Consultation outcome

Equality analysis for Local Government Pension Scheme (England and Wales) on addressing unlawful age discrimination: March 2023

Updated 6 April 2023

This document records the analysis undertaken by the Department for Levelling Up, Housing and Communities (DLUHC) to fulfil the requirements of the Public Sector Equality Duty (PSED) as set out in section 149 of the Equality Act 2010. This requires the department to pay due regard to the need to:

1. eliminate unlawful discrimination, harassment and victimisation and other conduct prohibited by the Act

2. advance equality of opportunity between people who share a protected characteristic and those who do not

3. foster good relations between people who share a protected characteristic and those who do not.

The protected characteristics which should be considered are:

• age
• disability
• sex
• gender reassignment
• marriage or civil partnership
• pregnancy and maternity
• race
• religion or belief
• sexual orientation.

Please note that in relation to the protected characteristic of marriage and civil partnerships the department is required to have due regard only to the first point in the first paragraph above.

This equalities impact assessment builds on that undertaken by the government in respect of the Public Service Pensions and Judicial Offices Act 2022^{[footnote 1]}.

Section 1

1.1 Policy/Service

Background

In 2018 the Court of Appeal ruled that the transitional protection in the 2015 public service pension reforms was directly discriminatory on the grounds of age and indirectly discriminatory on the grounds of sex and race in the Firefighters’ and Judges’ schemes, often informally referred to as the ‘McCloud’ and ‘Sargeant’ cases. Following this judgment, in July 2019 a Written Ministerial Statement confirmed that the government believed the ruling had implications for the main public service pension schemes, including the Local Government Pension Scheme in England and Wales (LGPS), and that the discrimination would be addressed in all the relevant schemes, regardless of whether members had lodged a legal claim.

Since then, we have been considering the changes that would remove the unlawful discrimination from scheme regulations. In February 2020, technical discussions were held with the national Scheme Advisory Board to discuss and get feedback on initial proposals. In July 2020, we commenced a full public consultation on proposals to remove the discriminatory provisions.

Responses were largely supportive of the key aspects of our proposals to remove the discrimination. In May 2021, having considered the responses, we published a Written Ministerial Statement (WMS) setting out at a high-level how the government would rectify the discrimination. In the summer of 2021 the government introduced a bill before Parliament to give it the powers needed to implement the remedy across the various public service pension schemes affected. The Public Service Pensions and Judicial Offices Act 2022^{[footnote 2]} concluded its passage through Parliament in March 2022. In relation to the LGPS, Chapter 3 of Part 1 of the Act gave DLUHC powers to make regulations rectifying the discrimination.

This equalities impact assessment has been published alongside the government response to our 2020 consultation containing details of the remedy we plan to implement in regulations. This equality impact assessment sets out the impacts of the changes we have detailed in the Government response.

The government need to take decisions on a number of isolated issues relating to the LGPS McCloud remedy and we will consult on these in the spring.

Existing transitional protection in the LGPS

In the McCloud and Sargeant cases, the claimants had challenged transitional protection given to older workers when the Firefighters’ and Judicial Pension Schemes were reformed in April 2015. These reforms were part of a wider programme of reform to public service pension schemes, implemented following the report of the Independent Public Service Pensions Commission in March 2011^{[footnote 3]} and a HM Treasury Green Paper in November 2011^{[footnote 4]}. The Public Service Pensions Act 2013 was enacted to provide for a new benefits and governance framework across all relevant schemes. Principally, the main changes that were implemented were:

• a move from a final salary benefit structure to a career average benefit structure, and
• for most schemes, an alignment of a member’s normal pension age with their state pension age.

As part of the package of reforms, members nearing retirement in all schemes were given transitional protection. These protections were intended to recognise that older members had less time until their retirement and therefore would have less time to adapt their retirement plans. The high level aims for this protection were set out on p10 of the November 2011 Green Paper:

for those public service workers who, as of 1 April 2012, have ten years or less to their current pension age, the government’s objective is that they will see no change in when they can retire, nor any decrease in the amount of pension they receive at their current Normal Pension Age.

In the LGPS in England and Wales, the changes to the scheme’s benefit structure were implemented from 1st April 2014. All active scheme members moved from the final salary scheme into the new career average scheme from this date, including those eligible for transitional protection.

Transitional protection for those eligible was provided through a statutory underpin, with details contained in regulation 4 of the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 (SI 2014 No.525).

Under regulation 4, underpin protection provides that when a member who originally qualified for the underpin reaches their underpin date (the earlier of the date they leave the scheme with an immediate entitlement to benefits and the date they reach their final salary normal pension age, usually 65), their final salary scheme and career average scheme benefits are compared. If the final salary scheme benefits are higher, an adjustment is made to their career average scheme benefits to make up the shortfall. If the career average scheme benefits are higher, no changes are necessary.

To qualify for underpin protection, members currently have to:

• have been within ten years of their final salary scheme normal pension age (normally 65^{[footnote 5]}on 1 April 2012,
• have been active in the LGPS on 31 March 2012,
• have gone on to be active members in the career average scheme, without having had a break in service of more than five years, and
• leave the scheme with an immediate entitlement to pension benefits, or attain age 65.

The changes

Through the McCloud and Sargeant cases, the Courts identified unjustified direct age discrimination, as well as indirect sex and race discrimination, in transitional protection arrangements in the Judicial and Firefighters’ Pension Schemes. In relation to the LGPS, this difference in treatment exists between two groups of LGPS members:

• those who were in service on 31 March 2012 and were within ten years of normal pension age on 1st April 2012, therefore benefiting from underpin protection; and ‘better off’ than the second group
• those who were in service on 31 March 2012 and were more than ten years from normal pension age, and so were not eligible for underpin protection and therefore “worse off” than the qualifying members (as they were not guaranteed a pension of at least the level they would have received in the final salary scheme).

The changes we sought views on in our consultation set out how we would attempt to remove the difference in treatment found in the McCloud case from LGPS scheme regulations. We also proposed additional changes to ensure that the underpin works effectively and consistently for all qualifying members following the extension of the underpin to younger members. Having considered the responses submitted, our final approach is detailed below.

Principally, we will remove the difference in treatment by removing the age-related aspect of the qualifying criteria for the underpin. This would extend the application of the underpin and mean that qualifying members active in the LGPS on or before 31 March 2012 who subsequently joined the career average scheme without a break in service of more than five years would receive transitional protection. Currently, scheme regulations require that a member must have been in active service on 31 March 2012 itself to have underpin protection. In our 2020 consultation, we proposed to retain this rule. However, following consideration of this matter since then, we have decided that this is likely to disadvantage members who have taken career breaks, a group which is statistically more likely to be female. As a result, the underpin rules will be amended so that protection will apply to members who were in active service on or before 31st March 2012 and meet the other qualifying criteria.

The ‘underpin period’, the period over which a qualifying member’s final salary and career average benefits are compared, currently begins on 1 April 2014 and runs until a member’s ‘underpin date’. The underpin date is the earlier of a) the date the member leaves active service and b) the date they reach their final salary normal pension age. This means that, for the cohort of members originally protected, the last possible underpin date is 31 March 2022, as this is the last date a member in the protected cohort can reach their final salary scheme normal pension age. Having considered how to equalise treatment between the unprotected and protected groups, the government has decided that scheme regulations will provide that underpin protection cannot continue beyond 31 March 2022 for any qualifying member. From 1 April 2022, all LGPS members will accrue pension on a career average basis, without underpin protection. This is an important element of ensuring that, prospectively, LGPS benefit accrual applies equally for all members, whether in scope of underpin protection or not.

Where a qualifying member leaves active service prior to 31 March 2022, or where an active member reaches their final salary scheme normal pension age (normally 65) before this date, underpin protection will also cease to accrue. This ensures that, subject to the overriding cessation of underpin accrual at 31 March 2022, the underpin will operate in line with the existing scope of the protection in the LGPS– i.e. that qualifying members should not receive any decrease in their pension at their normal pension age.

Where a member continues in active service beyond March 2022, they will retain a final salary link, and it will be their pay at the point of leaving the LGPS (or at age 65, if earlier) which will be used in their underpin calculation. This should ensure that older and younger members have an equivalent level of protection.

We are also making changes to some other aspects of the underpin to ensure it works effectively and consistently for scheme members in scope of the remedy. The main changes can be summarised briefly as follows:

• Members returning to LGPS employment - At the moment, the underpin applies at a single point in time and, if a member returns to active membership at a later date (potentially in a higher paid post), there is no re-calculation of their underpin (even if they may have a continuing final salary link). Under the revised regulations, where members have not yet ‘crystallised’ their benefits and return to work without a disqualifying break in service (a continuous break of five years or more in active membership of a public service pension scheme), they will retain underpin protection, subject to rules on aggregation which will be finalised after the next consultation^{[footnote 6]}. This should particularly benefit women, who are more likely than men to have employment breaks^{[footnote 7]} (for example, due to caring responsibilities) and, overall, ensure that the underpin applies more fairly across the LGPS membership.

• Immediate entitlement - Under the current underpin regulations, members must have an immediate entitlement to benefits upon ceasing to be an active member, in order for the underpin to apply. This requirement means that members leaving the scheme before age 55 do not usually benefit from underpin protection. We consider that this would mean older workers will be more likely to obtain underpin protection than their younger colleagues (as they would be more likely to remain in active membership until their 55th birthday). At the moment, this rule only impacts on a handful of individuals^{[footnote 8]}, as most members had to be at least 55 in April 2012 to obtain underpin protection. However, to avoid creating a difference in treatment between older and younger workers which is likely to become bigger over time, the requirement for members to have an immediate entitlement will be removed. Instead, underpin protection will apply to members leaving the LGPS with a deferred or immediate entitlement to a pension.

• Introduction of a two-stage process - Under current provisions, the underpin calculation takes place at a single point in time – a member’s underpin date, being the earlier of the date a member leaves active service with an immediate entitlement to a pension, and the date they reach their final salary scheme normal pension age. This has its advantages, such as in respect of administration. However, in the round, we consider a two-stage underpin process will provide a more robust form of protection. Under this, all protected members will have an ‘underpin date’ and a ‘final underpin date’:

  • the purpose of the ‘underpin date’ would be to provide for a provisional assessment of the underpin, generally at the earlier of a member’s date of leaving active service and the date they reach their final salary scheme normal pension age.
  • The purpose of the final underpin date would be to provide for a final check at the point the member’s benefits from the scheme are ‘crystallised’. The check would be designed to ensure that members always receive at least the higher of the pension they would have been due from the career average scheme and the final salary scheme, taking into account the impact of factors like early/ late retirement adjustments

Together and individually, the changes are intended to be beneficial for scheme members, and are intended to ensure that the underpin works for all members with underpin protection in a consistent and effective way. The extension of underpin protection to those with breaks in employment may be more likely to benefit women, who are more likely to have time out of the labour market^{[footnote 9]}, and therefore have positive affects in relation to the protected characteristics of sex. The extension of underpin protection to those who leave with a deferred or immediate entitlement is likely to mean younger members would be more likely to benefit from underpin protection and therefore have positive effects in relation to the protected characteristics of age.

To avoid creating new differences in treatment in the LGPS, the amended regulations will apply retrospectively from 1 April 2014, ensuring that all qualifying scheme members are subject to the same detailed provisions.

Section 2

2.1 Summary of the evidence considered in demonstrating due regard to PSED

In considering the impacts of these reforms on the LGPS membership, we have been supplied with and considered analysis from the Government Actuary’s Department (GAD) on how the package would impact on different sections of the LGPS membership. This was published alongside the consultation in 2020 and has been republished alongside this equalities impact assessment. The data used in the GAD analysis was LGPS fund membership data as at 31st March 2019, collated from each administering authority and provided to GAD in late 2019. Later this year, we plan to publish an updated equalities impact assessment when final regulations are being made.

Full information regarding the assumptions used in GAD’s analysis and the limitations of the analysis are set out in that document. However, we draw attention to the following points in particular:

• GAD’s analysis has principally considered those who would benefit from the remedy as described in the Government response So members who already have underpin protection under existing provisions (being those aged 62 and older on 31 March 2019) have not been considered directly.
• GAD’s analysis is based on active membership records totalling 1.68 million. The analysis has been conducted on a per-member basis, meaning additional records where members have more than one active employment have been removed.
• GAD’s analysis on the number of members who will have underpin protection is limited by the data available. In relation to aggregation, the government intends to reconsult on whether this will be required where members have had service gaps. If there is an aggregation requirement, it will not be possible to know what aggregation decisions are taken by members in the future and GAD’s analysis on this feature may therefore be limited. However, GAD does not anticipate these limitations would significantly change the results of the analysis. The proportion of the qualifying membership which is eventually likely to be better off as a result of underpin protection is strongly dependent on what future pay growth is in the LGPS. In this analysis, the annual future pay growth assumption used is CPI + 2.2%. This is in line with the HMT Directions for the 2016 scheme valuation. If future pay growth differs from this it may impact on the proportion of the membership who will benefit from underpin protection. Significantly, if future pay growth is closer to more recent pay growth trends in the public sector, it is likely more members will benefit from the reformed scheme. In that situation some of the trends noted in this assessment of who the underpin is more likely to benefit may not materialise.
• The analysis is based on the LGPS’s active membership as at 31 March 2019. Under our remedy, the changes to the underpin would apply retrospectively to 1 April 2014. We would therefore expect that a number of additional members would benefit from our changes (i.e. those who left active membership before 31 March 2019, but would otherwise meet the underpin qualifying criteria). However, we do not anticipate this limitation would significantly change the results of the analysis.
• The analysis is based on an “average” member at each particular age. Allowing for variations in individual members’ future service or salary progression could produce different figures.

Public service pension schemes do not hold complete or up-to-date data on the other protected characteristics under the Equality Act 2010. This data is therefore not currently available to analyse. Whilst it was not feasible to acquire such data, it was also considered not necessary to do so given the close match of available data with data for the public sector as a whole, which has therefore been used for remaining protected characteristics, where available.

For the other protected characteristics where there is data, we have considered the Annual Population Survey (APS) 2021-22. We have considered economic activity status and sector of workers, by race, disability, marital status and religion in the UK in 2021 and 2022. As we are not aware of available datasets covering these characteristics for LGPS members specifically, we have used the public sector workers category as a proxy for LGPS membership.

Protected characteristic	Data collected	Data reference	Country
Race, disability, marital status, religion	Economic activity status and sector of workers, by ethnicity, disability, marital status and religion, UK: 2021 to 2022	APS, 2021-22	UK
Sexual orientation	Data unavailable
Gender reassignment	Data unavailable
Pregnancy and maternity	Data unavailable

The APS is compiled from interviews for the Labour Force Survey (LFS) along with additional regional samples. The APS comprises the main variables from the LFS, with a much larger sample size. Consequently, the APS supports more detailed breakdowns than can be reliably produced from the LFS. The APS survey has been used for race, religion, marital status and disability. Data on sexual orientation, gender reassignment, pregnancy and maternity (other groups covered by the Equality Act 2010) is not available.

To help maximise the evidence available, in our consultation we asked respondents if they were aware of additional data sets that would help assess the potential impacts of the proposed changes on the LGPS membership, in particular for the protected characteristics not covered by the GAD analysis. However, of 96 responses in total, no suggestions were put forward for additional data sets that may help in this respect. We will seek further data sets again in our next consultation.

2.2 Assess the impact

Age

The changes outlined here are intended to remove age discrimination, which had been found to be unlawful in the firefighters’ and judicial pension schemes, from the LGPS rules governing the underpin. After the changes are implemented, we would expect there to be greater equality in how the underpin applies to members based on their age.

The data shows that there would remain some differences in how the underpin applies across age ranges, and we set out below why this is the case.

Data

March 2019 data supplied to GAD by LGPS administrators included an age breakdown of active LGPS membership, showing the following age distribution^{[footnote 10]}across the scheme:

Age range	Total number of members (000s)	Proportion of total
16-20	26	1.6%
21-25	86	5.1%
26-30	122	7.3%
31-35	153	9.1%
36-40	189	11.3%
41-45	202	12.1%
46-50	261	15.6%
51-55	278	16.6%
56-60	222	13.3%
61-65	112	6.7%
66-70	20	1.2%
71-75	5	0.3%
All	1,676	100.0%

As can be observed, LGPS active membership is not uniformly distributed through age ranges and the group who make up the highest proportion of the total membership are in the 51-55 age group.

Based on the remedy we are implementing, and described at a high-level in section 1, GAD have analysed which members would qualify for the revised underpin, and broken this down by age^{[footnote 11]}:

Age range	Total number of members expected to qualify (000s)	Proportion of total
16-20	0	0.00%
21-25	1	0.20%
26-30	12	1.80%
31-35	39	5.80%
36-40	68	10.10%
41-45	84	12.40%
46-50	135	20.00%
51-55	171	25.30%
56-60	145	21.50%
61-65	20	3.00%
66-70	0	0.00%
71-75	0	0.00%
All	675	100.00%

GAD have also considered which members would benefit from the revised underpin (i.e. where the final salary benefit is higher) and broken this down by age^{[footnote 12]}:

Age range	Total number of members expected to benefit (000s)	Proportion of total
16-20	0	0.00%
21-25	1	0.30%
26-30	9	2.90%
31-35	25	8.10%
36-40	35	11.30%
41-45	45	14.60%
46-50	89	28.80%
51-55	105	34.00%
56-60	0	0.00%
61-65	0	0.00%
66-70	0	0.00%
71-75	0	0.00%
All	309	100.00%

Analysis

Figure 2 in the GAD analysis presents the findings of the above tables in a graph. This shows that, broadly, the likelihood of a member either qualifying for the underpin or benefitting from the underpin reflects the age profile of the LGPS generally.

However, it is also clear from figure 2 that there are some differences in how the underpin would apply based on age. In particular:

• members between 41 and 60 are more likely to qualify, and those between 16 and 40 less likely to qualify.
• members between 41 and 55 are more likely to benefit (i.e. where the final salary pension would be higher), and those between 16 and 35 and over 55 are less likely to benefit.

Qualification date

These trends reflect a number of points. Significantly, in relation to qualification for the revised underpin, it reflects that under our remedy members would need to have been in active membership of the LGPS on or before 31 March 2012 to qualify for the underpin. The proportion of members active in the scheme as at 31 March 2019 who had been members of the scheme on or before 31 March 2012 is lower for younger members, as experience shows they have a higher withdrawal rate from active scheme membership. We would also expect new entrants after 31 March 2012 to be younger, on average, than the average age of the total membership as at 31 March 2012. This is particularly the case as we move further from 31 March 2012, as more younger people enter the workforce.

Post-31 March 2012 joiners

Requiring members to have been in active service on or before 31 March 2012 reflects the fact that transitional protection across public service pension schemes was always designed to help members with the transition from the old scheme designs to the new (principally, in the LGPS, in relation to the move from a final salary to a career average structure). We therefore consider it would be inappropriate to grant underpin protection to those joining the scheme on or after 1st April 2014, as they joined the scheme when it had already been reformed.

41 consultation responses highlighted concerns that members who joined the LGPS in the final salary scheme after 31st March 2012 would be ineligible for underpin protection under our proposals. Some of those responses considered that this approach could potentially discriminate against members joining the final salary scheme between 1st April 2012 and 31st March 2014 on grounds of age. It was noted that, on average, scheme members joining in this period were likely to be younger than a comparator in service on 31st March 2012. Others, particularly scheme administrators, expressed concerns that a loss of a future legal challenge by the government in relation to these members would potentially create significant additional administrative impacts. As a result, it was suggested the government should carefully consider its position to avoid those additional complexities.

It is acknowledged that more recent joiners will, on average, typically be younger, and that there may be more women and minority ethnic groups amongst new joiners. However, extending underpin protection, which was designed to be transitional, to members who would never reasonably have expected this is not considered justifiable. Changes to pension arrangements or other terms and conditions of employment by their nature impact differently on those who join or leave employment at different times. The government therefore remains of the view that the limited impacts on these protected groups are justified in the context of its aim of removing earlier discrimination in a manner which is proportionate, does not create new unjustifiable discrimination and is affordable.

The purpose of the original transitional protection was to protect those members closest to retirement and already in public service, as they had the least time to prepare for the changes (although the Court of Appeal decided that this did not justify the subsequent discrimination).

This rationale never applied to those who joined the schemes in the year commencing 1 April 2012, or in subsequent years, after the former coalition government’s proposals had been made known in November 2011. The publication of the final IPSPC (Hutton) reform proposals^{[footnote 13]}, acceptance of those by the coalition Government^{[footnote 14]}and the subsequent proposed introduction of the reformed schemes in the White Paper ‘Good Pensions That Last’^{[footnote 15]} were well publicised at the time and were the subject of widespread media coverage. The government therefore remains of the view that those joining after 31 March 2012, considered as a group, can reasonably be expected to have known that they would not remain in the final salary schemes (or be otherwise protected), whether or not the precise date of anticipated changes was known.

Ceasing protection at normal pension age

Six consultation responses raised concerns about our proposal that underpin protection should cease to accrue when an active member reaches their final salary scheme normal pension age (normally 65), even if they remain in active service beyond this date. It was highlighted that this could mean that currently protected members, being those who will reach this age on or before 31 March 2022 could receive a shorter period of underpin protection than their younger colleagues (who would have protection until 31 March 2022 under our remedy), and that therefore this approach could be directly age discriminatory.

Nevertheless, the government considers that this is proportionate and remains the right approach, for the reasons that follow.

This was the approach taken to transitional protection in the LGPS originally, with members having underpin protection until they reached their final salary normal pension age (normally 65). The subsequent finding that the protections were unlawful in excluding younger members meant that changes need to be made to extend the protections to younger members. However, the government does not believe this necessitates changing the approach that underpin protection should end if a member remains in active service at the date they reach their final salary normal pension age. Whilst the government has taken the decision that underpin protection should end for all members from 1 April 2022, meaning underpin protection will end for many before they reach their final salary normal pension age, the government considers that ending underpin protection from a fixed date that applies to all members is the right thing to do to ensure that scheme members accrue benefits on the same career average basis for all members going forward, regardless of whether they had underpin protection. It is also necessary to ensure the cost savings originally envisaged through pensions reform are achieved, and therefore provides a balanced approach that takes into account the interests of tax payers.

Understanding differences in who benefits from the underpin

The figures also show that members in certain age ranges (particularly those between 41 and 55 as at 31st March 2019) would be more likely to benefit than those in the latter stages of their career and those at the early stages of their career.

Partly this is a consequence of the point discussed above – i.e. that members would have to have been in the LGPS on or before 31 March 2012 to qualify for underpin protection, and older scheme members are more likely to have been so. However, it is also partly due to our understanding (based on analysis of previous member experience) of how members’ career average and final salary benefits are likely to compare over the underpin period, 2014 to 2022, for different age groups. Specifically, we anticipate that those aged between 41 to 55 are:

• more likely to remain in active service until such time as their final salary benefits are higher than their career average benefits than younger colleagues. This is reflected in the assumed voluntary withdrawal rates used which are shown in Table B3 in the analysis.
• more likely to have salary growth/ promotional pay increases over the underpin period (including increases after the end of the underpin period) than their older colleagues, resulting in the final salary benefit being higher. Again this assumption is reflected in the assumptions made for promotional pay increases shown in Table B2 in the analysis (noting that members aged 41 to 55 in 2019 would be aged between 36 and 50 in 2014).

These differences in outcome between different age groups reflect that final salary schemes typically benefit members with particular career paths (for example, they usually favour high-earners with long service).

Over time, we would expect the age group of LGPS members who have underpin protection and who would be likely to benefit from underpin protection to continue to mature. As noted in section 1, from 1st April 2022 all LGPS membership accrues on a career average basis, without ongoing underpin protection. This reflects the Government’s original desire to phase out final salary membership of public service pension schemes, and to replace them with career average pension rights, which we believe are fairer and more sustainable.

Nevertheless, to ensure that younger members with underpin protection have protection that is equivalent to their older colleagues, we will provide that members with underpin protection will retain an ongoing final salary link until the earlier of the date they leave active service or reach their final salary scheme normal pension age. This will ensure that younger members who are currently at an early stage of their career, and who may have promotions and other salary increases later in their career, have an equivalent underpin test to their older colleagues (i.e. allowing for career progression). Members who return to active membership without a disqualifying break in service (i.e. five years or more) would retain their final salary link, subject to our final rules on aggregation, which we are reconsulting on.

Sex

We expect some minor differences in how the underpin would apply based on sex, as described in this section.

Data

March 2019 data supplied to GAD by LGPS administrators shows that the LGPS active membership is predominantly female^{[footnote 16]}:

Sex	Total number of members (000s)	Proportion of total
Male	439	26.2%
Female	1,238	73.9%
Total	1,676	100.0%[footnote 17]

GAD’s analysis of our remedy show that the proportion of men and women who would qualify for underpin protection and benefit from that protection (i.e. where the final salary benefit is calculated to be higher) broadly matches the profile of the scheme^{[footnote 18]}. As at 31 March 2019:

• 74% of scheme members were female, and 26% male
• 73% of the scheme members who were estimated to qualify for the proposed underpin protection were female, and 27% male
• 73% of the scheme members who were estimated to benefit from the proposed underpin (i.e. where the final salary benefit is higher) were female, and 27% male

In addition, men and women are estimated to qualify and benefit from the underpin in similar proportions:

LGPS populations	Proportion who qualify for underpin after remedy is implemented	Proportion who benefit from proposed underpin after remedy is implemented
Male	42%	19%
Female	40%	18%

This shows that men are, proportionally, marginally more likely to qualify for the underpin protection and to benefit from that underpin protection. However, as almost three quarters of scheme members are female, in absolute terms the number of female members who qualify and benefit will be much higher than for male members.

GAD have also supplied analysis which shows, for an average member, the likelihood that they would:

a) qualify for underpin protection at any given age, and

b) benefit from underpin protection at any given age.

This is presented visually at figure 2 in the analysis and shows that at most ages men are more likely to qualify for, and benefit from, underpin protection than women.

Analysis

As set out above, the proportion of men and women who would qualify for underpin protection and benefit from that protection under our proposals closely matches the profile of the scheme.

However, as a proportion of their membership, men are marginally more likely to qualify for the underpin and also more likely to benefit from that underpin protection.

Who qualifies for underpin protection

It is anticipated that men would be marginally more likely to qualify for the underpin under our remedy, based on the data used in this analysis, because the average man would be expected to have a lower voluntary withdrawal rate than the average woman, based on LGPS experience. This reflects the fact that women are more likely to have breaks in employment due to childcare and other caring responsibilities^{[footnote 19]}. Our plan to allow for breaks in service of up to five years during which a member would retain underpin protection would help ensure that female members are not disadvantaged by their increased likelihood of having breaks in employment. This would have a positive impact on those that share this protected characteristic, and would be more likely to further equality of opportunity.

It should also be noted that GAD’s analysis is based on the LGPS’s active membership in March 2019. As our intention is that the amended regulations would be applied retrospectively to April 2014, a number of members who would benefit from the underpin are not included in this analysis (being those who were previously in the scheme on or before 31 March 2012 and re-joined after 1 April 2014 without a five year break in service). As female members are assumed to have a higher rate of voluntary withdrawal, it is possible that a greater proportion of female members would be included in this tranche of membership.

Who benefits from underpin protection

It is anticipated that men would be marginally more likely to benefit from underpin protection after remedy is implemented because, in line with previous scheme experience, the average male LGPS member would be expected to have higher salary progression than the average woman and that women are generally expected to have higher voluntary withdrawal rates than men. Members with longer scheme membership and with higher salary progression would be more likely to receive an addition to their pension through the underpin (i.e. where the final salary benefit is higher). These differential impacts reflect the workings of a final salary scheme and demonstrate some of the effects that can arise under that design. This reflects the government’s original desire to phase out final salary membership of public service pension schemes, and to replace them with career average pension rights, which we believe are fairer and more sustainable. From 1 April 2022 all LGPS membership accrues on a career average basis, without ongoing underpin protection.

Other protected characteristics

Limited data specific to the LGPS in England and Wales is available in relation to other protected characteristics.

Race, religion, disability and marital status impact

There is limited membership data available across public service pension schemes on race, religion, disability and marital status as the APS has no information about pension membership. The APS does however separate results out for those working in the public sector, which we have used as a proxy for the LGPS membership for race, religion, disability and marital status data. We know that the civil service, a sub-section of the public sector workforce, has broadly the same level of representation of ethnic minorities as the UK population so we assume this holds true for the remainder of the public sector. Tables A-D show the distribution of the total population compared to the public sector population.

Although there are limitations with formal religion, race, disability and marital status data, the government recognises the need to continually monitor the race and disability status of public service workforces and the relationship with scheme membership. It also acknowledges the importance of using new data obtained to inform these reviews and the development of pension policies.

Table A indicates that the breakdown of ethnicity within the public sector is broadly consistent with the UK working population. We therefore assume this to be the same within public service pension schemes. Although Black/African/Caribbean/Black British individuals are slightly overrepresented in the public sector relative to the UK working population, this is only by a small proportion.

The changes to the LGPS transitional arrangements will mean that, in absolute terms, larger numbers of white people will qualify and benefit from the underpin as this ethnic group represents 86% of the public sector workforce.

Table A - Total and public sector population by ethnicity

Ethnicity	Working population	Public sector population
White	85.8%	86.0%
Mixed	1.5%	1.5%
Indian	3.2%	3.0%
Pakistani	1.5%	1.3%
Bangladeshi	0.8%	0.6%
Any other Asian background	1.5%	1.5%
Chinese	0.6%	0.5%
Black/African/Caribbean/Black British	3.3%	4.0%
Other ethnic groups	1.8%	1.6%

Source: APS2022

Table B shows the distribution of those with disabilities as defined under the Equality Act 2010. It suggests that disabled individuals are marginally overrepresented in the public sector, whilst non-disabled people are marginally under-represented relative to the UK working population.

Table B: Total and public sector population by disability

Disability	Working population	Public sector population
Equality act disabled	16.6%	17.5%
Not equality act disabled	83.4%	82.5%

Source: APS 2022

Table C shows the distribution of those with and without a religion in the public sector workforce compared to the UK working population. This shows that Christians are slightly over represented in the public sector relative to the UK population while other denominations are slightly underrepresented.

Table C: Total and Public sector population by religion

Religion	Working population	Public sector population
No Religion	48.5%	46.8%
Christian (all denominations)	42.2%	45.2%
Buddhist	0.5%	0.5%
Hindu	1.9%	1.7%
Jewish	0.5%	0.4%
Muslim	4.0%	3.2%
Sikh	0.7%	0.6%
Any Other Religion	1.8%	1.8%

Source: APS 2022

Table D shows that people who are married or in a civil partnership are overrepresented in the public sector and therefore the changes to LGPS transitional arrangements will have a larger than expected effect on those people. Those who are not married are slightly underrepresented in the public sector compared to the working population.

Table D: Total and public sector population by marital status

Marital status	Working population	Public sector population
Married or in a civil partnership, together	47.3%	52.8%
Married or in a civil partnership, separated	2.1%	2.2%
Divorced or legally dissolved	6.7%	7.1%
Widowed or partner died	1.1%	1.2%
Single, never married	42.8%	36.6%

Source: APS 2022

In relation to each of the protected characteristics discussed above (race, religion, disability and marital status), we do not consider that the changes to underpin protection we are proposing will result in a direct differential impact on individuals with and without these protected characteristics. None of the underpin qualifying criteria directly consider a member’s race, religion, disability or marital status. It is possible that there may be some indirect effects on members with these protected characteristics, although we do not have the data to fully consider this. For example, if younger members are likelier to be more ethnically diverse, some of the differential outcomes in how the underpin applies to members based on their age could apply indirectly to members of different races. Where any such secondary effects do apply indirectly to members, the base analysis we have included in this document for age and sex applies.

Sexual orientation, gender reassignment, pregnancy and maternity

Data on sexual orientation, gender reassignment, pregnancy and maternity (other groups covered by the Equality Act 2010) is not available. The Government is therefore unable to conduct detailed analysis on whether the McCloud remedy measures will have a disproportionate impact on those with these protected characteristics. Nevertheless, the government does not envisage there being differential impacts from the local government measures in the Act on members with these protected characteristics.

2.3 Summary of the Analysis

Age

The changes we are making will significantly reduce differential impacts in how the underpin applies based on a member’s age, by removing the age-related qualifying criteria which the government considers unlawful, following the McCloud and Sargeant cases.

Compared to the total active membership in March 2019, we anticipate some differences in how the underpin applies to different age groups – both in terms of qualification for the protection, and in relation to the members who would be likely to benefit from it. This reflects two main points:

1. Under our remedy, members will have to have been in active membership of the LGPS on or before 31 March 2012 to qualify for underpin protection. Younger members, who are more likely to have joined the LGPS since then, will be less likely to qualify. The government is not extending underpin protection to those who joined the LGPS after 31 March 2012 because:

• For members joining after 1 April 2014, they joined the career average scheme and there is no need to provide protection to help them transition to the new scheme structure.
• For members joining between 1 April 2012 and 31 March 2014, they joined the LGPS at a time when upcoming reforms were well publicised, and they could not have expected to remain in the final salary scheme.

2. Members between the ages of 41 and 55 as at 31 March 2019 are more likely to benefit from the underpin than other groups because, based on previous LGPS experience and future assumptions:

• they are more likely to experience pay progression that would make the final salary benefit higher for the underpin period than their older colleagues, and
• they are more likely to remain in active membership than younger colleagues who would be expected to leave before they receive the pay progression necessary for the underpin to result in an addition to their pension.

These differential impacts reflect the workings of a final salary scheme, and demonstrate why the government has moved local government pensions accrual to a career average basis which is expected to achieve fairer outcomes. From April 2022, pension builds up for all members on a career average basis without underpin protection.

Sex

Broadly, the proportion the proportion of men and women who would qualify for underpin protection and benefit from that protection matches the profile of the scheme.

Men are marginally more likely to qualify for underpin protection and to benefit from underpin protection. This reflects the fact that men would be expected to have higher salary progression than women and that women are expected to have higher voluntary withdrawal rates than men.

These differential impacts reflect the workings of a final salary scheme, and demonstrate why the government has moved local government pensions accrual to a career average basis which is expected to achieve fairer outcomes. From April 2022, pension builds up for all members on a career average basis without underpin protection.

Other protected characteristics

Limited data specific to the LGPS in England and Wales is available in relation to other protected characteristics. Following consideration of the data that is available, we do not consider that the changes to underpin protection will result in a differential impact to individuals with the following protected characteristics: disability, race, religion or belief, gender reassignment, pregnancy and maternity, sexual orientation and marriage/civil partnership. We sought views from stakeholders in the consultation on whether further data sets are available that would help us consider the impacts, particularly in relation to these other protected characteristics. However, no respondents suggested additional datasets which could be used to better understand the impacts of our changes on the LGPS membership.

Mitigation

We have considered the differential effects as set out in the main body of this document and, in doing so, have decided to expand the scope of the underpin to include members in active service on or before 31 March 2012 to mitigate the potential affects. This aligns with the purpose of the project – to address unlawful discrimination.

Section 3

3.1 Decision Making

Following the broad consultation undertaken and the assessment outlined here, we intend to proceed with introducing the changes to the LGPS outlined in section 1. Changes to regulations will be made following a further consultation on McCloud remedy in the LGPS. This consultation will largely focus on technical issues and we do not expect significant changes to the basic policy approach being taken. However, this assessment will be reviewed and updated to reflect any changes made before final regulations are made later in 2023.

3.2 Monitoring arrangements

After the McCloud remedy is implemented, we will review the operation of scheme regulations through regular dialogue with the sector. We maintain a close relationship with the LGPS scheme advisory board, a statutory body with a function to advise the Minister on the desirability of making changes to the scheme^{[footnote 20]}. The scheme advisory board is made up of equal numbers of employee and employer representatives so represents those individuals and organisations with the keenest interest and awareness of the impacts of our reforms. This relationship, and others we have with different scheme stakeholders, will enable us to monitor the application of the amended regulations.

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1. Public Service Pensions and Judicial Offices Act 2022: Equality Impact Assessment (PDF, 1.28 MB). ↩

2. Public Service Pensions and Judicial Offices Act 2022. ↩

3. Independent Public Service Pensions Commission: final report by Lord Hutton. ↩

4. Public service pensions: good pensions that last. ↩

5. A small sub-group of LGPS members, who have protections accrued from previous service in other parts of the public sector, have a final salary scheme normal pension age of 60. ↩

6. See paragraphs 49 to 64 of the government response for more detail. ↩

7. Briefing paper (PDF, 1.98 MB). ↩

8. Some members who have a protected final salary scheme normal pension age of 60 under regulation 24 of the 2014 Regulations may not have been aged 55 in April 2014. It is possible those members could have initially been entitled to underpin protection, but failed to receive it if they left before they were 55. Nevertheless, our plans to make the regulation changes retrospective should ensure members who were in this situation do not suffer any negative impact in the round. ↩

9. Briefing paper (PDF, 1.98 MB). ↩

10. Table 4. ↩

11. Table 4. This analysis does not include members who already have underpin protection – i.e. those aged 62 or above at 31 March 2019. ↩

12. Table 5. This analysis does not include members who already have underpin protection – i.e. those aged 62 or above at 31 March 2019. ↩

13. Independent Public Service Pensions Commission: final report by Lord Hutton. ↩

14. ‘Budget 2011’, HM Treasury, March 2011, Paragraph 1.132. ↩

15. Public service pensions: good pensions that last. ↩

16. Figure 1b and table 4 of the analysis. ↩

17. Difference in total and individual numbers reflects rounding. ↩

18. Figures 1a and 1b and table 1 of the analysis. ↩

19. Briefing paper (PDF, 1.98 MB). ↩

20. Regulation 110(3) of the Local Government Pension Scheme Regulations 2013. ↩