Thinking of becoming an academy?

Pension Issues to Consider

The LGPS

The Local Government Pension Scheme (LGPS) is a nationwide pension scheme for non-teaching employees.

Administration of the pension scheme is split between 89 funds across England and Wales, and Equiniti administers the LGPS for all relevant employers in the London Borough of Hackney Pension Fund.

The London Borough of Hackney Pension Fund and has in excess of 400 participating employers and looks after more than 22,000 members.

In 2010 the LGPS regulations were amended to allow non-teaching employees of academies to be members of the pension scheme.

Note: Teaching staff are covered by the Teachers’ Pension Scheme which is administered by Capita.

Your responsibilities as an employer

To your employees:

  • Automatically enrol new staff into the LGPS if their contract is for more than three months.
  • Decide the percentage of pay each employee must pay into the LGPS.
  • Pay employer and employee contributions to the pension fund on time each month.
  • Send a statutory notice to new members or to members with a change of relevant circumstances.
  • Distribute Annual Benefit Statements issued by Peninsula Pensions.
  • Inform your members of the hackney.xpmemberservices.com/website which has lots of information relevant to members of the LGPS.
  • Inform your members of the Hackney newsletter.
  • Inform your members of Member Self Service on the hackney.xpmemberservices.com/website where they can get up-to-date information on their pension.
  • Inform your members of any relevant information on the LGPS which will affect their pension.
  • Inform your members of the Internal Dispute Resolution Procedure (IDRP)

To Equiniti:

  • Keep Equiniti informed of any relevant changes to employee details, such as:
  • Change of name
  • Change of hours
  • Unpaid or maternity leave
  • Strike breaks
  • Keep Equiniti informed of any pensionable employees who leave or have chosen to opt out of the LGPS.
  • Send Equiniti an annual return at the end of each financial year, giving details of employee contributions paid and pensionable pay.

Disputes

There is an Internal Dispute Resolution Procedure (IDRP) in two stages which deals with complaints from LGPS members. If the complaint is about an employer decision, then the employer must deal with stage 1 of the IDRP and you must appoint an officer to deal with such cases.

Ill health retirements

  • You must appoint an Independent Occupational Health Medical Practitioner which has to be approved by the fund. Please contact the London Borough of Hackney Pension Fund for a list of approved doctors.
  • Retirement on ill health can be at any age.
  • The cost of ill health retirement benefits is met by the employer’s contributions rate
  • You must obtain a certificate from the Independent Occupational Health Medical Practitioner.
  • There are three ill health tiers – each relating to the member’s medical condition. The first two tiers provide for additional membership being awarded to the employee.
  • Tier One applies to the more serious cases of ill health, where the member has little prospect of obtaining gainful employment before age 65. Immediate benefits would be payable and the scheme membership would be made up to their normal retirement age.
  • Tier Two applies to members who have little prospect of obtaining gainful employment within the next three years but are likely to be able to do so before their normal retirement age. Immediate benefits would be payable and the scheme membership would be made up by 25% of their remaining service to their normal retirement age.
  • Tier Three applies to members who have little prospect of obtaining gainful employment straight away but are likely to be able to do so within the next three years. Immediate benefits would be payable but there would be no award of extra membership. This award must be reviewed after 18 months and must terminate after a maximum of 3 years.

If your employee was awarded tier three ill health retirement, then you must review the case after 18 months on the pension.

Employer discretions

All employers must have a policy on their LGPS discretions, some of which are:

  • Flexible retirement
  • Waiving of actuarial reduction
  • Funding of additional pension through a Shared Cost Additional Pension (SCAPC) arrangement.

More information on Employer Discretions can be found on our website.

Employer Contributions

What an employer is expected to contribute (the ‘pension contribution rate’) is decided by the fund actuary. Contribution rates are reviewed every three years, when the whole pension fund is valued.

Strain costs

If you agree to your employee receiving their pension benefits early, you are required to pay a ‘strain cost’ to the pension fund. This can occur in the following circumstances:

  • If an employee is made redundant or leaves on efficiency grounds and is age 55 or over.
  • If an employee is retired from age 55 on flexible retirement grounds or employer consent grounds.
  • If the employer chooses to waive a member’s actuarial reduction and the member has left on flexible retirement, or chooses to voluntarily draw benefits from age 55, and before age 60.

Equiniti calculates the strain cost, and the cost to you as the employer depends on the member’s sex, age and service. The strain cost can be paid as one lump sum immediately, or over three or five years where interest is added. If paid over three or five years, the first payment is due in the April after the member has left.(?)

Additional pension award

  • If your discretions allow, you may award a member with additional pension per annum (APC).
  • The cost of this award must be paid to the pension fund immediately.
  • If this award is given when the employee is about to retire early on one of the grounds mentioned above, the additional pension will increase the strain cost.

Additional employer costs

  • If there is any information you might need that only the actuary can supply, then you will be charged for the work done.
  • When you need to use the services of your Independent Occupational Health Medical Practitioner, then you will be charged by them.
  • Any payments due from an employer which is paid over a month late will incur interest. (?)

Pension Fund Deficit

When a new academy is set up, our actuary will calculate the employer’s contribution rate together with the value of the deficit in the part of the fund which relates to the academy. It is important to note that the deficit is retained with the academy and is reflected in the employer’s pension contribution rate.

NB: Please note the amount of deficit quoted in a FRS17 valuation can be higher recently than the 3 yearly valuations as the methodology for the calculation is done a different basis. However, it could go the other way down to what current bond returns are.

Contact us

There is also a lot of information on the hackney.xpmemberservices.com/ websitefor members of the LGPS along with a dedicated Employers Section providing full guidance on regulations and procedures.

Email:

Full staff list can be found on our website under Contact Us

The London Borough of Hackney Pension Fund has a dedicated Pensions Liaison Officer, Karen Chenery, who is always available to give guidance where necessary.

Karen’s contact details are:

Telephone: 0208 356 6802 and ask for Karen Chenery

Email:

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First steps

What you need to do

  • Assure those employees already in the pension scheme that their membership will continue in the same way with the new employer.
  • It is suggested that you write to those eligible employees not in the LGPS at the time of transfer to advise them that they will be automatically contractually enrolled into the LGPS (depending on your admission agreement) but they do have the option to opt out of the scheme.
  • You must formulate and publish your discretions in the LGPS.
  • Inform the London Borough of Hackney Pension Fund of who will be providing your payroll services. Please note that the London Borough of Hackney Pension Fundcan only deal direct with the employer and not the payroll provider. However, there have been some automatic processes set up with ITrent if they are your payroll provider.
  • Inform the London Borough of Hackney Pension Fundof the date of transfer.

What will the London Borough of Hackney Pension Fund and Equiniti do?

  • Equiniti will add the new employer on our pensions administration system (Compendia).
  • The London Borough of Hackney Pension Fund will meet with representatives from the employer and the payroll provider if required.
  • Ask the employer to complete a form requesting their contact details.
  • The London Borough of Hackney Pension Fund holds regular annual employer meetings to provided updates to any changes in the LGPS.
  • Between the annual meetings, the London Borough of Hackney Pension Fund will send regular emails to employers providing information for them and their employees.

Things you need to do
First steps checklist
Have you been informed of the employer’s contribution rate?
Have the London Borough of Hackney Pension Fundconfirmed your new employer’s number?
Have you informed your payroll provider of the employer’s contribution rate?
Have you forwarded the instructions on how to pay over employer and employee pension contributions to your payroll provider, along with the deadlines?
Have you informed the London Borough of Hackney Pension Fund of your payroll provider?
Have you informed the London Borough of Hackney Pension Fundof the date of transfer along with a list of staff transferring to LGPS?
Town/Parish Councils:
Have you completed and submitted a Starter form for each eligible employee?
Have you completed the Employer contact details form and sent it to the London Borough of Hackney Pension Fund?
Have you nominated a Stage 1 Appeals Officer for the Internal Dispute Resolution Procedure and returned the completed IDRP officer form to the London Borough of Hackney Pension Fund?
Have you formulated and published your employer discretions policy and sent a copy to the London Borough of Hackney Pension Fund?