Local Government Pension Scheme (LGPS) funds must carry out assessments urgently to understand the impact of the McCloud judgment, says Aon.
The consultancy estimated that between one and 1.5 million members of English and Welsh LGPS funds are potentially in scope of the landmark ruling, which said transitional protection gave rise to unlawful discrimination on the basis of age.
In December 2018, the Court of Appeal ruled against reforms made to the judges' and firefighters' schemes allowing older members of the schemes to remain in more favourable arrangements, with the judgment reverberating across public sector schemes with similar reforms.
Aon added that the "administrative headache" could take two years or more to complete, with data likely to present the biggest challenge.
Partner Alison Murray said: "It's clear that LGPS schemes face a real administrative challenge to meet the requirements of McCloud. Given the significant number of members who will need their benefits checked - and irrespective of whether they will actually increase - implementing changes to legislation resulting from the McCloud judgment is likely to represent the largest administrative headache for public service schemes since the 2014/15 reforms."
Aon said LGPS funds should undertake impact assessments; discuss implementation and its impact on resources, other projects, and business as usual; get ready to collect data from employers; and respond to any forthcoming consultations on the final regulations.
Murray continued: "Pensions administration teams are already stretched, given Covid-19 and the challenges of working from home, not to mention an ever-increasing list of projects. These include GMP rectification, data improvement, systems improvements, and other legal challenges which may have a retrospective effect on survivors' benefits."
The Ministry of Housing, Communities and Local Government is expected to publish a consultation on draft regulations shortly, but Murray said funds "don't need to wait… before getting started with planning and data collection".
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