Organisations that are not automatically scheme employers, but who meet certain conditions, can be admitted as scheme employers. These are called admission bodies.
Admission bodies either become Local Government Pension Scheme (LGPS) employers as a result of a TUPE of LGPS eligible staff, or where they provide a public service and have sufficient links to a current LGPS employer.
In both cases, their admission is subject to the body meeting the eligibility criteria, applying for admission body status, a report being commissioned from our fund actuary, and an admission agreement being signed by the contractor, the original employer and the administering authority of the pension fund.
The most common way that an organisation will become an admission body is due to a TUPE arrangement, usually as a result of the outsourcing of a contract from an existing LGPS employer to an outside organisation, such as a charity or private sector organisation, or the creation of a new company or charity from an existing scheme employer (normally a local authority) to be responsible for the delivery of some of its functions or services.
An organisation's eligibility to become a scheme employer is determined by Derbyshire County Council in its role as the administering authority of Derbyshire Pension Fund.
Protecting pension provision for transferring staff
Contractors taking on a function or service from a current scheme employer are obliged to ensure that the pension provision for the transferring staff is protected. The requirements are slightly different and are dependent on which type of scheme employer is outsourcing the function or service.
For transferring staff who were eligible for the LGPS before the transfer, the new contractor must provide the following:
For functions and services from local authorities
The 'best value authorities staff transfers (pensions) direction 2007', ensures that transferring employees are provided with rights to pension benefits that are the same as or better than those they had before the transfer. This therefore requires that the contractor provides either continued access to the LGPS or a "broadly comparable" pension scheme validated by a certificate of comparability issued by the Government Actuary Department (GAD).
Where a contractor taking on a local authority function/service provides a “broadly comparable” pension scheme, a copy of the GAD certificate must be provided to the outsourcing employer and pension fund.
For functions and services from other scheme employers (including academies)
The 'new fair deal' arrangements do not include an option and require that the contractor provides continued access to the LGPS.
Matters to consider for outsourcing employers and contractors
Whether you're a current LGPS employer considering outsourcing a function or service to an external contractor, or you are considering bidding for such a contract, there are some important considerations:
For employers outsourcing a contract
- ensure that those bidding for your contract are made fully aware of their responsibilities in respect of pensions, including the need to apply for Admission Body status to enable continued access to the LGPS for transferring staff
- liaise with your legal adviser to ensure that pensions information (including costs) is included in the tender and contract
- keep the staff transferring to the new contractor informed about the impact of the transfer on their pensions
- acknowledge and understand that the ultimate responsibility for pension matters relating to the transferring staff, and unpaid liabilities to the pension fund, remains with you
- to mitigate the financial risk of picking up unpaid pension liabilities from the contractor, determine if you will insist that the contractor arranges a bond to cover such situations
- liaise with your legal adviser in preparation for checking the admission agreement and any bond agreement
- determine whether any liabilities to the pension fund in respect of transferring staff will pass to the contractor or whether it will commence operation as fully funded
- be prepared to provide pay details to the pension fund for affected LGPS members to the date of transfer
- be prepared to monitor the contractor’s performance as a scheme employer.
For new contractors becoming an LGPS employer
- understand the responsibilities and costs related to being a scheme employer
- liaise with the outsourcing employer about whether you will pick up any existing liabilities to the pension fund or commence operation as fully funded.
- liaise with the outsourcing employer on whether a bond will need to be arranged
- complete the application for admission body status
- be prepared to provide all necessary information to the pension fund
- familiarise your pay and HR staff with the LGPS and your scheme employer responsibilities.
- ensure your payroll is ready to apply employees and employers LGPS contributions and provide payments and contribution reports to the pension fund
- prepare your employer discretions policy within 1 month of becoming a scheme employer
If you are considering applying to become an admission body or if you represent a current LGPS employer that is considering outsourcing a service, please contact us as soon as you are able by email: firstname.lastname@example.org
Links to useful documents