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

110. In 2019, it was proposed that transferred employees who were entitled to pension protection under the 2007 or 2012 Directions and were given access to a scheme certified as broadly comparable to the LGPS, should have a right to transfer their benefits from their broadly comparable scheme to the LGPS. It was proposed that the value of these transfers would proceed on a Cash Equivalent Transfer Value (CETV) basis, using factors contained in actuarial guidance issued by the Secretary of State.  

111. Whilst respondents were broadly supportive of the proposal for these staff to have the option of transferring their benefits back into the LGPS, several respondents pointed out that using CETV factors for the inward transfers would mean staff with final salary benefits would lose out. This is because the inward CETV would reflect the value of a deferred pension in the broadly comparable scheme, with pre-retirement revaluation in line with price increases, whereas the CETV-in factors used by the receiving LGPS fund would take into account the expected future salary increases (generally assumed to be higher than price increases). This would then result in a loss of final salary benefits measured in terms of years of pensionable service. 

112. The government has considered these responses and is now proposing to align more closely with the updated 2013 Fair Deal guidance which sets out that inward transfer values from broadly comparable schemes should be calculated using bulk transfer values, which would protect any final salary benefits accrued. The intention, which would be set out in the accompanying guidance, is that the bulk transfer terms would be non-negotiable, and would provide a year for year service credit without any additional shortfall contribution being required at the time. 

113. To implement this, the draft regulations allow for inward bulk transfers into the LGPS. This sets out that where one or more people who have accrued benefits in another occupational pension scheme become members of the LGPS and agree to transfer their benefits from their other occupational pension scheme into the LGPS, the administering authority may accept the transfer value.  

114. In addition, the draft regulations allow for the transfer of final salary benefits, from a broadly comparable pension into the LGPS, in a way that ensures that those transferred benefits continue to provide final salary benefits. To be clear, this would preserve the value of previously accrued final salary benefits, whilst providing that any future accrual within the LGPS would be a CARE accrual, in line with the 2013 Regulations, regardless of whether the member has final salary benefits from previously accrued service.  

115. The government is proposing that it would work with the Government Actuary’s Department and the Scheme Advisory Board to draft guidance that would set out clear expectations for how these transfers should be calculated and processed where the transfer includes members covered by the 2007 or 2022 Directions. Further detail of this is given in “Implementation of New Fair Deal proposals”.