An extraordinary story comes from Mr George who tells us that Government is to add to regulation and stop councils exercising their right to raise or drop contributions to LGPS schemes as they see fit. The Kensington council has decided to stop paying the money it’s been ploughing into the LGPS (despite their section being 200% + over funded); rather than taking money out, they’ve decided to use the money to help the victims of the Grenfell disaster.
A stark contrast to the Ministry below.
Such initiative should be praised by public and politicians
This week we heard from the Pension Minister that he wanted to see money being used for the good of society , not to please accountants and actuaries who are behind the triannual valuations which the Government’s Ministry of Housing, Communities & Local Government.
This Ministry isn’t far from the DWP or the Treasury where Torsten Bell has key passes. Perhaps he could spend a day with Michelle Warbis of MHCLG explaining that the world is changing.
We need local councils spending money on Britain so that in five or ten years, we can look back to 2025 as the year that we put behind the over-protection of surpluses. LGPS pays pensions by statutory command, if the schemes fall into disrepair, councils have to up contributions, if it goes the other way, they should be able to reduce contributions when they need to. Birmingham need the money now but are being told to wait till later when it can be deemed proper to follow “advice”.
Here is what LGC tell us;
The government plans to tighten rules about reducing local authority pension contributions after one council’s rate was reduced to zero.
Employer contributions to the Local Government Pension Scheme are usually set every three years through the triennial valuation, but Kensington & Chelsea RBC asked its pension fund to reduce its rate outside of this process because it had a large surplus.
The fund agreed, setting a 0% contribution rate for 2025-26 despite opposition from its actuary. The move saved the council £8m.
The council used a process set out in LGPS regulation 64A to request a review of employer contributions between valuations, but now the Ministry of Housing, Communities & Local Government has written to pension funds saying that using this mechanism “in the context of a fund surplus is not in line with the original context and intention”.
The letter from Michelle Warbis, deputy director, local taxation and local government pensions, says the regulation was designed to manage changes in employers’ liabilities or their ability to meet their obligation.
LGC has seen the mail and quote her:
“MHCLG considers that revised contribution rates should not be applied to local authority employers in order to manage surpluses or deficits that have not yet been confirmed as part of the valuation process.”
There is more. As a result, the government is now planning to change the regulations. Ms Warbis wrote:
“As it is clear that the intended and actual usage of 64A are not aligned, the government intends to consult on changes to the regulations as they apply to revision of contribution rates (including on the role of the fund actuary).”
Kensington & Chelsea RBC told LGC it had not been contacted by the government or the Pensions Regulator since last month’s decision by the pension fund’s investment committee, and the decision to reduce the council’s contribution rate to zero in 2025-26 would go ahead. As this blog has already said
“good on Kensington”
In a more compliant mood, the LGPS Advisory Board said it would
“continue to work closely with MHCLG to input into and bring forward proposals that better deliver the policy intent”.
It’s time that Government departments work together and take their position on pensions from the pension minister.
‘Speaking for me, the Chancellor and the Prime Minister” Bell has clear ambitions. pic.twitter.com/ODWcsNqQh5
— Henry Tapper (@henryhtapper) March 11, 2025
I recommend LGC for those who need the answers as prescribed by MHGLC
- Can local authorities reduce their pension contributions outside of the triennial valuation process?
- What is the role of the pension fund actuary in the LGPS?
- What changes is the government planning to make to the LGPS regulations?
- What is the LGPS Advisory Board’s role in the consultation process?
- What is the government’s policy intent for the LGPS?
