The Local Government Pension Scheme Advisory Board has written to local government minister Jim McMahon asking that the Ministry for Housing, Communities and Local Government stop putting the cost of new tasks on pension funds, including the McCloud remedy implementation. 

In a letter on 30 July, SAB chair Cllr Roger Phillips said central government should pay for these tasks, citing the ‘new burdens doctrine’. This aims to keep pressure on council tax down by requiring the net additional cost of bureaucratic burdens placed on local authorities to be fully costed and funded by central government. 

“MHCLG officials have taken the position that as the money to fund these extra requirements comes from the pension fund in the first instance, central government is under no obligation to follow the new burdens doctrine,” Rogers wrote. This view seemed to “flow from a misconception that the pension fund is itself a separate source of funding”, he added.   

Its contributions come from employers alongside employee contributions and investment income, Rogers pointed out, with employers being largely local authorities and admitted bodies, and asked McMahon “to ensure that MHCLG fully abides by the new burdens doctrine and does not seek to exempt LGPS-related policies from consideration under it”.  

Recent extra costs include the McCloud remedy implementation, LGPS fund annual reports and accounting returns. Mallowstreet understands McCloud accounts for a significant proportion of recent increases in governance and administration costs in the LGPS, through software system changes and additional staff.  

The Board stresses that the McCloud costs were caused by a government decision – to protect some scheme members based on age when public sector schemes were switched to career average, which was ruled to be discriminatory, with a remedy ordered by the courts. In practice this means schemes need to make two benefits calculations, one based on final salary and one on career average, paying whichever offers the greater pension to a particular member. 

Three years ago, SAB already wrote to former minister Luke Hall asking for extra funding to support the McCloud remedy. Whether the new government will be more open to carrying these costs than the last is unclear. SAB is hoping the new minister will look at the issue afresh. The MP for Oldham West, Chadderton and Royton was leader of Oldham Metropolitan Council for five years until 2016. 

MHCLG has been contacted for comment.

Should central government cover the costs created by the implementation of the McCloud remedy?