In previous newsletters, we told you about the McCloud judgment. This is commonly used to refer to the court judgment which ruled that the protection given to older members of the public service pension schemes, when they reformed to CARE Schemes, was discriminatory.
For the LGPS, the discrimination related to the underpinning of the pension a member would receive for pensionable service during the period 1 April 2014 to 31 March 2022, as this protection was only applied to members who, on 31 March 2012, were within 10 years of reaching their Normal Pension Age (NPA) at the time. Members who benefited from this protection would, on their retirement, receive the higher of their CARE pension or the pension they would have received if the LGPS had continued to be a final salary scheme. This protection is referred to as the statutory underpin.
The current position hasn’t really changed - the Government still intends to extend the statutory underpin to all members who were previously excluded because they were more than 10 years away from reaching their NPA. In addition, the Government aim to publish the necessary regulations to amend the LGPS in early September. The amendment regulations will apply retrospectively from April 2014, and are coming into force on 1 October 2023.
The underpin calculation will be based on your final pay at the underpin date, even when this is after 31 March 2022. There will be two stages to the underpin calculation:
- The first on the ‘underpin date’ – this will be your date of leaving the Scheme or, if earlier, your NPA. The calculation will be based on the CARE pension you’ve built up over the period 1 April 2014 – 31 March 2022, as well as the final salary pension you would’ve built up over the same period, had the final salary scheme still been in place.
- The second when the benefits are paid
It’s unlikely that many members will see a change to their LGPS benefits. This is because CARE pension builds up much faster than final salary pension. For example, £10,000 of pensionable pay would build a CARE pension of £204.08, whereas the final salary pension would only be £166.67.
However, even though the statutory underpin may rarely apply, it will be an automatic protection. This means you won’t need to apply for it. If you’re eligible to benefit from it, you’ll get it.