Contact: Nick Weaver, (01962 847568) email [email protected]

1 Summary

1.1 This report is to inform the Panel of the current position concerning proposals for the 2008 Local Government Pension Scheme (LGPS).

1.2 In November 2006 the Government decided the new scheme would continue to be "final salary", with a higher accrual rate and no automatic lump-sum. The total cost, to employers and contributors, will be higher than now.

1.3 The Government undertook to have everything in place 1 April 2007,
to allow time for systems changes and member communications.

1.4 Three sets of legislation are required. None have yet been finalised.

1 Recommendations

a) That the Panel note the current position with the Local Government Pension Scheme.

b) That a full report to the Panel is submitted when all three parts of the proposed legislation are in place.

2 Background

2.1 Last summer there was a Government consultation on the options for a new look LGPS, from April 2008.

2.2 There were four possible options, as outlined in the table overleaf:
(For full details please see the report to the Panel on 15 September 2006.)

	Option A	Option B	Option C1	Option C2
Benefit Type	Final Salary	Final Salary	Career Average	Career Average
Accrual rate	1/80th	1/60th	1.85% (=1/54th)	1.65% (=1/60th)
Lump Sum	3/80th plus commutation for extra lump sum	On commutation of pension	On commutation of pension	On commutation of pension
Total Estimated Cost (% Pay)	18.3	19.9	17.7	18.1

Note: The current cost, as certified by the 2004 valuation , is 19.0% of pay.

2.3 The Hampshire Pension Fund supported Option A

2.4 In November 2006 the Government Minister for Local Government and Community Cohesion announced that Option B had been chosen
- the most expensive option for the Hampshire Pension Fund.

2.5 The reforms will be made by three separate Statutory Instruments covering:

· Benefits, membership and contributions

· Scheme administration

· Transitional arrangements

2.6 The Government made an undertaking to have the 2008 Scheme in place by 1 April 2007, to enable time for systems to be updated and members informed.

3 Timetable

3.1 The consultation on the Benefits, Membership and Contributions Regulations covered the period 22 December 2006 to 28 February 2007. The Regulations were made on 3 April 2007.

3.2 The Department of Communities and Local Government has recognised these regulations contain many errors and omissions. These are to be corrected at the earliest opportunity to enable actuaries to project costs for the next three years from the 2007 valuation exercise.

3.3 The consultation on the Administration Regulations was from 29 January to 23 March 2007 and the intention is for these to be in place later this month.

3.4 The Transition Regulations have yet to be produced for consultation.

3.5 For full details of the current position please see Appendix A.

Section 100 D - :Local Government Act 1972 - background documents

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

NB: the list excludes:

1. Published works

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

None.

Addresses as attached

T B J Crossley

Local Government and Firefighters' Pension Schemes

Zone 2/F8

Ashdown House

123 Victoria Street

London SW1E 6DE

Direct line: 020 7944 5970

Fax: 020 7944 6019

Web site: www.communities.gov.uk

Our Ref: 53/007876/07

4 April 2007

Dear Colleague

THE LOCAL GOVERNMENT PENSION SCHEME (BENEFITS, MEMBERSHIP AND CONTRIBUTIONS) REGULATIONS 2007.

With the agreement of Ministers, I enclose Regulations made on 3 April under powers contained in sections 7 and 12 of the Superannuation Act 1972 and laid before Parliament on 4 April. The regulations amend the Local Government Pension Scheme Regulations 1997 (the "1997 Regulations") with effective dates as set out in regulation 1. These regulations deal specifically with rights accruing and benefits based on membership from 1 April 2008 and events linked to that membership which subsequently occur.

Background

The basis of the Government's reforms for the Scheme were initially announced on 23 November 2006 in a written Ministerial statement to Parliament. It emphasised that the long-term policy objective for the Scheme reforms should be affordable, viable and fair to taxpayers. The key intention throughout this reform process has been to ensure that no additional costs are imposed on taxpayers who ultimately guarantee its security.

The statement also emphasised the central importance of the reforms having to meet the challenge of being attractive to existing and future employees, and to their employers, both in and around local government in England and Wales. Flexibility and accessibility are seen as important components, as is the need to provide a range of modern, equality-proofed, defined benefits. However, central to the reform process has been, and will continue to be, the objective of ensuring an equitable and proportionate balance between the actual level of pension benefits provided by the Scheme for its members, and the costs of providing those benefits incurred by employers.

Draft amending regulations, to give effect to the 23 November statement, were circulated to Scheme interests in England and Wales on 22 December 2006. The consultation period closed on 28 February 2007. The assessment of the responses indicated broad support for the vast majority of the proposals. A summary of responses can be found on the LGPS website at

www.communities.gov.uk/lgps. The consultation period provided the opportunity for interested parties to discuss several detailed areas which required clarification and adjustment, within the required cost envelope for the new Scheme, in order to fulfil the key policy objectives for reform outlined above.

The 2008 Local Government Pension Scheme

The principal features of the new Scheme, to be effective from 1 April 2008 (annex A sets out the full package), include:-

· The retention of a guaranteed, final salary pension scheme;

· A 1/60^th accrual rate for all new and existing and members, including those with a rule of 85 protection;

· Flexible retirement provisions;

· Improved death-in-service terms;

· The ability for members to commute part of their pension into a lump sum;

· Retention of provision for early payment of pension in cases of redundancy at certain ages;

· Better targeted ill health provisions;

· Introduction of tiered employee contribution rates to benefit the low paid and to assist in equality proofing the Scheme;

· Extension of partners' pensions;

· Retention of AVC rights;

· Averaging of employees' contributions yield at 6.3% of payroll (up from 5.8% in the existing Scheme);

· Average employers' costs for existing members and new entrants is 13.1% of payroll.

New arrangements for employees, whose contributions will yield on average 6.3% of pensionable pay, are in the package. By linking pay to the rate of contribution payable, members from 1 April 2008 will contribute 5.5% of annual pay of the first £12,000 of salary and 7.5% on any excess. Bandings above £12,000 will ensure an equitable level of graded contributions, linked to pay. The contribution rates and bands are based on whole time equivalent pay levels. The arrangements help considerably to equality-proof the new Scheme and have been welcomed because they focus favourably on part-time, low-paid workers, mostly female, who form a highly significant proportion of the Scheme's current and likely future membership. Higher earners will contribute proportionately more in their contributions under the terms of the bandings set out in the regulations. The transitional position of current members who pay contributions at the rate of 5% of pensionable pay are to be dealt with on a phased basis and will be set out in related but separate provisions, described in Annex C, on which consultations will begin shortly.

Ill-health provisions in the regulations provide new levels of protection for eligible Scheme members. Those who are totally incapacitated will receive their accrued pension entitlements plus a service enhancement of all their prospective membership to their normal retirement rate, and those with a lower level of incapacity will receive 25% of that prospective membership along with their accrual pension entitlements. For other cases, if a scheme member leaves employment because they are assessed by an occupational health doctor to be permanently incapable of their current job but medical evidence indicates that alternative gainful employment could be obtained within a reasonable period of leaving, an employer is to be provided with the appropriate powers to pay a benefit at an accrued membership equivalence for the interim. These payments would need to be subject to review as they could not continue if alternative employment is found. Costs arising from these payments would fall to employers' revenue accounts and not, as in the other levels where membership is enhanced, to the appropriate pension fund. Draft regulations to give effect to this new arrangement will be circulated shortly to stakeholders for comment.

Equality-proofing

The regulations comply fully with the necessary gender equality requirements which come into force on 6 April for all public bodies. They also meet appropriate race equality and health impact assessments. The successful provision of equality-proofed regulations for the new-look LGPS is a critical policy success of the reform programme.

Benchmark costs

The final benefit package has been revised since the December statutory consultation proposals. Adjustments to the benchmark costs have had, first, to deal with a technical re-balancing between current and future members, and second, to deal with issues raised, discussed and subsequently amended as a result of the consultation process with stakeholders. The consultation package was provided on the basis of the cost-envelope made up of an employee contribution yield of 6.3% of pay, plus an employer benchmark cost of 13.2% of payroll. The final package, set out in the regulations, has been adjusted marginally so that the total benchmark cost for existing members is 20.6% (less 6.3%) and 18.2% (less 6.3%) for future members. This provides employer benchmark costs of 14.3% and 11.9% respectively, or an average at 13.1% of payroll.

The reason for the revision is due entirely to the decision to restructure the ill-health provision in the new Scheme from three levels to two levels. A third level of benefit is now to be provided by employers, paying from their revenue budgets, rather than through pension funds. In essence, the equivalent sum totals are the same, although they are now differently disposed among employers.

Scheme Governance

To assist in the on-going stewardship of the Scheme's regulatory and policy development, a Policy Review Group of key stakeholders is being established. Its membership is drawn from all Scheme interests and has been approved by the Minister Phil Woolas. The Group will focus on strategic issues, establish common ground between stakeholders and monitor closely longevity trends ill-health and flexible retirement trends and other demographic experiences in the Scheme as a basis for co-operative decision-making on Scheme developments, considering proposed regulatory changes to the Scheme's legal framework and developing essential cost-sharing requirements.

The establishment of the Policy Review Group is a major step forward and a genuine measure to enhance the governance of the Scheme by involving key stakeholders in a constructive forum about its future. Its constituent membership is being announced today and the organisations who have been invited to be represented on it are listed in Annex B. Arrangements have been made for a first meeting in early May.

The Group's most immediate task will be to develop, with the full involvement of the LGA, other employers and trades unions, a shared approach towards meeting the new Scheme's future service costs and so limiting employers' and taxpayers' liabilities for the future. Regulation 40 includes a requirement that guidance be issued by the Secretary of State by 31 March 2009 regarding the handling of future costs. Efforts take this forward will feature prominently as the Group's work programme develops. The outcomes of the Scheme's 2007 valuation exercise will provide a benchmark for more immediate cost experience, which in turn will be reflected in subsequent cost-sharing arrangements.

The work of the Group will be reported regularly to Ministers. It will complement the extensive statutory and non-statutory consultation arrangements which already exist within the current framework of the Scheme. Other working groups associated with CLG's responsibilities for the LGPS will continue and, where appropriate, their findings can inform the Group.

Conclusion

The reform package, as a whole, is workable and affordable. It recognises the importance of delivering pension reforms and, at the same time, recognises the need to protect providers and taxpayers from increases in future costs. It positively addresses the balance of responses received from stakeholders to recent consultation exercises. It delivers the Government's policy objectives for the Scheme's reform, particularly in terms of equality-proofing, viability, affordability and fairness to taxpayers, and provides good quality, secure pensions for eligible workers in and around local government in England and Wales.

Transitional protections

Annex C sets out the provisional items so far identified which CLG intends should be included in addressing transitional protections. A consultation exercise will begin shortly.

Local Government Pension Scheme (Amendment) Regulation 2007

Scheme interests will be aware of recent consultations on draft regulations about the administration aspects of the new Scheme. Their closing dates for consultation responses was 23 March. An update on the progress towards introducing final provisions will be issued shortly. The current intention is to bring the final regulations forward next month.

Contacts

The LGPS website is located at www.communities.gov.uk/lgps.

For enquiries on the content of this letter, please contact: -

Brian Town: [email protected]

Charlotte Hine-Haycock: [email protected]

Nicola Rochester: [email protected]

or please telephone 020 944 6016.

Yours sincerely



T B J Crossley

ANNEX A

LGPS BENEFIT PACKAGE

The main benefits of the new-look Local Government Pension Scheme are set out below:

· Normal Retirement Age (NRA) of 65 for release of unreduced benefit

· Pension to be indexed in line with the Retail Price Index and must come into payment before the 75^th birthday

· Earliest age for release of pension is 55 by 2010 for current members except on grounds of ill-health

· Early release from age 55 on grounds of redundancy or business efficiency and on objective justification basis

· Augmentation of membership/benefits

· Final Salary Pension based on 1/60^th of salary for each year of pensionable service, with the flexible option to commute pension at the rate of £1 of annual pension for £12 of lump sum up to a maximum tax free lump sum of 25% of capital value of accrued benefit rights at date of retirement

· The best actual pensionable pay in the last three years or an averaging of 3 years (financial) within the last ten before early retirement

· Survivor benefits for life, payable to spouses, civil partners and "nominated" dependant partners (opposite and same sex) at a 1/160^th accrual rate

· Survivor benefits payable to children, and the accrual rates vary relative to status

· Revised permanent ill-health retirement package with no review system within the Scheme - two levels with a higher enhancement of benefits for total incapacity; 25% (with degree of protection) enhancement with prospect of return to gainful employment

· A death-in-service tax-free lump sum of 3 times salary

· Post-retirement lump sum death benefit up to a maximum of 10 years before age 75

· Phased retirement arrangements that would enable LGPS members under specified circumstances to draw down some or all of their accrued pension rights from the scheme while still continuing to work

· Actuarial enhancement for those who continue in work beyond NRA 65 without accessing their pension benefits

· Tiered employee contribution rates with 5.5% payable on the first £12,000 of pensionable pay, and 7.5% paid on the excess over £12,000 to be increased in line with RPI

· A facility to purchase up to £5,000 of added annual pension

· Facility to contribute to AVC arrangements in conjunction with an external provider

ANNEX B

LOCAL GOVERNMENT PENSION SCHEME

POLICY REVIEW GROUP

Representative Organisations

Society of County Treasurers

Association of Consulting Actuaries

(Local Government Sub-Committee)

Society of London Treasurers

Society of Metropolitan Treasurers

UNISON

GMB

TGWU

Universities and Colleges Employers Association (UCEA)

Association of Colleges (AOC)

Environment Agency

Association of Professionals in Education and Children's Trusts (ASPECT)

Society of Local Authority Chief Executives (SOLACE)

Public Sector People Managers Association (PPMA)

Welsh Assembly

Local Government Employers

Local Government Association

Communities and Local Government

April 2007

ANNEX C

Transitional Arrangements

Following the introduction of the new LGPS Benefit provisions we will shortly carry out a brief consultation exercise which will confirm the process of closing off the 1997 Regulations. None of the rights, qualifying conditions or processes linked to service and membership up to and including 31 March 2008 will be lessened in any way by these particular provisions. Nor can there be any substantive changes to those provisions dealing with pension sharing on divorce. The finalised SI will either be in the form of a stand alone instrument or inserted as a transitional schedule to the regulations.

As previously advised to pension fund administrators it will need to cover the following issues

i. For a member who was an active member on 31 March 2008 who continues to be a member by virtue of regulation 2, all membership accrued on a 1/80^th and 3/80^th basis under the 1997 Regulations up to that date will be calculated using final salary on leaving with or without immediate entitlement to pension or where a flexible retirement occurs.

ii. The old provisions defining pay which have not been replicated in the 2007 Regulations will be protected and continue for those affected individuals under the 2008 regime;

iii. A member who joins the LGPS on or after 1 April 2008 with preserved rights under the 1997 Regs which have not come into payment will be treated as if regulation (2) and (i) above applied. Such a member must make an choice within 12 months of rejoining in order to qualify.

iv. Subsequent to the separate calculation of benefits under above regulations 6, 10, 11, 12 and 16 of the 2007 Regulations the two amounts shall be added and treated as a single BCE for the purpose of calculating benefits under 13 and 14.

v. Retaining the facility to pay the lump sum death benefit to a deferred member for pre 2008 membership, this is to be paid along with any lump sum payable under regulation 17.

vi. In the case of survivor benefits as well as rights accruing under these regulations, and to be paid under regulation 20 or 21, in the case of survivor continue the provision that only membership between 1988 and 2008 counts for calculating that part of the pension for civil registered or cohabiting partners.

vii. Consider in connection with (vi), whether a provision be inserted which allows reduction in pre 2008 membership or payment for this period for those wishing to count pre-1988 membership.

viii. In the case of deferred member, continue right of child of such a member to receive survivor pension under 1997 Regulations.

ix. In the case of a pensioner at 1 April 2008, continue right to pay survivor benefits as under the 1997 Regulations.

x. Continue to commute trivial pensions as accrued under 1997 Regulations.

xi. Added years contracts entered into before 31 March 2008 will be honoured and will be credited as pre- 2008 membership.

xii. Any augmented membership awarded under the 1997 Regulations will be credited as pre-2008 membership.

xiii. Continuous membership before 1 April 2008 will count towards the 3 month qualifying condition if 1997 qualifying condition is not completed as at 31 March 2008.

xiv. The schedule to SI 2006/966, which deals with protection linked to the removal of the rule of 85, will continue to apply irrespective of different accrual rates, as will the guidance issued by GAD.

xv. A phasing of increases to the 5% contribution rate of pre-1998 manual workers, bringing their contributions in line with all other Scheme members after the 2010 actuarial valuation and with effect from 1 April 2011. To achieve this, it is proposed that the phased rates will be 5%/6.5% in 2008/09; 5%/7.5% in 2009/10; 5.25/7.5% in 2010/11.

It is CLG's intention that where a person was a deferred member on 31.3.08, returns post 1.4.08. and aggregates membership (see (iii) above, or was an active member on 31.3.08., leaves post 1.4.08. and subsequently rejoins and aggregates then there is no justification to treat them differently. The same would need to be replicated under the current LGPS Regulations

It is not CLG's current intention to proceed with modifications dealing with elected members. Rather than transposing the extant provisions of Schedule 8 of the LGPS Regulations 1997, this provides the opportunity to recast the provisions relating to a CARE scheme with a 1/60^th accrual and indexed at RPI plus 1.5%.

3.5.1 ADDRESSEES

The Chief Executive of:

County Councils (England)

District Councils (England)

Metropolitan Borough Councils (England)

Unitary Councils (England)

County and County Borough Councils in Wales

London Borough Councils

South Yorkshire Pensions Authority

Tameside Metropolitan Borough Council

Wirral Metropolitan Borough Council

City of Bradford Metropolitan District Council

South Tyneside Metropolitan Borough Council

Wolverhampton City Council

London Pension Fund Authority

Environment Agency

Police Authorities in England and Wales

Fire and Rescue Authorities in England and Wales.

National Probation Service for England and Wales

Town Clerk, City of London Corporation

Clerk, South Yorkshire PTA

Clerk, West Midlands PTA

The Secretaries of:

Local Government Association

LGPC

Employers' Organisation for Local Government (LGE)

PPMA

SOLACE

ALACE

CIPFA

New Towns Pension Fund

ALAMA

UCEA

NALC

SLCC

Society of County Treasurers

Society of District Council Treasurers

Society of Welsh Treasurers

Association of Metropolitan Treasurers

Society of London Treasurers

Association of Consulting Actuaries

Northern Ireland Public Service Alliance

Trades Union Congress

UNISON

TGWU

GMB

UCATT

Aspect

Amicus

NAPO

Association of Educational Psychologists

Audit Commission

NILGOSC

Confederation of British Industry

Business Services Association

Other Government Departments with public service pension interests:

GAD

DoE (NI)

SPPA

11 April 2007

Dear Colleague,

LOCAL GOVERNMENT PENSION SCHEME (ADMINISTRATION) REGULATIONS 2007

LOCAL GOVERNMENT PENSION SCHEME (AMENDMENT)(No 2) REGULATIONS 2007

1. On 29^th January and 14^th February, we consulted on two sets of draft regulations relating to the general administration of the scheme, to be read in conjunction with the LGPS (Benefits, Membership, Contributions) Regulations 2007. Paragraph 2 of the 14^th February letter highlighted the fact that the draft provisions were incomplete and that the further provisions would be circulated for comment at the earliest opportunity.

2. The consultation exercise on the LGPS (Administration) Regulations ended on 23 March and it will be some weeks before decisions on the comments made by consultees are made. In the meantime, it is felt that stakeholders should be aware of the progress that has been made to these draft regulations since 14^th February and, in particular, the main issues raised by consultees during the statutory consultation process.

3. What follows therefore is not an exhaustive list of responses but is an attempt to summarise those general issues and concerns that have been raised by consultees, either by way of individual written responses or from meetings attended by CLG officials, eg, OAG and Technical Group and Pension Officer Group meetings which have proved useful and informative. Although this letter concentrates on the responses to the Administration Regulations consultation exercise, attached at Annex A is a summary of the main points arising from the parallel exercise on the Amendment No 2 regulations.

General

4. Some concern has been expressed about the interaction between the Benefit and Administration Regulations 2007 and whether it would be possible to amalgamate the two. At this late stage, and in view of our undertaking to give stakeholders the longest possible lead in time, amalgamating the two sets of regulations would not be a practicable proposition. But this does not rule out the possibility that some re-ordering might be possible in the future.

5. Paragraph 3 of our 14 February letter sought comments on proposals to remove three specific sets of provisions from the new administration regulations, ie, return of contributions; abatement and forfeiture. Based on the comments received to date, it is likely that the amending regulations will reflect the support of respondents for retaining the right to a return of contributions, as opposed to the proposed refund of salary resulting from an incorrect deduction. There was also some support, though to a much lesser extent, to remove the powers that administering authorities have to abate LGPS pensions in accordance with their local policies. However, a minority of consultees expressed a strong desire for these powers to be retained and given that the local discretion provided to an administering allows an authority to choose whether or not to abate LGPS pensions, it is likely that no action will be taken as part of this exercise to remove the power. On forfeiture, there was clear support for its removal from respondents, but there are public policy issues if such a step was proposed. It is likely therefore that it will be retained in the new look scheme for the time being, but that the issue of its ongoing activity will be raised within the MOCOP group.

Specific Provisions

Regulation 7(3)

6. It has been suggested that this requirement may no longer be necessary. We will check the position with HMRC and delete the provision if permitted.

Regulations 11 and 14

7. Given that draft regulation 16 enables scheme members to purchase additional membership via additional monthly contributions, it has been suggested that the specific provisions of regulations 11 and 13 could be classed as redundant. We will explore the possibility of removing these provisions.

Regulation 12

8. There is a general belief that scheme members who belong to the reserve forces, should not be required to pay contributions in order for any lost membership resulting from reserve forces leave to count towards their pension. It has been suggested that in these circumstances, the contributions should be deemed to have been paid. If accepted, this would not affect the arrangement whereby the employers' contributions are recovered from the MoD, etc.

Regulation 13 - Contributions during trade dispute absence

9. Several commentators have suggested that the rate of 16% mentioned in draft regulation 13(1) should be revised to include an element representing the employer's contributions as well. This would however, represent a significant policy change and could not be effected without a further period of formal consultation. It is not therefore proposed to proceed with any consideration of this issue as part of the current exercise.

Regulation 16(2)(b) - Payment of additional monthly contributions

10. It has been suggested that it should be the relevant LGPS employer or administering authority who should be responsible for any medical certification, and not self-certified by the scheme member applying for an AMC.

Regulations 18 - 30 - Additional voluntary contributions

11. At the recent meeting of the LGE Technical Committee, it was proposed that this entire section of the draft regulations should be condensed to no more than several, general enabling powers and in doing so, remove all the prescription originally proposed. The LGE undertook to draft replacement provisions and we will consider their contribution sympathetically.

Regulation 35 - Accounts and Audit

12. At draft regulation 35(1)(a), it has been suggested that the reference should be to the "summary revenue account". We will check the position with CIPFA and amend accordingly.

Regulation 40 - Circumstances where revised actuarial valuations, etc)

13. There is some uncertainty whether the requirement to obtain a revised actuarial valuation, etc under draft regulation 40(2) when an admission agreement ceases to have effect, applies to all admission agreements, or just those subject to an admission agreement funds under draft regulation 34. We will consider this and clarify if required.

Regulation 45 - Administration costs increased by employing authority's level of performance

14. We have been advised that labelling these re-charge or recovery costs as administration charges may have VAT implications. To avoid this, the provisions could be amended so that the references are made to just "additional costs". There has also been some discussion about the need for two discretionary powers within the same provision. Draft regulation 45(1) states that draft regulation 45(2) applies where, in the opinion of the appropriate administering authority, it has incurred additional costs. Regulation 45(2) then goes on to offer a further discretion in as much that it then gives the administering authority the choice as to whether or not it intends to issue a written notice to an employer to recover the additional costs. Opinion is divided as to whether or not the word "may" where it appears in draft regulation 45(2) should be replaced with "must" and we will therefore be seeking further advice on the suitability of any such change.

15. The term "employing authority" appears frequently throughout regulation 45. We are aware that this may be too narrow a term as it may exclude LEA schools who have contracted out their payroll and pension scheme administration that has been contracted out to third party administrators. We have undertaken to replace this term with an alternative which encompasses all scheme employers involved in supplying payroll and other information to administering authorities.

Regulation 66 - Exchange of information by authorities

16. The comment has been made that these provisions might sit more comfortably in Part 7 (Policy Statements and Information) of the draft regulations. We will take this suggestion on board.

Regulation 70 - Annual benefit statements

17. It has been suggested that the date by which the first statements must be published under draft regulation 70(2) should be extended to April 2010. We will consider the implications of such a change and amend accordingly.

Regulations 72 and 81 - Mis-sold pension rights, etc

18. These provisions were included in the 1997 scheme regulations on the basis that as at some future date, they would be revoked. The FSA deadline for the re-instatement of mis-sold pension cases has long since expired and we have been asked whether these provisions can now be removed from the scheme. Given that the very small number of individuals with outstanding claims would still be able to seek redress directly from their personal pension plan provider, we would be sympathetic to any such change, although consideration would need to be given as to whether the new administration regulations should offer, perhaps, a six month final "cooling" off period before the curtain finally comes down. Another alternative would be to leave the existing provisions in the 1997 regulations on the statute book after 31 March 2008 though it is questionable whether this would have any merit given the very small number of cases involved.

Regulations 80 and 82 - Right to count credited period, etc

19. Given that they refer to periods of service and rights accrued under the 1997 scheme regulations, we are minded to accept the suggestion that draft regulations 80(5) and (6) and 82 should be deleted and inserted in the regulations dealing with the transitional arrangements.

Next Steps

20. The above comments (including those summarised at Annex A), together with those received in response to the statutory consultation exercise over the past few weeks, will be fully considered before any final decision is taken on the content and format of the new administration regulations. In this context, it is important to re-iterate the statement made in Brian Town's letter of 22 December that the new administration regulations will comprise all the extant provisions of the 1997 regulations, less those pertaining to the provisions on benefits and entitlement which feature in the Benefit Regulations 2007. On this basis, it cannot be assumed that policy changes to the extant provisions of the 1997 regulations raised by consultees for addition or deletion in the new administration regulations can be taken forward for consideration.

Yours faithfully,

Bob Holloway

3.5.2 ADDRESSEES

The Chief Executive of:

County Councils (England)

District Councils (England)

Metropolitan Borough Councils (England)

Unitary Councils (England)

County and County Borough Councils in Wales

London Borough Councils

South Yorkshire Pensions Authority

Tameside Metropolitan Borough Council

Wirral Metropolitan Borough Council

City of Bradford Metropolitan District Council

South Tyneside Metropolitan Borough Council

Wolverhampton City Council

London Pension Fund Authority

Environment Agency

Police Authorities in England and Wales

Fire and Rescue Authorities in England and Wales.

National Probation Service for England and Wales

Town Clerk, City of London Corporation

Clerk, South Yorkshire PTA

Clerk, West Midlands PTA

The Secretaries of:

Local Government Association

LGPC

Employers' Organisation for Local Government (LGE)

PPMA

SOLACE

ALACE

CIPFA

New Towns Pension Fund

ALAMA

UCEA

NALC

SLCC

Society of County Treasurers

Society of District Council Treasurers

Society of Welsh Treasurers

Association of Metropolitan Treasurers

Society of London Treasurers

Association of Consulting Actuaries

Northern Ireland Public Service Alliance

Trades Union Congress

UNISON

TGWU

GMB

UCATT

Aspect

Amicus

NAPO

Association of Educational Psychologists

Audit Commission

NILGOSC

Confederation of British Industry

Business Services Association

Other Government Departments:

GAD

DoE (NI)

SPPA

DEFRA

DfES

Annex A

LOCAL GOVERNMENT PENSION SCHEME (AMENDMENT)( NO 2) REGULATIONS

SUMMARY OF CONSULTATION RESPONSES

All of the proposals are being taken forward, but with some modifications.

Governance Statement

The first Statement including the new compliance report element will have to be published by 1 March 2008, rather than by 1 October 2007.

The relevant statutory guidance will be issued a reasonable time in advance, to allow authorities time to consult on their approach and prepare their Statement.

The statutory guidance will be circulated in draft to enable stakeholders' comments/suggestions to be considered before the guidance is finalised.

A working group of the Governance Subgroup, which will do the initial work on preparing the guidance, has been constituted.

Annual report

CLG was not proposing that pension funds should need to have an annual actuarial valuation, in order to provide the required information on funding. The wording of the regulation will be changed to make it clear that it is only necessary to state the funding level as at the last triennial actuarial valuation. (If a fund wishes to provide more recent funding information that they have anyway for other purposes, they can do so.)

The report will not now have to include the whole text of pension fund documents that are already published elsewhere - ie the Funding Strategy Statement, Statement of Investment Principles, Governance Policy Statement, and Communications Strategy. Instead, the annual report should say that these documents exist, and give clear information on how they can be accessed/obtained - ideally in a range of formats so that all Scheme interests can see them easily (for example in hard copy by post, on a website, etc). The fund authority may choose to include a summary of one/more of these documents in their annual report, as is customary now in some cases.

The first annual report will cover the financial year [2007/2008] and its publication date will be determined following a meeting with CIPFA, the Audit Commission and other interested parties to be held shortly.

The regulation will be amended so that annual reports on authorities' performance on administration - as proposed in draft regulation 76C(2)(f) - will become an additional element in the pension fund annual report, in relevant instances.

Pension Administration Strategy

There is no longer any deadline or time limit associated with this provision. Administering authorities may make use of the power when convenient.

The wording of the regulation is intended to allow authorities to adopt a different approach to different types of employer if they consider this appropriate (for instance, large and small employers).

Various drafting improvements have been suggested and are being considered - for example, the definition of "employing authorities" should be broad enough to include all bodies from whom the administering authority requires accurate and timely information relating to scheme members.

.

Pension focal points (pension liaison officers) are intended to be covered in draft regulation 76C(2)(a). Non-statutory guidance to be issued later will include material on this topic.

The regulation will seek to make clearer the distinction between the dual roles that an administering authority has - as the pension fund administering authority and also as an employing authority.

Additional costs charging power (poor performers)

Various drafting improvements will be made - for example to seek to avoid any potential problems with VAT.