The Local Government Pension Scheme (Amendment) Regulations 2023

EXPLANATORY NOTE

(This note is not part of the Regulations)

The Local Government Pension Scheme Regulations (“the 2013 Regulations”) established the Local Government Pension Scheme (“the Scheme”) as a career average revalued earnings scheme in accordance with section 8(2)(a) of the Public Service Pensions Act 2013 (“the Act”).

According to section 8(4) of the Act, a person’s pensionable earnings under a career average revalued earnings scheme must be revalued each year until the person leaves pensionable service, based upon the index rate adjustment for the relevant period specified in a Treasury order made under section 9(2) of the Act.

These Regulations amend the provisions of the 2013 Regulations in relation to the process of making revaluation adjustments which currently require the revaluation adjustment to be made at the beginning of the Scheme year, meaning that on 1st April each year, members’ pensions are revalued to take account of the impact of inflation over the previous Scheme year (1st April to 31st March). Currently, tax liabilities may arise because the timing of the Scheme revaluation process on 1st April is not aligned with HMRC’s process for assessing the annual allowance tax charge under the Finance Act 2004.

The overall effect of the changes made by these Regulations to the 2013 Regulations is that the revaluation adjustment is made on 6th April each year, so that the Scheme revaluation is brought into alignment with the HMRC process for assessing the annual allowance tax charge and then applied to the member’s account and accounted for when calculating the end of year balance on 31st March. These Regulations will have no effect on the amount of Scheme benefits to which members are entitled.

Regulation 3 amends regulations 23 to 25 and regulation 27 of the 2013 Regulations in relation to active members, and members who change status within a Scheme year, (by becoming deferred members of the Scheme, or by taking full or flexible retirement).

The amendments specify that the revaluation adjustment made to the member’s pension account must take place on the ‘revaluation date’ (defined as being 6th April). This change means that the inflation figure used for the revaluation adjustment in the tax year commencing 6th April is the same as the inflation figure used for any tax calculation specified by HMRC for annual allowance purposes, under the Finance Act 2004.

Regulation 3 also makes consequential changes to the 2013 Regulations, to ensure that the correct figures are used and the index rate adjustment in accordance with the Pensions (Increase) Act 1971 is correctly applied.

Regulation 4 amends regulations 41 and 42 of the 2013 Regulations (in relation to survivor benefits for the partners and children of active members) and makes consequential changes to reflect the fact that the revaluation adjustment is now to take place at the new ‘revaluation date’. The purpose of these changes is to ensure that, notwithstanding the change in the revaluation date, there is no change to the amount of Scheme benefits to which survivors are entitled.

Regulation 5 amends regulation 43 of the 2013 Regulations in relation to death grants relating to deceased deferred, pension credit and deferred pensioner members. The purpose of these changes is to ensure that, notwithstanding the change in the revaluation date, there is no change to the amount of Scheme benefits to which survivors are entitled. The changes ensure that for deferred and deferred pensioner members, where the person died within the period 1st to 5th April within a Scheme year (ahead of the revaluation date), the death grant reflects the correct pension entitlement, factoring in the relevant revaluation adjustment.

Regulation 6 amends regulations 44 and 45 of the 2013 Regulations in relation to survivor benefits for partners and children of deceased deferred and deferred pensioner members and similarly to regulation 4, makes consequential changes to reflect the fact that the revaluation adjustment is now to take place at the new ‘revaluation date’. The purpose of these changes is to ensure that, notwithstanding the change in the revaluation date, there is no change to the amount of Scheme benefits to which survivors are entitled.

Regulation 7 amends regulation 46 of the 2013 Regulations in relation to death grants relating to deceased pensioner members and regulations 47 and 48 of the 2013 Regulations relating to survivor benefits in relation to such a member. The changes to regulation 46 of the 2013 Regulations ensure that where the pensioner member died within the period 1st to 5th April within a Scheme year (ahead of the revaluation date), any death grant payable reflects the correct pension entitlement, factoring in the relevant revaluation adjustment. The purpose of these changes is to ensure that, notwithstanding the change in the revaluation date, there is no change to the amount of Scheme benefits to which survivors are entitled.

Regulation 8 of these Regulations amends the definition of “revaluation adjustment” in Schedule 1 to the 2013 Regulations and inserts a new definition of “revaluation date”, so that the revaluation date is fixed as 6th April which aligns with the start of the tax year, rather than taking place at the end of a tax year.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, public or voluntary sector is foreseen.