PENSIONS
Let’s talk LGPS
Jim Woodlingfield ChMCIPP, deputy head of service delivery, Surrey Pension Fund, explains some of the nuances of the Local Government Pension Scheme (LGPS), providing some useful hints and tips along the way to guide you T he LGPS is a pension scheme which covers local government in the United Kingdom. Due to various
local authorities; generally these are the county councils, but there are also the London borough councils, Metropolitan borough councils, city councils and a small number of independent LGPS authorities. The administering authorities are responsible for: l running the scheme in their area l collecting and investing contributions l paying out the pensions l supporting employers in their duties under the scheme. Currently, there are 86 administering authorities in England and Wales. It’s important to note that the LGPS is a funded scheme, unlike the Teachers’ Pension Scheme or the National Health Service (NHS) Pensions Scheme, which are unfunded. This means the contributions are invested and the returns from these investments are used to pay the pensions. Some of these assets are invested individually by the administering authorities and some are pooled in one of nine asset pools. The larger asset pools give access to more investment opportunities and help save money on investment costs. The LGPS is a defined benefit pension scheme. Up to 2014, it was a final salary
scheme, and is now a career average revalued earnings (CARE) scheme. The scheme benefits are set out in the regulations, and members accrue 1/49th of their pensionable earnings each year as a pension, which is revalued with the previous September’s rate of consumer price index (CPI) each April. The employee contribution rates are also set in the scheme regulations. The LGPS is a banded scheme, so higher paid employees pay more. The employer needs to pay the balance, which is assessed by the administering authorities every three years, in a process known as a triennial valuation. An actuary assesses the liabilities of the scheme, compared to the assets and an appropriate contribution rate is set for the employer. The employer has duties under the scheme, which include: l paying over the contributions to the administering authority on an agreed schedule l notifying scheme starters and leavers l providing data for monthly and annual returns l making several decisions under the scheme regulations. n 2028), in which case their pension will be reduced, as it will be in payment for longer. Members can take flexible retirement, by reducing their hours or grade, access all or part of their pension and continue to work for their employer – this is at employer discretion and there should be a policy covering how it works. When the LGPS scheme was changed
changes and reorganisations over the years, this can include more organisations than you might think. The local government family covers the following, and more:
l councils l schools l academies l housing associations l colleges l post-92 universities
There are separate schemes for Scotland and Northern Ireland. This article deals with the scheme as it’s administered in England and Wales. There were major changes to the LGPS in 2008 and 2014. This means that members with long service can have different benefits for different periods of service. It’s a statutory scheme, which means the rules are set out in legislation – the part of government responsible for the scheme is the Department for Levelling Up, Housing and Communities, and details can be found here: https://ow.ly/Mtpl50PMCPP. The scheme is administered by specific
Useful practical information, hints and tips
There are some unique situations which can occur in relation to the LGPS that the responsible payroll professional will want to be aware of. Some of these are covered off below. If an LGPS member is made redundant (under the statutory definition) or is dismissed by reason of business efficiency, and they’ve met the two- year vesting period within the scheme,
and are aged 55 (moving to 57 from 2028) or over, they must receive immediate payment of their pension on an unreduced basis and the employer must pay the administering authority the additional cost of this. The normal pension age in the LGPS is now linked to state pension age; however, scheme members can retire early, from age 55 (moving to 57 from
| Professional in Payroll, Pensions and Reward | October 2023 | Issue 94 42
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