LGPS Discretions

An issue often over-looked by employers participating in a Local Government Pension Schemes is that each admitted body is required to have a Discretions Policy in place.  This Policy must be published, kept under regular review, and a copy must be sent to the administering authority. A Discretions Policy will set out how your organisation will deal with certain aspects of member benefits that require a decision from the employer prior to being agreed/paid.  Examples include (but are not limited to):

• Whether to award members with added years of service in certain circumstances;
• Giving members approval to purchase additional years of service in the Fund;
• Allowing members to retire early without an actuarial reduction being applied to their benefits.

The examples above all represent a risk to the organisation as they may result in additional costs or the build up of additional benefits.  If they are automatically approved, they will result in larger, more volatile liabilities.  It is important that your Discretions Policy limits this risk as much as possible, whilst not being too onerous on the organisation. It is worth working with your professional adviser to consider your options and to draft a suitable Policy which exactly meets your needs.