Members gave consideration to a report of the Director of Pensions that covered two government consultations, ‘Restricting Exit Payments in the Public Sector’ published by HM Treasury, and ‘Changes to the Local Valuation Cycle and Management of Employer Risk’ by the Ministry of Housing Communities & Local Government (MHCLG).

The HM Treasury consultation had been issued on 10 April 2019 with a closing date of 3 July and the MHCLG consultation had issued on 8 May 2019, closing on 31 July. 

It was reported that the Fund response to the HM Treasury consultation had been shared with the Chairs of Pension Committee and Pension Board for comment and approval prior to submission and were attached as Appendix A to the report for noting.

A draft response to the MHCLG consultation was attached as Appendix B to the report for Members consideration, comment and approval.

The report also updated Members of recent developments on the Scheme Advisory Board review of governance models for the LGPS.

Yvonne Murphy, Head of Pension Administration outlined the report to the Committee, responded to Members questions and highlighted that, as the Committee were aware, as reported at the Committee meeting dated 15 November 2016 (minute 128 refers), of the Government’s intent to cap the cost of early retirement packages within the public sector at a total cost of £95,000 per employee.  The cap would include the value of any early retirement strain payments, and it was envisaged that the ability to take an unreduced early retirement pension would be severely restricted for a number of members.  As such the new regulations would reduce pension costs for affected employers given that the total exit payments made to employees would now be capped.  Separate administrative processes would need to be implemented by the Fund for those employers covered by the cap, and for those not covered. The Fund would need to establish and keep a clear record of which employers fall into each category.

With regard to the MHCLG consultation the proposal to remove the requirement for further education corporations, sixth form college corporations and higher education corporations to offer membership of the LGPS to new entrants could lead to a reduction in the active membership base with an adverse impact on cash flow and the pace of scheme maturity.  Members were apprised of the late submission of comments from the Chair of the Pension Board vehemently opposing this proposal. Members shared the concerns and commented that this would be a retrograde step leading to a two-tier system and the diminishing of Funds. Committee requested the Fund’s response to be strengthened to demonstrate opposition to the proposal from both an employee and Funding perspective.

Resolved – That;

1.  the response sent to HM Treasury regarding the consultation on ‘Restricting Exit Payments in the Public Sector’ be noted, and;

2.  the Fund’s draft response to the MHCLG consultation on ‘changes to the Local Valuation Cycle and Management of Employer Risk’ be revised to reflect the concerns raised and shared with Pension Committee for formal approval prior to submission to the government on 31 July 2019.