The Ministry of Housing, Communities & Local Government (MHCLG) has launched a consultation on the Local Government Pension Scheme (LGPS) in England and Wales titled “Local Government Pension Scheme in England and Wales: Access and Fairness.” This consultation, which will remain open until 7 August 2025, seeks to address key issues related to fairness and access within the scheme, especially focusing on improving equality for members. It is relevant to a wide range of stakeholders, including LGPS members, employers, and administering authorities.
Focus Areas of the Consultation
The consultation aims to fundamentally improve fairness within the LGPS by addressing several long-neglected issues. Key areas under consideration include:
- Survivor Pensions and Death Grants: The consultation seeks to explore and address concerns related to survivor pensions and the grants given upon the death of a scheme member. This is to ensure that dependents are provided with adequate support.
- The Gender Pension Gap: One of the most prominent issues highlighted is the disparity in pension accrual between men and women in the LGPS. The Government Actuary’s Department (GAD) has provided important analysis on this matter, revealing that women in the LGPS often have significantly lower pensions than their male counterparts, with the gap standing at over 40%. This is largely attributed to several systemic and societal factors.
- Opting Out of the Scheme: The consultation also explores the impact of individuals who choose to opt out of the scheme, potentially due to perceived inequality or insufficient understanding of the scheme’s benefits.
- Forfeiture: This refers to situations where scheme members may lose benefits under certain conditions. The consultation will review the fairness and application of forfeiture rules within the LGPS.
- McCloud Remedy: The consultation includes addressing the McCloud remedy, which is a response to a court ruling concerning age discrimination in pension schemes. It will look at how to implement changes to correct this issue within the LGPS.
GAD’s Role in the Consultation
The Government Actuary’s Department (GAD) has been instrumental in supporting the MHCLG’s pensions policy team with this consultation. GAD provided analysis on various aspects of the report, including assessing the potential cost impact of proposed changes to the LGPS. Their work also includes illustrating how these proposed changes could positively impact individual members, especially women who have historically been at a disadvantage in the scheme.
Addressing the Gender Pension Gap
A key issue that has been highlighted through GAD’s analysis is the significant Gender Pension Gap in the LGPS. As noted in the consultation, 74% of the 6.7 million members of the LGPS are women. Previous analysis from GAD for the LGPS Scheme Advisory Board revealed that, on average, the pension accrued by women in the scheme is more than 40% lower than that of men. This gap is attributed to a combination of factors, including lower lifetime earnings, career breaks for family reasons, and fewer full-time positions.
To address this disparity, the consultation proposes that GAD will collaborate with MHCLG and other stakeholders to develop detailed data on the Gender Pension Gap for each of the LGPS funds. This data will help provide transparency and guide future policy decisions to close the gap.
Improving Fairness and Access
The consultation’s main focus is to ensure that the LGPS offers equal access and fairness for all members, regardless of gender or other factors. The goal is to create a more inclusive and efficient pension scheme that provides equal opportunities for all who contribute to public services. The consultation emphasizes core principles such as equality, fairness, integrity, efficiency, and accuracy in the implementation of the pension scheme.
This consultation is an important step in ensuring the LGPS is a more equitable and accessible scheme for all. It provides an opportunity for stakeholders to offer feedback on the proposed changes and helps shape future reforms that will improve the retirement prospects of millions of local government employees. The findings and the responses to this consultation will play a crucial role in developing policies that address long-standing issues within the scheme.
