Annual revaluation date change in the Local Government Pension Scheme (LGPS)
This consultation seeks views on changing the LGPS CARE annual revaluation date from 1 April to 6 April. This is to mitigate the impacts of high inflation on annual allowance calculations.
We are seeking views on changing the LGPS annual revaluation date from 1 April to 6 April. CPI in September 2022, which is used for the LGPS revaluation for the 2022-23 scheme year, was 10.1%. This is markedly higher than CPI in September 2021, used for the HMRC uplift, which was 3.1%. As a result, members would have significantly higher total growth in pension for tax purposes (PIA).
Changing scheme regulations to move the revaluation date from 1 April to 6 April means that inflation would be reflected in the value of the pension after HMRC assess the value of an LGPS pension for the purposes of annual allowance in tax year 2022/23. Thus, by taking revaluation out of scope of the annual allowance calculation, we will reduce the number of members affected by pensions tax for this year.
For tax years from 2023/24 onwards, the LGPS EW Career Average Revalued Earnings (CARE) revaluation would be aligned with the inflationary growth allowed for when calculating how much a pension had grown for annual allowance purposes, as it was before 2016/17.