Agenda item

Update on Changes to Local Government Pension Scheme (LGPS) Regulations and Related matters

Report of the Director of Finance and Assurance.


The Pension Board received a report informing Members of several recent and proposed regulatory changes which were expected to have a significant impact on the Local Government Pensions Scheme (LGPS) as well as on the workload of Harrow Council’s Pensions Administration Team.


The Interim Pensions Consultant reported that the Government was in the process of amending the Pension Scheme Regulations (LGPS), with a number of key changes planned.  In particular, it was noted that the Restriction of Public Sector Exit Payments Regulations 2020 which came into force on 4 November 2020, limiting “exit payments” to £95,000 were in conflict with the current LGPS Regulations, which stated that if an active member aged 55+ was made redundant, he / she  had immediate unreduced access to their pension.  This was problematic because unlike most other public sector funds, the LGPS was funded, and therefore any early payment of pension gave rise to  “strain costs” to be met by the employer to offset the cost to the pension fund of pensions being paid early.


The Board heard that until the changes to the LGPS Regulations were approved, any member aged 55 or over who was made redundant and breached the £95k exit payment cap would be offered an actuarially reduced or deferred pension.  The updated Regulations were expected to have a significant impact on lower earning staff and could result in a number of legal challenges.


A consultation on the Regulations was currently under way, with the final amendments not expected to be approved until early 2021.


Members raised several questions which were responded to as follows:


·                     changes to LGPS Regulations, coupled with the impact of the McCloud/Sargent court judgements, would have a significant impact on the pensions team workload and would affect workforce management.  The team would be expected to review the cases of hundreds of pensioners who had already retired under the original transition arrangements as well as recalculate the entitlements of any existing active and deferred members.  Additional capacity would need to be secured by moving existing staff to focus on the new Regulations and backfilling any vacancies.  The work was expected to be complete by 2023, subject to approval of the Regulations and software changes;


·                     employer flexibilities, which were introduced as part of the LGPS Regulations on 23 September 2020 to provide assistance to some of the admission bodies struggling as a result of the Covid-19, were not expected to have a major impact on Harrow compared to other Local Authorities.  The Regulations enabled the Pension Fund to manage exist arrangements and the Council was already in the process of putting these into practice through the handling of the recent SopraSteria IT Services cessation, which came to an end in October 2020;


·                     work was underway between the Pensions Fund and the Council’s Legal teams to ensure senior management was aware of the implications of the Regulations and enable them to act appropriately should any redundancies occur.


The Board thanked officers for the comprehensive report and requested that, given the profound implications of the changes to the LGPS regulations on the Fund and the wider local government context, the matter be monitored closely and updates provided on regular basis at future Board meetings.


RESOLVED:  That the report be noted.

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