Minutes:
The
Head of Pensions Governance and Investments presented a report to provide
Members of the Teesside Pension Board with an update on current issues
affecting the Pension Fund locally or the Local Government Pension Scheme
(LGPS) in general.
The
four items covered in the update were as follows:
● Government
consultation on a remedy for discrimination identified in the McCloud/Sergeant
court cases.
A
government consultation had taken place on proposals designed to remove the
unlawful discrimination caused by the protection of older members when the
Local Government Pension Scheme was reformed in 2014. All leavers would now
have a check carried out to establish whether they would have been better off
under the final salary scheme or under the career average scheme. Whilst this
would not have a huge impact in terms of uplifting peoples
benefits, it would have resource implications for XPS. Checks would also need
to be made retrospectively on all leavers since 2014.
At
the last actuarial valuation in March 2019, the Actuary had made an assumption
that this unfairness would be corrected and added 0.9% of pensionable pay to
every employer’s contribution rate.
XPS
were considering how best to plan and resource for the applying the underpin and had already communicated with employers to
advise that additional data would be required.
● Reforming
Local Government Exit Pay.
Regulations
which introduced a limit of £95,000 on total exit payments to, or in respect
of, an individual leaving public sector employment had been passed and would
come into force on 4 November 2020. This created an issue for Administering
Authorities and for Scheme Employers, as the LGPS regulations had not yet been
changed. This meant the LGPS regulations stated that a member leaving the LGPS
on redundancy or business efficiency grounds aged 55 or more would have their
pension benefits paid immediately without any early retirement reduction applied
(regardless of employer cost), but the exit cap regulations stated that any
payment to, or in respect of them, was capped at £95K. The Local Government
Association was seeking legal advice on this and was expecting government
guidance on this imminently.
A
further proposal was that any member being made redundant could receive either
a redundancy payment, or the payment that their employer made for unreduced
benefits - the capital cost amount. Members would no longer be entitled to both
and would need to choose.
● Partial
Government Response: Review of Employer Contributions and flexibility on exit
payments.
This
new legislation would allow administering authorities to review contributions
from employers to allow them to be considered in between valuations in certain
circumstances. There would also be more flexibility around Employer exit
payments and a new category of "Deferred Employer" would be
introduced along with the facility for administering authorities to enter into
a "Deferred Debt Agreement" with such an employer.
The
Head of Pensions Governance and Investments would work with the Scheme Actuary
to bring a revised draft Funding Strategy Statement (FSS) to the Committee to
agree prior to consultation with the scheme employers. The revised FSS would
set out the Fund’s policies in relation reviewing employer contributions and
flexibility on exit payments.
● Earliest age to access pension to increase from 55 to 57.
In
2014 the Government indicated its intention that the earliest age most
individuals would be able to choose to draw a pension would increase from age
55 to age 57 with effect from 2028. Thereafter the intention was for the age to
increase so that it stayed 10 years below an individual’s state pension age. In
a recent written response to Parliament, the Government affirmed its intention
to legislate for this increase in due course. Further detail would be provided
when available.
AGREED that the information provided was received and noted.
Supporting documents: