Pensions update: Local Government Pension Scheme

09 December 2020

Recent developments mean employers have more options for managing Local Government Pension Scheme assets and liabilities. Our pensions advisors Isio explain the detail.

Deferred debt arrangements

In September 2020, new Local Government Pension Scheme (LGPS) regulations were laid which ease the way for employers looking to cease LGPS accrual without triggering a large one-off debt payment. At this stage we do not yet know whether all funds will utilise the new regulations, although many will and it is certainly a move in the right direction.

Because of delays in government, this hasn’t moved as quickly as we expected, and so we still await two pieces of guidance which are required to allow funds to progress:

  • Statutory guidance from MHCLG – this is now going through a period of informal consultation involving a small group of stakeholders. Both the NHF and Isio have representation on the Working Group (Isio are working in a wider capacity as well as supporting the NHF). This was expected to be published in December but could now be delayed into the New Year.

  • LGPS Scheme Advisory Board guidance – this is due to follow the statutory guidance. Our understanding is that the Scheme Advisory Board is concerned about potential delays and may now be looking to proceed in parallel with the statutory guidance.

Some LGPS funds won’t act until both pieces of guidance are out. At that stage we would expect that they would review the guidance, consult, and then reissue their Funding Strategy Statements. Changes are not going to be mandatory for funds, but once these steps have been completed, funds that have chosen to introduce deferred debt arrangements will be able to start to implement them.

What can LGPS employers do to prepare?

The most cautious funds are delaying (wanting to follow due process) but other funds are helpfully already engaging with employers and pressing on. Some funds may not want to utilise the new regulations at all and may not recognise the importance of this for some employers.

Deferred debt arrangements have already been put in place by some employers using a legal mechanism which some funds are prepared to recognise. It is a concern that some funds won’t proactively recognise the ‘new world’ and we would recommend you ascertain your own fund’s views on this as soon as possible.

Exit cap

Please note that the £95,000 exit cap which applies to public servants and has recently publicised by many LGPS Funds does not apply to housing associations. The new regulations apply only to bodies on a specified list including local authorities. New LGPS regulations have not been finalised and it might be that individuals are or could be affected if they have previously earned LGPS benefits whilst working for a specified body.