Local Government Pension Scheme in England and Wales - Access and Fairness
Interest on Part 4 Tax Losses
Part 4 tax losses can occur where a member may have overpaid annual allowance or lifetime allowance charges as a result of the application of the McCloud remedy. Treasury Direction 37 of the Public Service Pensions (Exercise of Powers, Compensation and Information) Directions 2022 says that LGPS regulations must make provision for certain rules regarding interest on McCloud payments. Direction 39(2) says that the LGPS Regulations must include provision about the periods over which interest must be calculated in relation to specified relevant amounts. However, Regulation 14 of the 2023 Regulations does not cover direct compensation for a part 4 tax loss, which is a “relevant amount”.
The government’s proposal is to amend the LGPS Regulations to cover interest on compensation payments made under section 82(1) of the Public Service Pensions and Judicial Offices Act 2022, including part 4 tax losses. This would require that interest is calculated either from the date direct financial loss occurred or the date overpayment was made, up until the date of payment.