Agenda item

The purpose of this report is to update the Board on recent developments within the Local Government Pension Scheme (LGPS) regulatory environment and any recent consultations issued which would have a significant impact on the Fund.

John Smith (Pensions Manager, Brent Council) introduced the report from the Corporate Director Finance & Resources, providing an update on the latest developments within the LGPS regulatory environment listing during the quarter.  The following key matters were highlighted

·   Inheritance Tax and Death Benefits: Members were advised that the Budget had confirmed the Government’s intention to proceed with its proposal to include certain unused pension funds and death benefits within the estate for inheritance tax (IHT) purposes for deaths after 5 April 2027.  The key point for the LGPS was that transfers between spouses would not ordinarily be caught. For non-spousal beneficiaries who were affected, provision had been made for the pensions team to be directed to withhold 50% of benefits to address potential Inheritance Tax liability.

·   Contribution Bands: The Board was advised of the employee contribution bands, which would be effective from 1 April 2026 (as set out within Table 1 of section 3.2.7 of the report). These had been calculated by increasing the 2025/26 employee contribution bands by the September CPI figure of 3.8% and then rounded down to the nearest £100.

·       Access and Fairness Consultation – Death Grants: The Board was advised of a number of proposals which MHCLG had announced its intention to implement with effect from 1 April 2026.  These included the age 75 limit on death grants having been removed, with effect from 1 April 2014 and the requirement to pay death grants to the estate after two years had elapsed from the date the fund could reasonably have known of a death being removed, which was welcomed as a helpful practical change for administrators, albeit not universally applicable.  Other changes had involved Qualifying additional pension arrangements (QAPAs), the requirement for cohabiting partners to be formally nominated, introduced in 2018 but widely not adhered to on equality grounds, being formalised along with significant changes being made in relation to leave without pay.  It was reported that where this involved periods of up to 14 days, contributions would be collected on normal pay with no requirement to buy back the period. For periods of more than 40 days, the cost of buying back would now be based on the member’s actual pay and contributions. The election period had been extended from 30 days to one year and the existing three-year cap had been removed. These changes applied to breaks commencing after 31 March 2026. The changes were noted as forming part of a wider suite of measures aimed at addressing the gender pay gap, with the Secretary of State also introducing a requirement in the 2025 valuation to provide data on the gender gap, with more detailed measures anticipated from 2028.

·       Access and Protections consultation: The Board were reminded of the Government consultation on LGPS (England and Wales): Scheme improvements (access and protections) which had commenced in October 2025 on which Brent’s had responded in December 2025 (as detailed attached in Appendix 6 of the report).  The government had issued a partial response to replies focusing on elected members in February 2026 (as detailed in Appendix 7 of the report), which had confirmed that the Government intended to offer mayors and councillors access to the LGPS.  Rather than automatic enrolment, they would be required to opt in, and provisions such as the 50/50 scheme would apply in the same way as for other members. The implementation date had been delayed from April 2026 to 11 May 2026 given the proximity of local elections with it noted that software houses were unlikely to be able to reflect the change fully in Annual Benefit Statements until 2027.

The Chair thanked John Smith for a comprehensive and informative report and with no questions or comments raised by members it was RESOLVED to note the report and the recent developments outlined in relation to the LGPS.