LGPS funds race to complete McCloud data remedy

Minutes released by the National LGPS Technical Group for a meeting on March 11 contain a spreadsheet collating responses from 84 of the 98 UK-administering authorities regarding their progress on McCloud data collection.

The majority of schemes have requested the necessary data and are cleansing the results, although some have have expressed concerns over how to treat employers refusing to provide data and how to account for employers that no longer exist.

Some schemes have obtained additional resources to complete the exercise. There have, however, been problems for schemes in obtaining hours and breaks information, while the upcoming valuation year has also created issues.

Meanwhile, many schemes have opted not to check the accuracy of the data themselves, instead relying on employers to have checked their data.

The McCloud scope may widen

Reforms made in 2015 to the judicial and firefighters’ pension schemes were found in 2018 to have been unlawful on the basis of age discrimination by the Court of Appeal. 

This ruling, known as the McCloud judgment, impacted all main public service pension schemes, including the LGPS.

As a result, every member active in a scheme before the introduction of the career average revalued earnings scheme will be eligible for the higher of either their final salary benefits or the Care benefits accrued since these were introduced.

LGPS funds are in the process of identifying members that sit within the scope of the McCloud ruling and reviewing the benefits they have paid to eligible members since April 1 2014.

In March, the Leicestershire County Council Pension Fund reminded employers of their June 30 2022 deadline for scheme member hours changes and service breaks covering the period of April 1 2021 to March 31 2022.

It warned employers that recent changes to legislation introduced by the public service pensions and judicial offices bill may widen the scope of members affected by the McCloud ruling.

“There may be a further exercise where data in respect of scheme members previously considered ‘out of scope’ may be required,” Leicestershire pensions manager Ian Howe wrote to employers. 

“It is expected that this will be conducted after the initial data is loaded when a check for any gaps in data is conducted.”

The government needs to provide more guidance

According to the National LGPS Technical Group’s March minutes, most schemes have requested the necessary data from employers and are cleansing the results.

There are concerns, however, over how to treat employers that no longer exist, and over what to do if employers refuse to provide data.

Schemes have told the Technical Group that some employers are struggling to provide the necessary data, while others are not responding to requests.

“From what we are aware, nobody has refused outright to review the data sent to them,” the Northamptonshire Pension Fund’s response stated, adding that “there has been a large number of employers who have received the data sheets and not responded”. 

“This could be that they agree with the data, so haven’t felt it necessary or that they haven’t reviewed it. We have sent a number of comms advising the urgency, and had to agree the approach that if they have not returned the sheets that they are happy with what we have issued,” it continued. 

Ian Colvin, head of LGPS benefit consulting at Hymans Robertson, said: “One of the things that LGPS funds are keen to know is how they will be expected to treat member records where there is no possibility of obtaining the necessary data.”  

He noted that the government “will need to provide clear guidance on the use of assumptions in such cases. If there is not consistency, this could open up the possibility of further legal challenge”.

The responses paint a mixed picture concerning data checks. Some schemes are checking the data they receive themselves ranging from sample spot checks to more detailed assessments. 

Other schemes, meanwhile, are leaving this to their employers. Some of these companies are being asked to sign an indemnity.

The West Sussex County Council Pension Fund said in its response to the Technical Group that it is carrying out initial checks to ensure the data is being provided in the correct format.

“Due to the large data sets we are unable to do any details on checking the data for accuracy, as we are expecting this to come out of error reporting when data is being uploaded,” its response stated.

One pensions administration company, meanwhile, told Pensions Expert that it had been held back in carrying out the exercise for a LGPS fund as it waits for the government’s response to its consultation on McCloud. 

Funds should review their resource requirements

The bulk of LGPS schemes are working to keep their members informed throughout the McCloud process, according to the spreadsheet.

The majority of schemes are communicating this process through newsletters for members, “though direct contact with employers seems to be the practised approach”, the minutes observed.

Around half of the LGPS funds have secured additional resources to carry out the McCloud data remedy.

“It is a good idea for funds to carry out a review of their resourcing requirement, bearing in mind that McCloud will not be the only additional project that funds will [be] undertaking over the next 12 months,” Colvin said.  

“The introduction of the Pensions Regulator’s single code of practice, the Pensions Dashboards, the Goodwin ruling, etc, all mean that there will be significant pressure placed on LGPS teams.”

The East Riding Pension Fund told the technical group that while it had not so far secured additional resources for the exercise, it is seeking approval for two individual posts from its administrative authority to support future projects, including McCloud and on pensions dashboards.

The North Yorkshire Pension Fund, meanwhile, said that it had also not received additional resources, adding that there are “major difficulties being experienced just filling existing vacancies at the moment”.

Graeme Hall, operations manager at XPS Administration, warned that the process would be challenging for those that have not received more resources to carry out the exercise.

“It’s not just the administrators, it’s also the employers,” he said. “They’re going to have to go back over eight years’ worth of data [...] that’s not a small job that they’re going to have to undertake.

“I know some employers are looking to try to bring more people in to do that. It’s a lot of work to do in a very short period of time.”