Local Government Pension Scheme
Academy Schools’ Briefing Note /
General
On 23 December 2011, Communities and Local Government (CLG) and the Department for Education (DfE) issued a “joint letter of understanding” on the treatment of Academies in the Local Government Pension Scheme (LGPS). The letter is accessible from the following link: pension_scheme-le-jan12-v.1.pdf
Thejoint communication sets out a recommended approach to determining contribution rates for Academies by way of a pooling arrangement.
This briefing note provides background information about the operation of pooling arrangements and their impact and details of the Hertfordshire Pension Fund’s (Pension Fund) current position in relation to the CLG/DfE recommendations.
Pooling arrangements and impacts
Pooling arrangements are generally set up for groups of employers that have similar characteristics and experiences to protect employers in the pool from fluctuations in contribution rates between triennial valuations. In setting up a pooling arrangement, it is recognised that cross subsidies may occur between employers within the pool.
In identifying suitable groups of employers for pooling arrangements, the actuary will seek to minimise cross subsidy and will compare, amongst other factors, membership profiles, the strength of the employers’ covenant, wage and pay award policies and other employment issues.
What are the issues?
There are a number of issues under consideration that administering authorities are seeking to resolve:
- how to mitigate the risk of cross subsidy for all employers within the pool
- types of employers that would be eligible for a pooling arrangement, e.g., Academies, FreeSchools, StudioSchools, etc.
- monitoring and reporting arrangements for employers within the pool
- joining and leaving arrangements for employers within the pool
- responsibility for funding any deficit resulting from a failed Academy(this to ensure that the pool does not, effectively, underwrite the liabilities of the failed Academy)
- the unwillingness of any body to back or guarantee the Academies
- unravelling current arrangements for Academies that have already converted
- no consideration has been given to the apportionment of assets to each Academy which will affect the funding position and longer term contribution rate for the Academy
Clearly, there are significant issues to resolve before implementing a pooled arrangement which the Pension Fund will need to resolve. Key to this will be the further guidance to be issued by CLG/DfE.
Current Position
The CLG/DfE letter of 23 December refers to guidance that will be issued to support Academies and LGPS administering authorities in managing a pooling arrangement for Academies. While awaiting this further guidance, the Pension Fund is consulting with the actuary to investigate the implications of a pooling arrangement for Academies and other employers in the Pension Fund.
In the meantime, the following arrangements will applyuntil a pooling arrangement and a policy for its operation has been agreed:
- For Academies that have already converted, then these Academies will continue to pay the actuarially determined rate. If this rate is revised in the future the Academy will directly benefit from these contributions as they will be taken into consideration in relation to the Academy’s funding position.
- For schools that are in the process of converting to Academy status and for whom an actuarially determined rate has been calculated, then on conversion they will pay the new contribution rate. Again if this rate is higher the Academy will benefit from these contributions.
- For schools that are in the process of converting to Academy status and for whom no actuarial valuation has taken place, then on conversion they will continue to pay the current schools’ pooled rate of 20.6%.
Academies and converting schools should be aware that once a solution is reached, there may be a need to make adjustments to the contribution rate in payment. At the present time, it is not possible to quantify the impact this may have and further details will be provided as soon as the pooling arrangement has been agreed.
Further information
Information and guidance for Academy schools is accessible from the Department for Education’s website at
The Hertfordshire Pension Fund website is accessible from
This provides access to information and guidance on:
- the management and governance of the Pension Fund
- Scheme Employer responsibilities and administration arrangements
- membership benefits for scheme member
Contacts
There is a split of responsibilities for the administration and management of the HPF:
Hertfordshire County Council’s Pensions Team deals with all legal, policy and financial accounting issues:
Legal and policy
Lyn Stainton01992
Patrick Towey01992 555148
Financial Accounting
Sarah Green01992
Emma Huggins01992
LPFA Pensions Administration Team deals with the day to day administration of members’ benefits and membership data, collection of employer contributions and year end reporting.
Transfer of membership data and actuarial valuations
Tim Allen01992
Taryn Mutter01992
Employer contributions
Michelle O’Connor01992 556747michelle.o’
Rachel Tisbury01992
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