Agenda item

The purpose of this report is to update the Sub-Committee on recent developments within the LGPS regulatory environment and recent consultations issued by the Ministry of Housing, Communities and Local Government which have would have a significant impact on the Fund.

Appendices 1 and 2 are attached to the main report.

The purpose of this report was to update the Sub-Committee on recent developments within the LGPS regulatory environment and recent consultations issued by the Ministry of Housing, Communities and Local Government (MHCLG) which was expected to have a significant impact on the Fund. Mr Ravinder Jassar (Head of Finance) provided updates on the following; exit cap payments; changes to valuation cycle; McCloud case.

Members were informed that on 10 April 2019 HM Treasury (HMT) launched a consultation on draft regulations, guidance and Directions to implement the exit cap, currently set at £95,000.  This figure included payments for redundancy, severance and pension strain which arise when a Local Government Pension Scheme (LGPS) pension is paid unreduced before a member’s normal pension age. Mr Jassar pointed out that payments related to death in service or ill health retirement, pay in lieu of holiday and payments made in compliance with an order made by a court or tribunal were not counted in the definition of exit payments.

Members were also updated about MHCLG consultation about changes to the valuation cycle and the management of employer risk for LGPS funds in England and Wales which would close on 31 July 2019. Mr Jassar outlined the five key proposals covered by the consultation:

(i)     Transitioning local fund valuations from 3 to 4 yearly, so that the national LGPS cost management valuation and local LGPS valuations were aligned from 31 March 2024 onwards.

(ii)    Giving funds the power to carry out ‘interim’ valuations between formal valuation dates, and adjust employer contribution rates upwards or downwards to reflect changing circumstances (with the ‘trigger points’ for the interim valuations subject to statutory guidance).

(iii)    Allowing funds more flexibility around the way in which they manage employers that exit the LGPS, by spreading cessation debt repayments or setting up private sector style ‘deferred debt’ arrangements to ease employer concerns over affordability.

(iv)   Amending LGPS Regulations to allow exit credits to be reduced to nil where a pass-through arrangement was in place.

(v)    Removing the requirement for further education, higher education and sixth form college corporations in England to offer new employees access to the LGPS.

Members heard that the fund was awaiting further analysis from LGA's Local Government Pension Committee and the Scheme Advisory Board (SAB) in relation to this consultation.  Members noted that in addition, Brent officers, in consultation with the Fund’s advisors, would prepare a response to the consultation on behalf of the Brent Pension Fund before the consultation closed.

Mr Jassar also provided an update on the McCloud case, the Court of Appeal case about transitional protections that protected older judges and firefighters from the public sector pension scheme changes in 2015.  This was originally reported to the last meeting of the Sub-Committee. Members noted the appendix to the report which set out the advice note by the SAB, which covered the implications of McCloud/Cost Cap in relation to the 2019 fund valuations.  He continued that the fund was currently analysing the implications of the advice note and would work with the Fund actuary and investment advisor to manage the potential ongoing risks for the fund.

RESOLVED:

That the recent developments in the LGPS be noted.