Agenda item

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.