5. Becoming a Fund employer
The page contains general information on
- becoming a Fund employer,
- important changes to employer status that we need to be made aware of
- employer’s exiting the LGPS
Become a Fund employer
The LGPS is a statutory pension scheme which means that the rules of the scheme are set out in the law, including which employers can participate in the LGPS. The different types of employer able to participate in the LGPS is set out in Schedule 2 of the LGPS regulations 2013.
- Schedule 2, part 1 employers are known as scheduled bodies. They have an automatic right to participate in the LGPS and must offer the LGPS to all qualifying staff.
- Schedule 2, part 2 employers are known as designated (or resolution) bodies. They are entitled to join the LGPS, but they do not have to. They must pass a resolution stating which employees they will offer the LGPS to.
- Schedule 2, part 3 employers are known as admitted bodies. Admitted bodies are able to participate in the scheme through a written agreement known as the Admission Agreement.
- Schedule 2, part 4 employers are bodies deemed part of a LGPS Fund employer such a governing body or a school maintained by a local authority. Schedule 2, part 4 employers are not considered the Fund employer for the purpose of the LGPS regulations, but they must offer the LGPS to all qualifying staff.
Upon joining the LGPS, you should be aware of your employer responsibilities and the associated costs.
Your employer responsibilities
Once in the scheme, all employers must ensure that they meet the employer responsibilities set out in the regulations. These duties are in addition to your auto-enrolment responsibilities and include, but are not limited to:
- providing us with accurate pension information
- processing ill-health cases
- dealing with IDRPs (Internal Dispute Resolution Procedures)
- meeting employers costs.
The Roles and Responsibilities document is a guide created to assist you in following the regulations. It also provides guidance on our Fund specific processes.
The cost to employers
When you join the scheme, you take on the responsibility of funding your employee’s pension benefits which are referred to as your ‘liabilities’.
A valuation will be carried out when you first join the scheme to assess your individual employer contribution rate. This is performed by the Fund actuary and your contribution rate is determined based on your covenant strength and the estimated cost of your liabilities. Your employer contributions must be paid to the Fund on a monthly basis in addition to your employee contributions. Employer contributions are reassessed for all Fund employers every three years.
Other costs an LGPS employer is liable to pay include, but are not limited to:
- Ill-health assessment costs
- Pension strain costs (for example in the case of redundancies)
- Actuary/Administrative/Legal costs for non-standard work
- Exit costs
- Outsourcing/TUPE associated costs
You should also be aware that employers may be issued charges in accordance with the Pensions Administration Strategy if you fail to meet your responsibilities.
Access to support
Employers have access to the support services we offer to assist you in fulfilling your duties. These include:
- A dedicated Employer Liaison Officer to answer your queries, support with difficult cases, or provide one to one training.
- Published training resources available on the guides, forms and booklets webpage
- Regular webinar events for you and your staff, details of which can be found on our employer events and training webpage.
- Our quarterly newsletter ‘In-Form’ providing you with key updates and training features.
If you are an LGPS Fund employer considering outsourcing a service, you need to ensure you are considering pension issues during the procurement phase and especially when the tender specifications are drawn up.
When staff TUPE transfer to a new contractor, there are specific pension requirements any prospective contractor will need to meet and checks that you will need to carry out in regard to pensions before you can proceed. There are also costs involved that you need to be aware of. Due to the nature of the process, it can take some time to approve a new employer for admitted body status. You should ensure you have allowed for this.
Applying for admitted body status
The LGPS is a defined benefit pension scheme for local government workers or those employed by organisations that work for or with local government. Admitted bodies listed in Schedule 2, part 3, can be a community of interest group, but most commonly a body is admitted to the LGPS where local authority service is outsourced. Admitted bodies are able to participate in the Fund through an admission agreement. If you are considering taking over a contract which requires you to obtain admitted body status, please contact us for more information on the admission process.
Academy conversions and multi-academy trusts
Academies are scheduled bodies listed in Schedule 2, part 1 and therefore must enrol all employees who are not eligible for another public sector pension scheme (such as Teachers pension scheme) in the LGPS. If you are converting to academy status or are a multi-academy trust taking on a new academy, you should inform us as soon as possible, so that we can explain the process and advise you of the costs involved.
While all academies in a multi-academy trust, pool their assets, each individual academy will require its own valuation report and will therefore be liable for the cost of this. You will be required to present this report when you first join a multi-academy Trust, and if you decide to change Trusts, you may be asked to obtain a revised valuation report by the new Trust before you are admitted.
Local authority maintained schools
If you are a local authority maintained school considering outsourcing, the first thing you need to do is contact the local authority. As the local authority is considered the Employer under the scheme regulations, they will need to approve any outsourcing decision. You should be aware that the local authority are unlikely to act as a guarantor and that any new contractor will need to be willing to put a Bond in place and meet any associated costs.
Change of payroll provider
If you are considering changing your payroll provider, you should ensure that you have read our ‘outsourcing your payroll’ guide. This explains what you need to think about before you proceed and also what to look for in a potential payroll provider. Please let us know as soon as possible if you are planning to change your payroll provider.
Exiting the LGPS
You become an exiting employer if:
- If you are a designated body (schedule 2, part 2) and your last active LGPS member leaves your employ or retires, and you decide to offer an alternative pension provision to your employees in the future.
- If you are an admitted body (schedule 2, part 3) and your last active member leaves your employ or retires, or your contract comes to an end.
- You are a Fund employer (schedule 2, part 1, 2, 3 or 4) who becomes insolvent.
If any of these circumstances apply, we will need to carry out a cessation valuation to assess the cost of any remaining liabilities you have to the Fund. There is a charge for carrying out the cessation valuation which you will be liable for. Please contact us for the current fees.
The cessations valuation will reveal whether you have a deficit and therefore owe a payment to the Fund (exit payment), or whether you are in surplus, in which case the Fund may consider paying an exit credit. Funds exercise discretion over who and in which circumstances an exit credit can be made.
If you don’t have any active members left in the scheme, but you expect that you may offer the LGPS to employees within 3 years of becoming an exiting employer, we may be able to issue a ‘suspension notice’.
More information can be found in your Admission Agreement (if you are an admitted body) as well as the Funding Strategy Statement.
The circumstances where the Fund would consider an alternative arrangement to a lump sum payment to meet employer exit payments are set out in the deferred debt and debt spreading policies document.
It’s important that you inform us as soon as you are aware that you may exit the scheme so that we can start making preparations and inform the Fund actuary.
If you require any information about leaving or joining the scheme, or you need to discuss anything on this page, please contact us at firstname.lastname@example.org
Last updated: 7 June 2021