NTP not receiving PPS signal

I am using GPSD to connect to my GPS receiever (Garmin 18 LVC).

/etc/default/gpsd:
START_DAEMON="true"
GPSD_OPTIONS="-n -b"
BAUDRATE="4800"
DEVICES="/dev/ttyS5"
USBAUTO="false"
GPSD_SOCKET="/var/run/gpsd.sock"

The daemon works and i get data using: gpsd -n -b -N -D2 /dev/ttyS5

/etc/ntp.conf:

server 127.127.28.1 minpoll 4 prefer
fudge 127.127.28.1 refid PPS

server 127.127.28.0 minpoll 4
fudge 127.127.28.0 time1 0.535 refid GPS

Output of ntpq -p:
 SHM(1) .PPS. 0 l - 16 0 0.000 0.000 0.000
*SHM(0) .GPS. 0 l 4 16 377 0.000 8.359 18.780

As you can see NTP is only seeing the GPS NMEA input and not the PPS signal.
I just upgraded from debian queeze and this exact setup worked there.
GPS receiver is working, tested the PPS signal with multi-meter.