When New Fair Deal was published in October 2013, it did not apply to local authorities. The Government made proposals in May 2016 to bring local authorities within the scope of New Fair Deal, but after consultation it has decided that this would not be in the best interests of Local Government Pension Scheme (LGPS) administering authorities, members or employers. It now intends to consult on new proposals by the end of 2018.

New Fair Deal

New Fair Deal does not apply to local government staff who are compulsorily transferred to an independent provider by allowing them continued access to the LGPS. However, the Best Value Staff (Pensions) Direction 2007 (2012 for Wales) does. One key difference between New Fair Deal and the Direction is that the Direction permits a contractor to choose either the LGPS or a broadly comparable scheme in order to give the transferring public sector workers continued access to a defined benefit pension. New Fair Deal does not, unless there are exceptional circumstances.

The Government has said that the following issues were identified during consultation:

  • Concern over the additional administrative burdens for the LGPS funds arising from the increase in employer (contractor) numbers

  • Concern that the proposals would mean that all employers in the LGPS would be caught, not just local authorities. There are a number of charities and voluntary organisations which participate in the LGPS as 'community' admission bodies. Under the Government's plans, they would have been compelled to ensure that their contractors secured LGPS admission

  • Whether transitional provisions are needed to prevent individuals protected by the existing Direction framework from losing their protection (for example, on a re-tender).

The Government has said that it will consider all these points when formulating new proposals "to achieve a workable, efficient system of pensions protection for local authority employees".

Other amendments

The May 2016 consultation included other proposed amendments to LGPS Regulations covering a range of matters. Amendments that will take effect include:

  • Confirming that admission agreements can have retrospective effect. Although there was some concern that this could discourage the prompt signature of admission agreements by new scheme employers, particularly in the case of outsourcings, the Government wanted to make clear that an admission agreement can have retrospective effect. It hopes to take a wider look at admission body status in the consultation to be issued later this year
  • Granting members who had transferred in from another public service pension scheme, and who would have met the statutory underpin criteria if they had been in the LGPS, underpin protection whereby they receive the better of the benefits they would have received under the 2008 Scheme or the 2014 Scheme. Although the responses to this proposal were almost uniformly negative, the Government has implemented it to bring the LGPS into line with other public service pension schemes.

Two proposed amendments are not being taken forward. As a result, there will not be a wider range of options for members to access benefits from AVC arrangements. In addition, ‘automatic’ aggregation of pension accounts will continue. This occurs when a member with a deferred pension account becomes an active member again.