Local Government Pensions Scheme in England and Wales - Scheme Improvements (Access and Protections)

Background

5. The Normal Minimum Pension Age (NMPA) is the minimum age at which most people can access their pensions unless they are retiring due to ill-health. Registered pension schemes – those registered with HMRC after 2006, including the LGPS - should not pay any benefits until members reach NMPA, except in cases of ill health. 

6. Parliament has legislated in the Finance Act 2022 to increase the NMPA from 55 to 57, effective from 6th April 2028, for all registered pension schemes in the country. This section sets out how the government proposes to update the LGPS regulations to reflect this change. 

7. To smooth the transition, the Finance Act 2022 provided for a Protected Pension Age (PPA). A member of any UK pension scheme has a PPA if three conditions are met: 

• immediately before 4th November 2021, the member had an actual or prospective right to any benefit from an age of less than 57; 

• the rules of the pension scheme on 11 February 2021 included provision conferring such a right on some or all of the persons who were then members of the pension scheme; 

• the member either had such a right under the scheme on 11 February 2021 or would have had such a right had the member been a member of the scheme on 11 February 2021. 

Summary of proposals 

8. LGPS regulations as at 11 February 2021 did confer the right to take pension benefits from age 55 to all members, and so the second and third conditions are met. If the member was in the LGPS immediately before 4th November 2021, meeting the first condition, the member will therefore have a PPA. There are also other circumstances where a member would have a PPA, such as by transferring an entire pension arrangement into the LGPS from a relevant registered pension scheme where the member previously had an actual or prospective right to take pension benefits from an age before 57.  

9. In the LGPS, the government proposes to implement the protections related to the pension age as established by the Finance Act 2022, with an exception for members who transfer previous pension benefits into the LGPS, as outlined in category 2 below. The government believes that the intentions behind the changes to the Finance Act are clear, in that the changes clearly established a protection regime. There are three categories of members: 

Category 1 – PPA from membership  in the LGPS immediately before 4th November 2021 

10. For those members who were in the LGPS immediately before 4th November 2021, the member will still be able to take pension benefits from their protected pension age, which will be age 55. This will also apply to other regulations that refer to age 55, such as Regulation 30(6) of the LGPS Regulations 2013 (flexible retirement) and Regulation 30(7) (redundancy).  

Category 2 – PPA from transferring a pension arrangement into the LGPS 

11. For those members who transferred a pension arrangement into the LGPS from a relevant registered pension scheme where the member previously had an actual or prospective right to take pension benefits from an age before 57, whilst the member will have a PPA in respect of the transferred benefits, the government proposes that the member would not be able to take the benefits from their PPA. The NMPA for such members would rise to 57 in line with the Finance Act.  

12. The government understands that a member in this category who wished to take transferred benefits at 55 may disagree with their NMPA rising to age 57. Members will not lose out over the whole period they receive their pension by taking their benefits at 57 rather than 55, due to the way that benefits following  early retirement are calculated to be actuarially neutral using early retirement factors. The government proposes this exception on the basis of LGPS scheme design. The scheme design of most public pension schemes, including the LGPS, requires members to take all their benefits in one pension account at the same time. This helps facilitate how protections in the scheme work such as the McCloud underpin or when someone retires on ill-health. At the point that a member may have decided to transfer in, there was no mechanism within the LGPS regulations to facilitate “ring-fencing” of different pension benefits.  

13. Were government to allow members in this category to “ring-fence” their transferred in benefits and so take the benefits from age 55, the LGPS regulations would need to be redesigned in multiple areas, allowing members to take different benefits at different times and it would be very complex and costly. The government believes it would be disproportionate to re-design the scheme regulations for all members in this way. 

Category 3 – no PPA 

14. For those members who do not meet the cut-off point of immediately before 4th November 2021 and so do not have a PPA, the NMPA will rise to age 57, in line with the Finance Act 2022.  

Category 4 – members with a PPA below age 55 

15. There is no intention to change current policy towards those members who have already existing protections from paragraph 22 of schedule 36 to the Finance Act 2004. Those already able to draw benefits between age 50 and 55 will continue to be able to do so.