LGPS Current Issues | June 2025
Regulatory round up
Fit for the Future consultation and Pension Schemes Bill
Please refer to the investment section which provides more comment on the government’s response to this consultation, which was published on 29 May 2025 and also the Pension Schemes Bill.
Fairness and Access consultation
Please refer to the funding section which references this consultation, which was released on 15 May 2025 and closes on 7 August 2025, in more detail.
Draft regulations were also published alongside the consultation.
In relation to the second phase of the government’s Pension Review, which is expected to focus on adequacy, further details are still awaited in terms of the scope, terms of reference and launch timescales.
On 18 June 2025, a roundtable event to discuss the Gender Pension Gap in the LGPS was held by the Scheme Advisory Board with representatives from Funds, Employers, Unions, Actuaries and other industry stakeholders in attendance.
The main focus of the event was to discuss the consultation proposals, gain a better understanding of current opt-outs and the experience of other public service pension schemes, and to discuss the wider interaction between pension / pay gaps, overall pension adequacy and other societal issues.
Cyber security
Recent weeks have seen a number of high profile cyber-attacks being reported in the media, in particular those to have targeted high-street retailers. Whilst local authorities and pension funds haven’t been the target of these attacks, the stories serve to act as a reminder of the cyber security risks faced in the current climate, and highlight some of the tactics used by those perpetrating the attacks.
With increasing scrutiny of governance arrangements, and with regulatory requirements to manage these risks, we would recommend funds look to implement their own cyber policies and incident response plans, separate to those of the host authority, recognising the funds own circumstances e.g. systems, third parties etc.
Further details on how we can support funds manage these risks can be found in our briefing note. Please contact your usual Mercer consultant if you’d like to discuss this further.
McCloud remedy - various
Work continues both centrally and locally to move the McCloud remedy forwards.
Transfers – Club and Non-club
Updated 2025/26 versions of the McCloud transfer out calculators (Club and Non-Club) were published by LGA on 25 April 2025. Prior versions of the calculators can still be accessed, and guidance notes should be followed when using them.
Template Letters
Updated templates have been made available by the Local Government Association including new templates relating to pensioner members, and also template wording for the 2025 annual benefit statements.
Regulatory Update
On 3 April 2025 HMT laid the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2025. These came into force on 24 April 2025 and modify the existing rules to prevent adverse tax consequences when implementing the McCloud remedy. Although most of the changes do not apply to the LGPS and instead apply to “Chapter 1 schemes”. Changes that do impact the LGPS, revolve around the following deadlines (alongside minor factual amendments):
- Deadlines for applying for fixed or individual protection (extended to 6 April 2027 from 6 April 2026).
- Deadline for administering authorities to apply for a refund where some/all of annual allowance tax charges have paid to HMRC on behalf of members and recalculations have indicated an overpayment (extended to 31 January 2031).
- Deadline for members to request a valuation for individual protection 2016 in relation to information calculated by reference to remediable service (deadline of 6 April 2027 introduced).
On 28 April 2025 HMT introduced minor technical changes to the Public Service Pensions (Exercise of Powers, Compensation and Information) Directions 2022 (‘2022 Directions’) through the Amendment Directions 2025, albeit the latest amendments only apply to “Chapter 1 schemes” and therefore not the LGPS.
Consultation: Local audit reform
On 9 April 2025 the Government issued a response to the December 2024 consultation titled "Local Audit Reform: A Strategy for Overhauling the Local Audit System in England," which closed on 29 January 2025 and aimed to enhance the local audit system. The response confirmed that the Government is committed to separating pension fund accounts from administering authority accounts in England. A working group has now been established by the Scheme Advisory Board to consider the implications of this further and to consider what additional guidance for funds needs to be developed.
Other regulatory news in brief
Local Government Reorganisation – initial government feedback
On 3 June 2025, government published its initial feedback on the interim plans submitted by Councils who were part of the 21 two-tier areas identified to develop proposals for Local Government Reorganisation. As commented on in our previous edition, reorganisation may have implications for LGPS funds in terms of funding, committee structures and overall governance arrangements, and potential implications for 2025 valuation outcomes. Please contact your usual Mercer consultant if you’d like to discuss the implications of LGR further.