EXPLANATORY NOTE
(This note is not part of the Regulations)
The Public Service Pensions Act 2013 (c. 25) (“the 2013 Act”) makes provision, and confers further powers to make provision (in the form of “scheme regulations” as defined in section 1 of that Act) about the establishment of public service pension schemes. The Local Government Pension Scheme (Scotland) Regulations 2018 (S.S.I. 2018/141, “the 2018 Regulations”) are the scheme regulations consolidating the Local Government Pension Scheme (Scotland) Regulations 2014, which established the successor local government pension scheme (“the 2015 Scheme”) to the pension scheme constituted by the Local Government Pension Scheme (Administration) (Scotland) Regulations 2008, the Local Government Pension Scheme (Benefits, Membership and Contributions) (Scotland) Regulations 2008 and the Local Government Pension Scheme (Transitional Provisions) (Scotland) Regulations 2008 (“the 2009 Scheme”). The Local Government Pension Scheme (Transitional Provisions and Savings) (Scotland) Regulations 2014 (S.S.I. 2014/233, “the 2014 Regulations”) provide transitional protection (“the statutory underpin”) for 2009 Scheme members. Similar transitional protection was made under the 2013 Act for members of judicial pension schemes and members of firefighters pension schemes. The transitional protection for members of the judicial and firefighters schemes was subsequently found to unlawfully discriminate between members of the respective schemes on the basis of age. Although the statutory underpin was not subject to legal action, all schemes established under the 2013 Act are subject to review. These Regulations do this in relation to the 2015 Scheme.
The Public Service Pensions and Judicial Offices Act 2022 (c. 7) (“PSPJOA 2022”), at Chapter 3 of Part 1, makes provision, and confers powers for scheme regulations under the 2013 Act to make further provision, in relation to specified service (“remediable service”, as defined in section 77 of PSPJOA 2022) of members who benefitted from the statutory underpin or who did not by reason of their age. Section 85 of PSPJOA 2022 requires certain powers in chapter 3 of Part 1 to be exercised in accordance with Treasury Directions.
These Regulations are scheme regulations under the 2013 Act and in accordance with PSPJOA 2022 in relation to a member’s remediable service in the local government legacy schemes and the 2015 Scheme. They are, to the extent required by section 85 of PSPJOA 2022, made in accordance with Treasury Directions (in the form of the Public Service Pensions (Exercise of Powers, Compensation and Information) Directions 2022). These Regulations have retrospective effect, which is authorised by section 3(3)(b) of the 2013 Act.
Part 1 of these Regulations makes general provision.
Part 2 amends the 2014 Regulations in relation to the statutory underpin:
Regulation 2(2) amends regulation 1 of the 2014 Regulations and introduces the concept of the “final guarantee amount”. This is the amount by which a member’s benefits under the 2015 Scheme (as assessed in accordance with the amendments made by these Regulations) are exceeded by the amount the member should have been entitled under the local government legacy schemes.
Regulation 2(3) omits regulation 4 of those regulations (which contained the original provision relating to the statutory underpin).
Regulation 2(4) inserts regulations 4A to 4T, which, by their effect, replace regulation 4:
Regulation 4A makes provision in relation to the application of the replacement statutory underpin provisions to certain members (“eligible members”) and in respect of a certain period (“the underpin period”).
Regulation 4B makes provision for eligible members who become entitled to a pension on the basis of retirement, redundancy, or ill health to have their pension account increased by the final guarantee amount on the day after they become so entitled.
Regulation 4C makes provision for eligible members who become entitled to a pension on the basis of taking flexible retirement under regulation 29(7) of the 2018 Regulations to have their pension account increased by the final guarantee amount on the day after they become so entitled. It makes further provision relating to the ability of an eligible member taking flexible retirement to elect to take less than 100% of the pension to which they are entitled.
Regulation 4D prevents eligible members who take a lump sum payment from having their pension account increased by the final guarantee amount relating to the pension account.
Regulation 4E prevents eligible members who transfer to a different scheme from having a final guarantee amount determined in relation to their pension account.
Regulation 4F prevents eligible members who take a repayment of contributions from having a final guarantee amount calculated in respect of those repaid contributions.
Regulation 4G provides for an “underpin date” to be determined in respect of eligible members. The underpin date is the date in respect of which a provisional calculation of the member’s benefits under the 2015 Scheme and the 2009 Scheme in respect of the underpin period is made.
Regulation 4H provides for a “final underpin date” to be determined in respect of eligible members. The final underpin date is the date in respect of which the final calculation of the eligible members benefits under the 2015 Scheme and 2009 Scheme is made, out of which the final guarantee amount is calculated.
Regulation 4I contains the calculation of an eligible member’s provisional assumed benefits. This is the provisional calculation of the benefits a member is entitled to under the 2015 Scheme.
Regulation 4J contains the calculation of an eligible member’s provisional underpin amount. This is the provisional calculation of the benefits a member should otherwise have been entitled to under the 2009 Scheme.
Regulation 4K provides for the calculation of an eligible member’s “final assumed benefits” for the purpose of the statutory underpin. This is the final calculation of the benefits the person is entitled to under the 2015 Scheme.
Regulation 4L provides for the calculation of an eligible member’s “final underpin amount” for the purpose of the statutory underpin. This is the final calculation of the benefits the person should otherwise have been entitled to under the 2009 Scheme.
Regulation 4M makes provision for the calculation of a “survivor guarantee amount” and for that amount to be added to a survivor member’s pension in respect of a deceased eligible member’s entitlement to a final guarantee amount.
Regulation 4N makes provision for the calculation of a “deferred guarantee amount” relating to an eligible member who is deceased and for that amount to be included in the calculation of a death grant payable in respect of the member.
Regulation 4O makes provision in relation to the calculation of provisional assumed benefits and provisional underpin amount for eligible members who have a pension account that has been aggregated from two or more pension accounts.
Regulation 4P makes provision for the calculation of the cash equivalent value of an eligible member’s relevant benefits (as defined in section 29 of the Welfare Reform and Pensions Act 1999 (c. 30)) where the eligible member is divorced or dissolves a civil partnership.
Regulation 4Q empowers an administering authority to pay additional benefits under the 2015 Scheme, instead of an amount under section 82 of PSPJOA 2022, in respect of a compensatable loss that is a Part 4 tax loss.
Regulation 4R prevents an administering authority from paying an amount under section 82 of PSPJOA 2022, or additional benefits under regulation 4Q, unless the eligible member concerned or their personal representatives have made an application. It makes provision for the contents of such an application, requires administering authorities to determine the amounts payable to the eligible member or their personal representatives, and for appeals against such determinations.
Regulation 4S provides that compensation under section 82 of PSPJOA 2022 or regulation 4Q may be paid from the pension fund concerned.
Regulation 4T makes provision for the payment of interest in respect of the payment of an additional benefit under regulation 4Q.
Regulation 2(5) amends regulation 9 of the 2014 Regulations to provide that where a transfer payment is received into the 2015 Scheme, which includes a payment in respect of remediable service, in respect of a person from a different public service pension scheme, that payment entitles the person to benefits under the 2015 Scheme. So long as there has been no continuous break of more than 5 years in active membership since the remediable service was accrued, the transferred remediable service is included in the calculation of the provisional assumed benefits and the provisional underpin amount.
Regulation 3 makes consequential amendments to the 2018 Regulations, including the following:
Regulation 3(2) amends regulation 29 to provide that the enhancement of a member’s pension received after their normal pension age, reduction, where the member receives their pension early, or adjustment, where the member reduces working hours or grade, does not apply to any final guarantee amount which has been added to the pension account in question.
Regulation 3(3) amends regulation 33 to provide that the pension used to calculate a member’s commutation payments may under certain circumstances include a final guarantee amount or a survivor guarantee amount.
Regulation 3(4), (5), (7), (8), (9) and (10) exclude the final guarantee amount to which an eligible member may otherwise have been entitled from the pension the member would have been entitled to for the purpose of the calculation of survivor benefits.
Regulation 3(6) makes similar provision in relation to death grants.
Regulation 3(11) and (12) provides that compensation paid under section 82 of PSPJOA 2022 or additional benefits paid under regulation 4Q are liabilities for the purpose of actuarial valuations of a pension fund’s liabilities.
Regulation 3(13) amends regulation 76 to disapply its provisions on the payment of interest in relation to sums in respect of which interest is payable under regulation 4T of the 2014 Regulations or regulation 14 of these Regulations.
Regulation 3(14) amends regulation 91 to provide that, where a non-Club Transfer out of the pension fund is applied for by an eligible member under paragraph (1) of that regulation, the value of the transfer is to be calculated in accordance with actuarial guidance issued by the Scottish Ministers, taking into account the member’s provisional underpin amount and provisional assumed benefits.
Regulation 3(16) provides that an actuary determining the amount of a bulk transfer payment must take into account the member’s provisional underpin amount and provisional assumed benefits.
Part 3 makes retrospective provision.
Regulation 4 makes general provision, including the persons to whom, or in respect of, the retrospective provision is made.
Regulation 5 makes provision in relation to members who retired or died before 1 October 2023. It is to be determined whether the person should be entitled to a final guarantee amount. If so, the amount is to be paid to the member’s pension account or personal representatives.
Regulation 6 makes provision in relation to death grants in respect of members who died before 1 October 2023. Provisional assumed benefits and a provisional underpin amount are to be calculated in respect of the member and regulation 41 of the 2018 regulations is to be applied to recalculate the death grant, with any excess being paid to the original recipients of the death grant.
Regulation 7 makes provision in relation to pensioner member death grants in respect of members who died before 1 October 2023. The death grant payable in respect of the person is to be recalculated under regulation 44 of the 2018 regulations and the amount is to be paid to the original recipients of the death grant.
Regulation 8 makes provision in relation to survivor benefits in respect of members who died before 1 October 2023. Provisional assumed benefits and a provisional underpin amount are to be calculated in respect of the member and regulation 4M of the 2014 Regulations is to be applied to the person and any survivor guarantee amount is to be added to the original survivor member’s pension account payable under regulation 39, 40, 42, 43, 45 or 46 of the 2018 Regulations.
Regulation 9 makes provision in relation to members who transferred into the fund before 1 October 2023 from certain schemes. Where that transfer results in the person being entitled to benefits or being credited pension under the 2015 Scheme, the transfer is to be treated as a transfer to which regulation 9(1A) and, as the case may be, (1B) of the 2014 Regulations applies.
Regulation 10 makes provision in relation to members who transferred out of the fund before 1 October 2023 under regulation 91 or 93 of the 2018 Regulations. Provisional assumed benefits and a provisional underpin amount are to be calculated in respect of the member and the transfer value is to be recalculated. Where a payment must be made, it is to be made to the trustees or manager of the new scheme for the benefit of the person.
Regulation 11 provides that where a person took a trivial commutation payment or lump sum under regulation 33(1) of the 2018 Regulations before 1 October 2023, it is to be determined whether the person is entitled to a final guarantee amount in accordance with regulations 4A to 4T of the 2014 Regulations.
Regulation 12 makes provision in relation to members who divorced or dissolved a civil partnership before 1 October 2023. The cash equivalent value of the person’s relevant benefits (for the purpose of section 29 of the Welfare Reform and Pensions Act 1999) is to be recalculated in accordance with actuarial guidance issued by the Scottish Ministers. Where the recalculated amount exceeds the original calculation, the annual pension awarded to the member’s spouse or civil partner is to be recalculated based on that amount.
Regulation 13 makes provision for a member with underpin dates (within the meaning of regulation 4G of the 2014 Regulations) that occur before 1 October 2023, but who do not have a final underpin date (within the meaning of regulation 4H of those Regulations) before that date. This regulation makes provision for the calculation of a provisional underpin amount and provisional assumed benefits in relation to the member and for the modification of the provision applying a final underpin date to the member.
Regulation 14 makes provision for the payment of interest in respect of sums payable under this Part of the Regulations.
No impact assessment has been produced for this instrument as no, or no significant, impact on the private or voluntary sectors is foreseen.