The LGPS was set up under the Superannuation Act 1972. However, the current rules are made under the Public Service Pension Schemes Act 2013. There were several public sector predecessor schemes to the current LGPS that can trace their origins back as far as the nineteenth century, with GMPF being able to trace its origins back to 1891.

The LGPS Regulations 2013 set out the current Scheme rules. Employee and employer representatives discuss potential changes to the rules at national forums, but only Parliament can amend them. Other legislation can affect how pension funds run the LGPS, such as auto-enrolment legislation and data protection legislation.

The Public Service Pensions Act 2013 requires all public service schemes to operate a Career Average Revalued Earnings benefit structure.

The Ministry of Housing, Communities and Local Government (MHCLG) made several significant changes to both the benefit structure and governance arrangements of the LGPS in 2014.

• Changes to the benefit structure - prior to April 2014, the LGPS was a final salary pension scheme. This meant that a scheme member’s benefits were normally based on a proportion of their final salary multiplied by the amount of membership they had built up. In 2014, it became a career average scheme, and members build up pension income that is ‘banked’ and revalued each year to keep their value. There were changes made to normal pension age and employee contribution bands. Plus, a new low cost 50/50 option was introduced.
• Introduction of a cost control mechanism – new rules required funds to provide the Secretary of State with information at least every three years, to enable him to monitor the overall cost of the Scheme and to take steps to ensure the cost remains below a certain level.
• Change to governance arrangements – the new 2014 regulations introduced the requirement for administering authorities to establish a pensions board.

In April 2014 (April 2015 in Scotland), all active LGPS members began building up benefits on a Career Average Revalued Earnings (CARE) basis. This was automatic (so no election needed) and everybody transferred into the new Scheme irrespective of their age. However, some transitional protections were put in place for members who were close to their normal retirement date, to ensure that they were not disadvantaged by the change from Final Salary benefits.

In the LGPS, CARE benefits build up at the rate of 1/49 in the main scheme and 1/98 in the 50/50 section.

There are multiple valuable benefits that come with LGPS membership. As well as accruing a defined benefit pension, which is calculated as a percentage of pensionable pay received, the member may be entitled to other benefits. These include potential entitlement to early retirement on ill health grounds (providing the relevant criteria are met), entitlement for dependants to receive a pension payable on death if certain criteria are met, and the automatic payment of their pension without reductions if made redundant from age 55.

Employee contribution rates are based on a member’s actual pay and vary depending on how much the individual earns. The contribution rates for the current tax year can be viewed on our Joining, contributions, and transferring in your benefits page.

A member’s employer is responsible for determining whether a member meets the criteria for ill health retirement. Although the decision to award ill health retirement is down to the employer, the employer must consider the opinion of an Independent Registered Medical Practitioner, whose role is to determine if a member meets the criteria to be eligible for ill health retirement.

The LGPS Regulations list the types of employers that must and can be part of the Scheme. Some employers have a statutory duty to be part of the Scheme and whose employees have the right to join, such as a local authority. Others, such as town councils, can designate employees to be members. Some other employers can ask to make an admission agreement with GMPF to join. These are most commonly employers who are carrying out functions of a local authority or similar body following the outsourcing of services, such as catering suppliers.

If an employee works for an LGPS employer and is not entitled to be part of another public sector pension scheme, then they can normally be a member of the LGPS. However, if they work for a body that designates entry or an admission body, then entry may be restricted.

The types of members that are usually in the LGPS include:

• local authority officers
• school or college support staff
• employees who were transferred to a contractor when their work was outsourced.

Employees who are teachers, firefighters, NHS workers, civil servants or policer officers are not normally able to join the LGPS, as they have their own public sector pension schemes.

The amount of pension contributions that an employee must pay into their LGPS pension is set out in the LGPS Regulations.

The contributions due are a percentage of the employees pay. The percentage differs depending on the amount of pensionable pay the employee receives. The LGPS Regulations contain the pay and contribution bands, which are set out in a table. The percentage increases from lower to higher earners.

The actuary determines the contributions that employers need to pay as part of the actuarial valuation of the fund, which takes place every three years.

The Pensions Administration Strategy supports GMPF and its employers to deliver on their responsibilities under the LGPS regulations. Its main purpose is to provide clarity on the key roles and responsibilities of GMPF and its employers, and it sets expectation and confirms the targets that GMPF and its employers need to work to.

An effective strategy is one the supports GMPF and its employers to deliver on their responsibilities so that all members and stakeholders receive an excellent service.

In an LGPS Fund’s administration strategy you would expect to see:

1. the expected levels of performance for both the administering authority and scheme employers
2. the process by which the authority will recover from an employer any additional costs covered by that employer’s failure to meet the expected standards
3. the processes for liaison and communication between the administering authority and employers.

In the LGPS issues regularly emerge. It’s important for trustees to be aware of the latest issues impacting the LGPS and GMPF.

The LGPS Scheme Advisory Board home page provides details of the latest news and developments at https://lgpsboard.org/

The LGA also maintains News and Update pages at https://www.lgpsregs.org/newsupdates.php

Several bodies can consult with pension funds on issues of importance that affect the running of the Scheme. The Ministry for Housing, Communities and Local Government (MHCLG), the Pensions Regulator, the Scheme Advisory Board or the Chartered Institute of Public Finance Accountants all issue consultations from time to time.

Here is a summary of consultations that are either open or have been recently closed, alongside GMPF’s response (where GMPF has submitted a response).

‘McCloud Case’ – closed 8 October 2020 and awaiting response

When Public Service Pension Schemes were reformed in 2014 they included an underpin to protect members ten, or fewer, years away from retirement to ensure they were not worse off under the new rules. This underpin was later challenged in the McCloud case on the grounds that it was age discriminatory. The courts agreed and this led to government consulting on how to eliminate age discrimination in the application of transitional measures. The consultation explored the proposed solution to rectify the age discrimination present in the previous transitional protections.

GMPF’s response – McCloud

The Government have produced follow on consultations and the McCloud remedy is being implemented.

Retail Prices Index consultation – closed 21 August 2020 and awaiting response

The Retail Prices Index’s (RPI) methodology was challenged by the UK Statistics Authority who do not see RPI as fit for purpose. This led to HM Treasury opening a consultation on how to amend RPI to ensure that it is an accurate measure of inflation. The consultation suggested aligning RPI’s methodology with the Consumer Prices Index with owner occupiers' housing costs (CPIH) methodology to ensure a better measure of inflation.

GMPF’s response - RPI

New Fair Deal – closed and awaiting response

This consultation contained proposals aimed at strengthening the pensions protections that apply when an employee of a LGPS employer is compulsorily transferred to the employment of a service provider. The consultation also contained other provisions such as the introduction of ‘deemed employer’ status intended to lighten the administration burden on LGPS funds. 

GMPF's response - New Fair Deal strengthening pension protection – sent April 2019

REFORMING LOCAL GOVERNMENT EXIT PAY: A consultation on the reform of exit payments in local government – closed

As part of a wider programme of cross-public sector action on exit payment terms, this consultation paper set out the government’s proposals for reforming local government exit payment.

Government have scrapped the exit pay cap.

GMPF’s response – Exit Pay Reform

Changes to the Local Valuation Cycle and the Management of Employer Risk – closed

This consultation dealt with a number of issues such as;

Government partially responded to this consultation by releasing amended regulations for exit credits, but has yet to respond to the other components of the consultation. The Government introduced more flexibility in the payment of exit credits to allow Administering Authorities to take into account additional information when deciding to pay exit credits or not.

GMPF's response - changes to the Local Valuation Cycle and the Management of Employer Risk  – sent July 2019

• amending the actuarial valuation cycle of the LGPS from the current three year cycle to a four year cycle
• introducing interim valuations so that LGPS funds can perform interim valuation between the main three/four year valuations
• amending the criteria when weighing up whether to pay exit credits when an employer exits the LGPS with an asset surplus.

Previous GMPF responses to consultations

£95,000 Exit Cap - sent October 2020

Draft Statutory Guidance on Asset Pooling – sent March 2019