What do the amendments mean for the LGPS?
1. More members are in scope of the McCloud remedy
Virginia Burke, Senior Consultant at Aon, said: “As expected, Government has brought the LGPS into line with other public service pension schemes, extending the qualification criteria to include those who were in pensionable service on or before 31 March 2012. They have also relaxed the “disqualifying break” so that members who were compulsorily transferred to the private sector and who became members of “broadly comparable” schemes, do not lose out.
"LGPS administrators should check that they are gathering retrospective part-time and service break data for members who have now been brought into scope. Any funds who didn’t heed the Scheme Advisory Board’s recommendation to collect data for all members with service in the 2014 CARE scheme, may find they have to go back to employers and ask for yet more data.”
2. Aggregation
Members must aggregate separate periods of pensionable service in order to qualify for McCloud underpin protection in the future, something they do not need to do with the current underpin.
Virginia Burke said: “Aggregation could be a real headache for administrators. It’s complicated and even the clearest communications may confuse members and be put in the ‘too difficult’ pile.
“However, putting in the effort to communicate and engage effectively with members is essential – not just to achieve the best outcomes for them, but to avoid administrators being overwhelmed with queries.”
3. Some teachers to be offered membership of the LGPS
Around 18,000 teachers may be offered membership of the LGPS as well as the Teachers’ Pension Scheme (TPS) in order to resolve a quirk causing problems in the McCloud remedy.
Virginia Burke said: “The LGPS has it easier than most other public service pension schemes when it comes to McCloud.
However, as the default scheme for when public servants’ employment is not eligible for any other public service schemes, it is going to be impacted by some of the quirks of the unfunded schemes.
“The post-2015 part-time employment for teachers who also hold full-time contracts - the so-called ‘excess teacher service’ - which can’t be reinstated into the final salary TPS, will become pensionable in the LGPS.
“We understand that the Department for Levelling Up, Housing and Communities (DLUHC) is going to consult on the details later in the year, but it’s hard to see how this isn’t going to be complex and time-consuming for LGPS administrators who are already under huge pressure.”
Virginia Burke added: “Overall, we’re pleased to see the continued passage of the Bill. It must receive Royal Assent before 31 March 2022, so that the remedy window does not extend any further. DLUHC can then get on with the job of making the LGPS regulations that administrators and software providers so badly need in order to finalise their preparations and to ensure the remedy can be implemented without putting day-to-day administration at risk.”
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