On the go: Local Government Pension Scheme administering authorities urgently need to carry out impact assessments to clarify how many of their members fall under the scope of the McCloud judgment, according to Aon.
The judgment tackled unlawful discrimination arising from the government’s 2015 public service pensions reforms, under which ‘transitional protections’ were afforded to older scheme members inequitably. McCloud poses “a real administrative challenge” to LGPS schemes in particular, Aon said.
Aon partner Allison Murray said: “Given the significant number of members who will need their benefits checked... implementing changes to legislation resulting from the McCloud judgement is likely to represent the largest administrative headache for public service schemes since the 2014-15 reforms.”
“Around 1m-1.5m members of the LGPS are potentially in scope in England and Wales alone,” she said, adding that this will be the case regardless of whether members’ benefits actually increase after review.
At a recent Aon webinar attended by 130 LGPS representatives, 50 per cent of respondents to a poll said they expected data to present the biggest challenge when implementing necessary changes.
“Pensions administration teams are already stretched, given Covid-19 and the challenges of working from home, not to mention an ever-increasing list of projects,” Ms Murray said.
“These include GMP rectification, data improvement, systems improvements, and other legal challenges which may have a retrospective effect on survivors' benefits.”
Though the hope is that the Ministry of Housing, Communities & Local Government will publish a consultation on draft regulations before the summer parliamentary recess, Ms Murray stressed that “funds don’t need to wait for final regulations before getting started with planning and data collection – in fact it could be a mistake to delay.”
Virginia Burke, a senior consultant at Aon specialising in McCloud, said: “We would encourage all LGPS administering authorities to take steps now,” including impact assessments, and establishing a team to consider how McCloud should be implemented and how it will impact “resources, other projects and business as usual”.
Additionally, Ms Burke said, administering authorities should “get ready to collect data from employers once guidance is issued,” and be prepared to respond to the MHCLG’s consultation “to help shape the final regulations”.
