This article looks at the responses to the May 2016 consultation on proposals to bring the New Fair Deal into the LGPS, as well as changes to the rules on the aggregation of service periods.
On 19 April 2018 the Ministry of Housing, Communities and Local Government responded to the consultation on the Local Government Pension Scheme (LGPS) Regulations 2013.
The consultation included proposals on employer exit credits, the introduction of "New Fair Deal" into LGPS and changes to benefit aggregation rules. You can read more about this in our previous article ‘Consultation on proposed changes to the Local Government Pension Scheme’.
From 14 May 2018, when an employer exits the LGPS because it no longer employs active members (or otherwise ceases to be a ‘scheme employer’), the appropriate administering authority of the LGPS fund will be required to pay a credit to the exiting employer where there is a surplus in respect of its pension liabilities.
In the light of concerns raised during the consultation, the government has extended the period for an authority to pay an exit credit from one month to three months (or at such interval as is agreed between the authority and the employer).
Administering authorities should consider whether they need to update their funding strategy statements and other policies to accommodate the possibility of having to pay an exit credit. Equally, administering authorities and local government employers may wish to consider (where a surplus is a reasonable possibility) existing admission agreements and outsourcing contracts to identify how an exit credit should be treated.
The legislation is the Local Government Pension Scheme (Amendment) Regulations 2018/493.
New Fair Deal
The government remains committed to bringing New Fair Deal into the LGPS. It plans to issue a further consultation paper by the end of 2018.
Proposals to reduce the circumstances when benefits from different periods of LGPS membership would be aggregated automatically will not be going ahead for the time being. This is because the government considers them inconsistent with Schedule 7 of the Public Service Pensions Act 2013, which requires final salary protection to be provided where a member re-joins a public service scheme within 5 years of leaving another.