Contact: Jon Pittam, ext 7400

1. Introduction

1.1 The Government planned changes in the Local Government Pension Scheme (LGPS) from 1 April 2005 which the Hampshire Pension Fund supported. These included:

· phasing out the 85 year rule

· increasing the normal retirement age to 65

· raising the early retirement age from 50 to 55

1.2 The Deputy Prime Minister, in advance of planned strike action for 23 March 2005, announced on 18 March 2005 that:

"Following constructive dialogue on the Local Government Pension Scheme, I have decided, with the agreement of all parties concerned, to establish a tripartite committee, which I will chair. The key stakeholders will consider and negotiate the long-term future of the Local Government Pension Scheme.

It is my clear intention to revoke at my earliest Parliamentary opportunity, subject to statutory consultation, the Local Government Pension Scheme (Amendment) (No.2) Regulations 2004 with retrospective effect: no Scheme members will be disadvantaged. It is my intention also to begin consultation on new Regulations, which will ensure the continuing solvency of the Scheme.

I will be meeting the employers and the unions as soon as possible to discuss a Programme of Action and Terms of Reference with nothing ruled in or ruled out".

1.3 The planned changes will therefore be revoked sometime during 2005/06. A copy of the new draft regulations will be considered by the Pension Fund Panel on 26 May 2005 and comments will need to be submitted by 31 May 2005. A copy of the letter from the Office of the Deputy Prime Minister sets out the position (Appendix 1).

1.4 Responses to the consultation document `Facing the Future: principles and propositions for an affordable and sustainable Local Government Pension Scheme', published on 4 October 2004, including Hampshire's response, are now being "taken into account as part of the further development work for a new-look scheme and will contribute to the tasks of the Deputy Prime Minister's Pension Committee".

2. Implications

2.1 Until the regulations are revoked, the new regulations from 1 April 2005 must be complied with. All employers and employees were sent a letter in February explaining the planned changes from 1 April 2005. Further letters have now been sent to explain that revised retrospective changes will be enacted.

2.2 The Hampshire Pension Fund must comply with the existing statutory rules from 1 April 2005, until these rules are withdrawn and the earlier rules are reinstated.

2.3 The rules from 1 April 2005 do not affect pension entitlement

· on grounds of permanent ill health

· of someone born before April 1953 who retires before April 2013

2.4 It does affect those born after March 1955 who will not be able to retire on pension before age 55, except for permanent ill health.

2.5 Currently only one individual has been identified who will be 50 next month and is due to be made redundant soon after. Until the regulations are revoked that individual cannot receive full pension benefits until age 65, but benefits could be paid from age 60 at a reduced rate. Similarly other individuals who resign in future will be entitled to deferred benefits which will not be paid in full until age 65. Transfer values for individuals joining other schemes and pension splitting on divorce will all be assessed using the 1 April 2005 rules. If the changes are reversed individuals will find their situation altered and there will be extra administrative work required. Each individual will be advised of the possibility, but there is no duty on the Fund to predict what would happen to an individual if the regulations are revoked.

3. Conclusion

3.1 No action is required by Cabinet. This report explains the uncertain position for individuals and the extra administrative effort required.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

Published works.

Documents which disclose exempt or confidential information as defined in the Act.

TITLE FILE

None.