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

Establishing criteria 

40. The lack of criteria for applications for a direction makes it difficult for employers and administering authorities to know how to construct their case and what the process will be for assessment. The government therefore intends to update the LGPS 2013 Regulations to establish criteria. The criteria build on the framework that MHCLG currently use. The proposal is for the following criteria:  

1. There must be a clear and evidenced value-for-money assessment in favour of the consolidation (such as to achieve administrative efficiencies that outweigh the cost of transfer and actuarial fees); 

2. There should be a pre-existing relationship with the administering authority that the MAT wishes to join or consolidate into (i.e. the MAT already has schools in that administering authority); 

3. All administering authorities involved should agree to the change; 

4. The receiving administering authority must be able to administer the transfer effectively. 

41. For employers considering an application for a direction to consolidate into one administering authority, we specifically want to limit so-called “contribution rate shopping”, where an employer is seen to select the administering authority primarily based on where it can get the lowest contribution rate.  

Removing the requirement for SoS consent where criteria are met 

42. For situations where all of these criteria are clearly met, the government also proposes to remove the requirement to seek Secretary of State consent. The majority of applications received are straightforward and clearly meet all of the criteria above. In line with the government’s desire for greater devolution, we believe that Secretary of State consent is unnecessary in this situation and administering authorities and employers should be able to take decisions locally. 

43. The government’s proposal to remove SoS consent in these situations relies on administering authorities and employers collaborating at the local level. The government however also proposes to create a process for unsatisfied parties to have the local decision, made without SoS consent, to be reviewed. For example, if a direction is made under this new proposal, i.e. without Secretary of State consent, but it later transpires that actually not all parties were in agreement, application to the Secretary of State for the direction would still be required. We expect that this will be very rare. MHCLG intends to provide guidance on when and how this new power should be used.