The Local Government Pension Scheme – Fair Deal proposals

The Ministry of Housing, Communities and Local Government has published its long expected proposals to change the Local Government Pension Scheme (LGPS) in response to the Fair Deal changes introduced in 2013.

This briefing will be of interest to:

1. Authorities and other bodies with staff in the LGPS, and

2. Service Providers (contractors and organisations which provide services to Authorities and/or other bodies participating in the LGPS, where those services involve the transfer of staff).

It is only relevant to England and Wales, although the Scottish Government (and when it starts functioning again, the Northern Irish Executive) may replicate these changes in respect of the Scottish LGPS and the LGPS for Northern Ireland.

Higher Education Institutions are not Fair Deal employers (as defined in the proposed new regulations). While these changes will not automatically apply to any outsourcing arrangements they put in place, they can choose to adopt them in contractual arrangements.

While this is a consultation, draft regulations changing the LGPS have been published. We expect these regulations to become law later in 2019, although there may be some revisions on technical points once the comments from the consultation are considered.

Key points

End of the broadly comparable scheme option

The option for Service Providers to use a broadly comparable scheme will end Service Providers who take on employees in active membership of the LGPS from a Fair Deal employer will have to offer these employees continuing membership of the LGPS Service Providers with transferred employees in a broadly comparable scheme will have to offer membership of the LGPS when a contract is next re-tendered Transferred employees who rejoin the LGPS following a re-tendering will have a right to transfer benefits from the broadly comparable scheme to the LGPS. This will make use of the existing individual right to transfer into the LGPS using cash equivalent transfer value (CETV) factors in guidance issued by the Secretary of State As a CETV is not the same as an actuarial equivalent, however, we are not certain that this will ensure a like for like conversion. While there is reference to converting the transfer value to an amount of career average pension on an actuarially neutral basis, this may not reflect historic final salary pension benefits Simplified participation in the LGPS to help facilitate risk sharing

Many Service Providers will be familiar with becoming...