Agenda item

McCloud and Exit Cap - MHCLG Consultation Update


The Committee received a presentation from the Director of Corporate Services on the potential impact on the Fund, and its members, of:


·         The Ministry of Housing, Communities & Local Government consultation on proposals to remove age discrimination from the Local Government Pension Scheme in England and Wales (LGPS) following the McCloud ruling which found that transitional protections given to older members in the judicial and firefighters’ pension schemes directly discriminated against younger members in those schemes.  The proposals, if made law, would extend LGPS statutory underpin protection to younger members of the scheme.


·         The Ministry of Housing, Communities & Local Government consultation on reforming exit payment terms for local government workers.


The Committee noted that, with regard to the proposals arising from the McCloud judgement, there were a number of concerns/issues which would have to be addressed including:


·         Data – the need to collect back data on hours / breaks from all Employers (for all Employees?) since 1 April 2014.

·         Assumptions – these needed to be consistent and in favour of the member if data was unavailable.

·         Technology – the need for software providers to update systems to prevent having to do manual calculations.

·         Resources – with c35,000 cases in scope where pensions benefits would need to be recalculated in line with underpin, there would be a need for several more staff and a project team – all at an increased service cost.

·         Priorities – e.g. the need to understand if benefits in payment now were more important to recalculate than deferred benefits due.

·         Communications – both for Employees and Employers.

·         Timeframe - the need to understand how long the Fund had to complete the 10 years ‘backlog’? 


The Director informed the Committee that officers were preparing a response to the consultation.  Mr Atkins also referred to the burden which would be placed on employers within the Fund in having to provide salary data for scheme members going back to 2014.


With regard to the consultation on reforming exit payment terms for local government workers, the Committee were informed that the Government first introduced plans to cap exit payments in the public sector in 2015.  The original proposals limited the maximum exit compensation payable to £95k.  The Government had now launched a consultation to incorporate the £95k cap within the LGPS regulations and to also change the Compensation Regulations.  The Director explained that the proposals raised a number of issues/concerns which would have to be addressed including:


·         Expectations - scheme members who had already received pre-cap quotations.

·         Legality / Timeframe – alignment of Regulations was required otherwise payments might be deemed illegal (particularly if the Exit Payment Regulations were introduced at short notice).

·         Resources – current retirement quotes were no longer fit for purpose and already creating a backlog. Would Pensions Teams be expected to provide option analysis?

·         Technology – LGPS software providers were likely to take some time to update systems resulting in lengthy manual calculations in the meantime?

·         Employers – New compensation policies would need to be introduced at short notice and replacements for complex compensation calculation systems would be required.

·         Communications – clarity on such a complex subject matter for Employees and Employers.

·         Uncertainty – there were many unanswered questions.


RESOLVED – That the presentation be received and noted.