SAB makes recommendations to pensions minister

The LGPS SAB has shared a letter to the minister for pensions in which it sets out three recommendations. The first is that the government confirm whether a recent Court of Appeal decision regarding the need for actuarial confirmation of "contracting-out adequacy" for amendments made to schemes formerly contracted out on the "reference scheme" basis applies to the LGPS (and, if so, make regulations to address any impact). The others are that the government increase the limit on payment, set out in the Administration of Estates (Small Payments) Act 1965, "that can be made to a deceased person’s personal representatives ahead of probate being granted…to allow more small payments to be made without the need for grant of probate"; and "urgently set out a timetable for Phase Two of the Pensions Review which [will] focus on pensions adequacy".

Neonatal leave | New regulations made and coming into force on 6 April

The Neonatal Care Leave and Pay (Consequential Amendments to Subordinate Legislation) Regulations 2025 will come into force on 6 April 2025. Among other things they will amend the LGPS Regulations 2013 to reflect the new statutory right to neonatal care leave and pay for employed parents whose child is born on or after 6 April, receives neonatal care starting within 28 days of birth and goes on to spend seven or more continuous days in care.

Normal minimum pension age and the McCloud remedy | LGPC update and webinars

The Local Government Pension Committee's February 2025 bulletin includes an update on the rise in the normal minimum pension age from 55 to 57 in April 2028 and suggests actions for administering authorities to take now in the areas of communications, transfers-in, transfers-out and estimates. (The normal minimum pension age is the youngest age at which current pensions tax rules permit a scheme to pay benefits to a member, except where the member is in ill health.)

The bulletin also shares details of upcoming webinars for "active and deferred LGPS members who are protected by the McCloud remedy and would like to learn more about how they might be affected" and offers wording for administering authorities and employers to use to publicise the webinars.

Survivor's benefits | High Court verifies co-habiting partner definition

The High Court has considered regulation 41(1) of the LGPS Regulations 2013 (entitlement to a co-habiting partner's pension). In Thomas v Southwark Council, the court confirmed that the final limb of the schedule 1 test of whether someone is a co-habiting partner of a deceased member requires a surviving partner to show that either they were financially dependent on the deceased or that they were financially interdependent with the deceased. There is no need for the surviving partner to show that the deceased member was financially dependent on them.

Stewardship | PLSA publishes updated vote reporting template

The Pensions and Lifetime Savings Association (PLSA) has shared an updated version of its vote reporting template. In a related press release, the PLSA explains that the template has been updated following extensive work by the FCA-convened Vote Reporting Group (VRG). The PLSA has "taken on the vote reporting template of the VRG, merging it with elements of its existing template to create a new, updated resource…which is intended to be more user-friendly and addresses the challenges asset managers currently face relating to the varying nature of vote reporting disclosures. The improvements are aimed at improving vote reporting quality and consistency, reducing reporting costs for asset managers, increasing transparency and comparability for clients, and enhancing engagement and market discipline."

All schemes

NHS Pension Scheme | Consultation response and amending regulations

The Department of Health and Social Care has published the response to its December 2024 consultation on changes to the NHS Pension Scheme to, among other things, "retrospectively amend the definition of overtime in the 2015 Scheme so that it aligns with the long-standing policy and practice for additional hours worked by part-time staff to be pensionable up to whole-time equivalent…hours…allow members who are affected by the McCloud remedy to revoke a deferred choice election or for a deferred choice election to lapse in certain circumstances" and make other technical amendments (including for neonatal leave) from 6 April.

The consultation response lists the changes the government is proceeding with and confirms that the amending regulations will also make the changes needed following the removal of the lifetime allowance. (Those changes were consulted on, separately, at the end of 2023.)

The amending regulations (The National Health Service Pension Schemes (Amendment) Regulations 2025) have since been made.

A separate policy paper addresses the amendment to clarify how member contributions should be calculated when members are on reduced or zero pay, for example because they are on maternity leave, adoption leave, shared parental leave or another type of authorised leave

Teachers' Pension Scheme | Consultation response and amending regulations

The Department for Education has published the response to its November 2024 consultation on changes to Teachers' Pension Scheme regulations to "adjust the member contribution tiers…implement HM Treasury’s policy of extending the Fair Deal provisions to Further Education colleges" and make other minor amendments to ensure the regulations continue to work as intended.

The consultation response confirms that the draft regulations have been modified to apply the provision relating to Fair Deal colleges retrospectively from November 2024 (the point at which HM Treasury confirmed their final policy) and to add two additional institutions to the Fair Deal amendments "to ensure that all relevant FE establishments that are eligible to participate in the [scheme] are brought in line with that new policy."

Final regulations (The Teachers’ Pensions Schemes (Amendment) Regulations 2025) have now been made and will come into force on 1 April.

Neonatal leave | Amendments to the Teachers' Pension and Judicial Schemes

New regulations, which are set to come into force on 6 April, will amend the Teachers' Pension Scheme and the Judicial Pension Scheme to reflect the new statutory right to neonatal care leave and pay for employed parents whose child (born on or after 6 April 2025) receives neonatal care starting within 28 days of birth and goes on to spend seven or more continuous days in care.

Regulation | UK chancellor launches action plan to reform the regulatory landscape

The UK chancellor has launched an "action plan to deliver on the pledge to cut the administrative cost of regulation on business by a quarter, make Britain the best place to do business and drive economic growth".

The action plan explains why the current regulatory landscape is not functioning as effectively as it should and confirms the government's intention to overhaul it so that it protects consumers while supporting investment and growth, is targeted and proportionate, is transparent and predictable, and adapts to keep pace with innovation.

It sets out a list of actions the government will take in order to reduce the complexity and burden of regulation, achieve greater clarity on the roles, approach and processes of the different regulators, and ensure that regulation and the actions of regulators are proportionate and fit for the age of artificial intelligence.

An annex then lists a series of pledges from regulators which "have a tangible effect on driving growth and investment, and are implementable within the next 12 months." These include four pledges from the Pensions Regulator. One of these is: "Develop an innovation framework and criteria to trial pensions innovation ideas and launch a hub to test a variety of innovation services with the market by the autumn of 2025." Another is: "Reduce unnecessary regulatory burdens and improved data and data-sharing by...[o]ver the course of 2025/2026…monitoring its engagements with schemes and employers seeking to reduce unnecessary regulatory burden whilst maintaining current high levels of compliance. As part of this [the Pensions Regulator] will monitor the quality and value of regulatory interaction and make sure that new interventions are not just clearly linked to delivery of better outcomes for savers but are also efficient and effective in delivery." The regulator will also "conduct a review of its scheme return and supervisory return data collection requirements by the end of March 2026 to identify options to reduce unnecessary burdens on schemes. Subject to the outcome of the review, the government will consider how and what we capture including amendments to legislation as required."

The Pensions Ombudsman  | Recent decisions

In CAS-92761-H7Q6, the Pensions Ombudsman has given a useful summary of the principles that apply to a decision as how to distribute a lump sum death benefit from the LGPS.

In CAS-60994-H2H2, the ombudsman upheld a complaint relating to a failure to send annual allowance pension saving statements.

The Pensions Ombudsman has also considered four complaints relating to a failure to implement an amendment to the Firemen’s Pension Scheme Order (1992). The members all argued that the failure to implement a change affecting pensionable pay at retirement resulted in them receiving inflated (and incorrect) retirement benefits and that they would not have retired when they did if they had been provided with the correct information. The complaint in CAS-84081-R5F2 was partly upheld, the complaints in CAS-84082-Y3B5 and CAS-84085-R9H4 were not upheld, the complaint in CAS-84084-B7D5 was upheld.

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.

• Universities and the Teachers’ Pension Scheme.