Local Government Pension Scheme in England and Wales - Access and Fairness
Death Grants (age 75 cap)
Background
In the LGPS, death grants are lump sums paid to beneficiaries of eligible members, due from the day after death. In most cases, the lump sum is initially set at 10 times the member’s annual pension amount and reduces to nil over the 10 years following pension payment commencement. This is intended to ensure members or their beneficiaries receive a minimum pension benefit equal to 10 years pension regardless of when a member dies.
In the LGPS, Normal Pension Age (NPA) is equal to an individual’s State Pension Age (SPA), which means that as SPA has risen NPA has followed. As a result, the age 75 death grant cap has become outdated, and beneficiaries of individuals who retired at an NPA over 65 have unintentionally been potentially excluded from death grant eligibility. For example, the beneficiary of an individual who retired at 66 (in line with their NPA and SPA) and then died between their 75th and 76th birthdays, would have been excluded from death grant eligibility.
Additionally, as the LGPS is a registered pension scheme, it must comply with overriding legislation, as made by the Department for Work and Pensions (DWP) and HM Treasury (HMT), that applies to all such schemes. In 2004, HMT legislated that death grants could only be paid in respect of members who died before age 75 and the current LGPS Regulations adopted that position. On 6 April 2011, HMT removed that age cut-off, but the current LGPS rules have not been updated accordingly and the cut-off remains.
Proposal
The government now proposes to amend the 2013 Regulations to remove reference to an age 75 limit on eligibility for death grant payments, and to amend the 2014 Regulations to disapply the age 75 limit on death grants for individuals to whom the rules of the previous schemes continue to apply and who died on or after 1 April 2014.
The effect of the proposed changes is to remove the age 75 cut-off from LGPS Regulations, retrospective for all deaths of eligible members on or after 1 April 2014. The government understands that administering authorities have access to records enabling them to identify members eligible for the retrospective element of the proposal.
This proposal would align the LGPS in England and Wales with the LGPS NI, which removed it with retrospective effect to 1 April 2015 (the date at which the reformed legislation was introduced).