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Government consultation is now closed Back to top
On Thursday 16 July 2020, MHCLG published a consultation on proposed remedies for the LGPS to remove age discrimination.
The period of the consultation ran from 16 July to 8 October 2020. We are now waiting to see the outcome of the consultations and the actions Pension Funds and employers will need to take to remove the age discrimination from the LGPS.
What is the McCloud case? Back to top
When the LGPS changed from a final salary to a career average pension scheme in 2014, protections for older scheme members were introduced. Similar protections were provided in other public sector pension schemes.
However, the Court of Appeal ruled that younger members of the judges' and firefighters' pension schemes have been discriminated against because the protections do not apply to them.
Following this judgement, the government has confirmed that there will be changes to all main public sector schemes, including the LGPS, to remove this age discrimination. This ruling is often called the 'McCloud judgment'.
What are the implications for the LGPS? Back to top
The judgement will seek to ensure that members who have been discriminated against are placed in an equivalent position to the protected members. The benefits of unprotected members will be raised rather than the benefits of protected members being reduced. The main elements of the judgement are:
- qualifying members would be protected by the application of a revised underpin
- eligibility is restricted to members who were active in the LGPS on 31 March 2012 and have accrued benefits since 1 April 2014
- the extended underpin period applies between 1 April 2014 and 31 March 2022, but ceases when the member leaves active membership or dies in service
- the final salary for assessing which scheme an eligible member is better off under will be the final salary at the point the member leaves active status or reaches age 65
- the changes will be retrospective and will apply to anyone who has left, retired or died and who didn’t meet the old underpin criteria but meets the new one. In some cases, this will mean retrospectively recalculating benefits for pensioners, and paying arrears and interest
- members must meet the qualifying criteria in a single membership for underpin protection to apply – so where a member has had a break in service or a period of concurrent employment, they must aggregate the benefits for the underpin to apply
- members who have previously chosen not to aggregate scheme employments will be given a further 12 months to reverse that decision where failure to aggregate would mean they would not meet the revised underpin qualification criteria issued 11 August 2020
- revised underpin protection will cease in respect of membership after 31st March 2022, however final salary protection will continue after that date in respect of membership before that date
- annual benefit statements should contain information on the potential impact of the revised underpin
When would any changes to schemes be effective from? Back to top
It is anticipated that any remedy would be backdated to the commencement of the revised LGPS which was introduced on 1 April 2014. The government has confirmed that members who qualify for the protection do not need to make a claim for the changes. If members qualify for the protection it will apply automatically.
As previously advised, we require all employers to retain hour changes and salary details for all employees, past and present who were members of the LGPS on the 1 April 2014.
At this stage we do not require employers to submit the additional information to the Fund. However, in the meantime you should identify where you will be able to obtain the required data going back to 1 April 2014, especially if your organisation has changed payroll providers during this period. If so, you should contact your former payroll provider about obtaining this data if you don’t currently hold it.
In the meantime so you may prepare for this large project we have set out the data fields we will require each employer to provide to the Fund in order for us to update our pension data base and to recalculate scheme member entitlement to comply with the McCloud judgement.
Pension information employers will need to supply to the Fund
Working hours history - data required
- * Whole-time equivalent hours
* to repeat for a history of all changes.
Service breaks history
- ^ Service break start date
- ^ Reason for service break
- ^ Part-time hours % during service break
- ^ Part-time hours during service break
- ^ Whole-time equivalent hours during service break
- ^ Did member elect to purchase lost pension in full
- ^ Did member complete the contract?
- ^ to repeat for a history of all changes
Important - data uploading Back to top
We are currently working with our software provider to establish a solution to load the missing historic data to the Fund's administration system. We will therefore contact you again setting out details of how the data should be uploaded once these are available.
Both employers and the LGPS Funds should not underestimate the considerable work involved to rectify members records and the administration burden this will place on resources.
Key to a successful outcome of this exercise is that the Fund and employers work together closely and in partnership. The first step in this project is to establish key employer contacts for Fund officers to liaise with. This person would ideally be in position of responsibility from within your HR or Internal Payroll Team.
Please note: this is an employer responsibility and whilst you may delegate the collection of data to a third-party payroll provider. The key employer contact who we liaise with must be employed from within your organisation.
We would be grateful if you could nominate a person from within your organisation and provide the following details to firstname.lastname@example.org
- phone number and/or works mobile
As mentioned earlier at this stage we do not require employers to submit this additional information to the Fund. However, it is vitally important all employers maintain the employee contractual hours history which will be required by the Fund in the very near future.
To further assist employers the following link takes you to the scheme advisory board website which contains all the latest information on the McCloud judgement including questions and answers outlining the possible outcomes as well as the consultation document.
We look forward to receiving the contact details of the representative from within your organisation. In the meantime, should you have any queries you can contact us.
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