The Local Government Pension Scheme Points To Be Aware Of
Most academies are aware of the Local Government Pension Scheme (“LGPS”). However the scheme throws up a number of practical issues which can, if not taken into account, be extremely costly. This note flags some of the key issues of which academies should be aware.
The LGPS is governed by the Local Government Pension Schemes Regulations 2013. Membership of the scheme is available to employees of the bodies named or described in the schedule to the Regulations, provided they are not eligible for membership of another public sector pension scheme (such as the Teachers Pension Scheme). The schedule includes governing bodies (where they are the employer) and proprietors of an academy, i.e. an academy trust.
The scheme is divided into a number of separate funds, each of which is separately administered. The Administering Authority for each fund is the Local Authority - generally the County Council or, in London, the Borough Council.
Employee contribution rates are fixed, and depend on salary. Employer contribution rates are set by each fund, and for each scheme employer individually. Employer contribution rates are based on the funding position, with the intention of ensuring that the fund can meet any anticipated liabilities and that any deficit is recovered over a period of time. Consequently, they can vary significantly between funds.
All support staff are automatically members - even central staff within a multi academy trust. For academy trusts with newer funding agreements, it is a condition that all non-teaching staff are members. Older funding agreements only refer to school-based staff, which can lead to some confusion. However the scheme is a statutory one, so regardless of what the funding agreement says all employees who are not eligible for membership of the TPS are eligible to be in the LGPS.
The question which arises for central staff in a multi academy trust is which fund they ought to be members of. The Regulations provide that the correct fund is the one for the area in which the employee works. For central functions this will generally be where the trust's head office is based. There may be more scope to choose which fund for staff based at a number of locations.
Pooling and Academy Trust Contributions
It is open to the Administering Authority for a fund to pool groups of similar employers. The effect of employers being pooled is that they have a common employer contribution rate, and consequently share the risk of the funding position worsening (or improving of course). All maintained schools are automatically pooled with the relevant local authority. The DfE has indicated that its view is that Academies should also be given the opportunity to be pooled with the local authority, so that they are put in the same position as maintained schools. However not all local authorities do this, and there have been instances of academies seeing their employer contribution rates increase significantly on conversion. Schools in the process of converting to academy status should establish whether the option of pooling with the local authority is open to them, and (with the benefit of actuarial advice) what effect it is likely to have on their contribution rate. In some cases we have had to challenge Authorities whose policies unfairly discriminate against academies.
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