Local Government pensions a glance

Transcription

1 22 June 2009 Local Government pensions a glance is a free monthly publication from the Pinsent Masons Pensions Group. It is a quick reference guide giving you the latest position on the main public sector pension reforms currently proposed. The most recent developments appear in bold and italic text. If you would like more details please contact your usual Pinsent Masons adviser or us on pensionslaw@pinsentmasons.com. Do forward this publication to your colleagues or let us know their address to receive a copy direct. 1 Admitted Body Status Change the provisions of ABS to make it more acceptable to contractors. The Department for The Department for Communities and Communities and Local Government issued a consultation paper in July 2006 seeking views on a proposed pass-through arrangement in connection with ABS. Local Government has established an official advisory group to consider any reform of ABS. An informal consultation paper was published on 18 January 2008 and related only to transferee admission bodies. We understand that new guidance is likely to be issued as a result. 2 Age Discrimination Prohibits direct and indirect discrimination on grounds of age. Employment and Race Directives The part of the new legislation relating to pension schemes came into force on 1 December Scheme (Amendment) Regulations 2006 removed, with effect from 1 October 2006, the retirement provisions under the Rule of 85. Transitional provisions protect existing members' rights. The Local Government Pension Scheme (Amendment) (No2) Regulations 2006 extend the transitional period for the 85 year rule. This was extended further by the LGPS (Transitional Provisions) Regulations In May 2007 the Government announced that if an affordable alternative is found, the current proposals will be amended. A formal consultation on the desirability of extending the transitional protection until 2020 was issued on 5 July The Government has asked the Local Government Pension Scheme Policy Review Group, with GAD s assistance, to look at costings again using 2007 actuarial valuation data, before it makes a final decision. The Scottish Public Pensions Agency have introduced changes to the LGPS in Scotland to remove the Rule of 85 (with transitional provisions). In March 2009 the European court of Justice ruled in the Heyday case that a compulsory retirement age of 65 is not in breach of EU legislation. The UK High Court must now decide if the age limit is justified. The hearing is scheduled for 16 and 17 July 2009.

2 3 Cost Sharing LGPS has a statutory requirement to have costsharing arrangements in place by 31 March A formal consultation was published An informal consultation exercise on how cost-sharing can be achieved started in December in February The aim is to have a model scheme established by 1 April 2011, although views are sought on whether implementation should be delayed until April Scheme (Amendment) Regulations 2009 came into force on 15 May The regulations require, amongst other things, administering authorities to provide the Secretary of State with specified financial data by 31 August 2010 (and triennially thereafter). GAD will use the data provided to produce actuarial information by 31 October 2010 (and triennially thereafter). This will assist the Policy Review Group in its deliberations on cost sharing. It will also help the Secretary of State to produce guidance on how the costs of the LGPS will be met in future years. 4 Flexibility Allows AVCs to be taken between ages 50 and 75 and income drawdown from money purchase schemes. PSO Update 54 published June Some amendments to cover flexible retirement were introduced in the Local Government Pension Scheme (Amendment)(No 2) Regulations More details are set out in Circular 199. Guidance from GAD was due to be available by the end of Freedom of Information Designate additional bodies Freedom of Information Act 2000 Consultation issued on 25 October 2007, which looks at whether the Government should use its powers to extend the coverage of freedom of information. It considered bringing organisations that provide public services within the ambit of the Act and building information access obligations within outsourcing contracts.

3 (2) Clarity on equalisation requirements. 6 Guaranteed Minimum Pensions (1) Promised simplification. Pickering report identified methods of simplifying GMPs, and encouraged The Pensions Act 2008 introduces a Government to assist on equalisation. facility for schemes to convert GMP rights into ordinary scheme pension, subject to certain safeguards. Draft regulations and a guide giving more information about how the conversion process will operate were published in September A response to this consultation was published in February The new law applies from 6 April LGPC bulletin 53 states that there are no current plans to convert GMPs to scheme benefits in the LGPS. In December 2008 it was announced that some pensions with a GMP element had been overpaid. The Scottish Government decided that overpayments to Scottish pensions would not be recovered. The Local Government Pension Amendment (Increased Pension Entitlement) (Scotland) Regulations 2009 provide that overpayments will continue to be paid from April 2009, but will be frozen. 7 Ill-health ODPM Review of Ill-health Regulations introducing the third tier arrangements Retirement in the Public were published on 22 April 2008 and Sector published in October were backdated to 1 April There are protections for those who retire before 1 October Final Guidance was published by CLG on 24 November The Department for Communities and Local Government confirmed in September 2008 that transitional protection applies to those who leave employment after 30 September 2008 if the employer s determination was made before this date. Circular 221 updates the sample ill-health certificates and contains sample certificates for third-tier cases. CLG published edition 2 of ill-health FAQs in May 2009.

4 8 Investment Draft regulations published in September 2004 provide that Statements of Investment Policy will need to be amended by 3 October 2005 to give more details about investment functions. The Investment Management Association (the trade body for investment managers) has issued a paper to CIPFA setting out why the IMA believes that the Investment Regulations are now out of step with current investment techniques and is seeking to open consultation on amending the Regulations. The CIPFA Pensions Panel has set up a working group which surveyed all LGPS funds on the operation of the investment regulations in As a result it published a report in February 2009 recommending changes to these regulations. Scheme (Amendment)(No 3) Regulations 2007 require administering authorities to publish an annual report containing specified information including investment policy. The first report is due by December Guidance will be produced in due course. The draft Local Government Pension Scheme (Management and Investment of Funds) (Consolidation) Regulations 2009 were published in February These primarily consolidate the 1998 regulations, but also make proposals covering separate bank accounts, borrowing and employer-related loans. The regulations are intended to come into force later in Myners Review The NAPF's review of the extent of compliance with Myners' principles is recommending some changes to the Myners' principles. It wants to introduce 'comply or explain' reporting for large schemes as well as guidance and toolkits for trustees. In April 2008, the Government launched a consultation on the updated principles. In October 2008, the Government published its response to the consultation. That paper confirmed the Government s intention to establish the Investment Government Group.

5 9 New look Proposals for a new look LGPS for LGPS - Scotland were published on 30 July Scotland Scheme (Benefits, Membership and Contributions) (Scotland) Regulations 2008, the Local Government Pension Scheme (Transitional Provisions) (Scotland) Regulations 2008 and the Local Government Pension Scheme (Administration) (Scotland) Regulations 2008 were all published on 4 June 2008 and came into force on 1 April Guidance to employers on how to assess the correct contribution rates for members from 2009 onwards was published in June 2008 (Circular 2008/3). In September 2008 the Government consulted on the third tier ill-health compensation payment under the draft Local Government (Discretionary Payments and Injury Benefits (Scotland)) Amendment Regulations Circular 224 provides administering authorities in Scotland with information about what is available to help communicate the changes. Circular 226 provides a sample letter to members. 10 State Pension Reforms S2P has replaced SERPS. Second stage of process will be to replace current calculation with flat rate pension. The Pensions Act 2007 provides for S2P gradually becoming a flat-rate weekly top-up to the basic state pension (eg approximately 2030). Also, the State pension age will gradually rise to 68 from 2046, and the basic State pension will start to increase in line with average earnings rather than prices by the end of the next Parliament. The number of years NICs needed to qualify for the basic State pension will be reduced to 30 years and initial contribution conditions will be abolished. 11 Tax relief Reduce higher rate Budget 2009 tax relief for those earning 150,000 or over. From April 2011, tax relief on pension contributions will be tapered down for those earning between 150, ,000. The Government will consult on how the new restriction will apply to defined benefit schemes. Anti-forestalling legislation will apply from 22 April 2009 to those earning over 150,000 to increase their pension savings.

6 12 Temporary Agency Workers Will give agency staff many of the same terms and conditions of employment as permanent workers. The final wording of the Temporary Agency Workers Directive was agreed in November The UK Government must implement it by 5 December Pension rights can be excluded. The Government published a consultation paper on implementing the Directive in May DBERR intends to exclude occupational pension rights, although agency workers will be covered by personal accounts. 13 Transfers Employees TUPE transferring to the private sector must be offered a broadly comparable scheme. Fair Deal for Staff pensions guidance note first issued in June The LGPC bulletin 53 sets out advice to administering authorities so that transfers can be completed in a practicable and consistent manner. Further Treasury guidance was issued in June However, the guidance issued by the Treasury was not mandatory for contracting authorities. GAD issued a press release on 6 April 2009 on the effect of changes to revaluation on certificates of broad comparability. Pinsent Masons LLP 2009 London Birmingham Leeds Manchester Christopher Berkeley Simon Laight Jacqui Timmins Stephen Scholefield christopher.berkeley@pinsentmasons.com simon.laight@pinsentmasons.com jacqui.timmins@pinsentmasons.com stephen.scholefield@pinsentmasons.com This note does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. LONDON DUBAI BEIJING SHANGHAI HONG KONG SINGAPORE OTHER UK LOCATIONS: BIRMINGHAM BRISTOL EDINBURGH GLASGOW LEEDS MANCHESTER T Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) and regulated by the Solicitors Regulation Authority. The word 'partner', used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm who is a lawyer with equivalent standing and qualifications. Singapore location in association with MPillay. A list of members of the LLP, and of those non-members who are designated as partners, is displayed at the LLP's registered office: CityPoint, One Ropemaker Street, London, EC2Y 9AH, United Kingdom. We use Pinsent Masons to refer to Pinsent Masons LLP and affiliated entities that practise under the name Pinsent Masons or a name that incorporates those words. Reference to Pinsent Masons is to Pinsent Masons LLP and/or one or more of those affiliated entities as the context requires. For important regulatory information please visit: