Further to our previous blog in December 2021, The Local Government Pension Scheme (Scotland) (Miscellaneous Amendments) Regulations 2022 have now been published and will take effect from 1 June 2022. We are pleased to see that the Regulations are largely in the form expected, and therefore will offer greater flexibility in the negotiation of employer exits from LGPS funds.
As noted in our December update, the Regulations:
- allow parties to enter into a ‘deferred debt’ agreement and also to spread exit payments over a period determined by the relevant Fund, allowing employers to benefit from improved funding positions and manage their liabilities over a longer period of time; and
- build in protections for the LGPS Funds, such as allowing for the employer’s contribution rate to be adjusted prior to any given triennial valuation cycle. The circumstances in which the Fund and the actuary would have the power to adjust the employer’s contribution rate remain the same as set out in the draft regulations.
In addition, provisions regarding ‘suspension notices’ have been clarified, to require such notices to specify the period during which they will apply, and to allow a Fund to withdraw a notice early at its discretion. However, as we noted previously, such notices are rarely used and we anticipate that employers and Funds will be much more likely to utilise deferred debt arrangements.
Wider Changes – Deferred Member Early Retirement without consent and Survivor Pensions
Finally, the Regulations introduce the anticipated changes which:
allow deferred members of earlier schemes, who meet certain conditions, to elect for early payment of their benefits between age 55 and 60 without needing their former employer’s consent; and
clarify and amend the calculation of Survivor Partner pensions (including for cohabiting partners) so that members are placed in a similar position to female survivors of male married members in order to comply with recent equality judgements.
Comment
We regularly work with charity and third sector organisations in Scotland which are looking to manage the significant risks associated with LGPS membership: these changes will greatly assist with that aim. Employers should get advice if they are considering how to manage and address their LGPS liabilities.
