Introduction
Between October 2012 and 2018, new government legislation progressively applied to all LGPS employers which required such organisations to meet a number of new pension requirements which apply from each employer's 'staging date' (the date the legislation applied to them).
In brief, the main requirement is for employers to auto-enrol all Eligible Jobholders into a Qualifying Pension Scheme with effect from the employer's Staging Date or the member's start date if later. New rules also apply surrounding opt-outs (making it more difficult for members to opt out of the scheme) and a requirement was introduced to re-enrol staff who have opted out at three year anniversaries after the employer's staging date.
The purpose of the auto-enrolment legislation is to increase the number of staff across the country's workforce that will be enrolled automatically into a qualifying pension scheme. Whilst the LGPS is a qualifying pension scheme, employers do not necessarily need to use the LGPS as its qualifying pension scheme (in particular for admitted bodies) although for many employers this will be required to do so under the LGPS Regulations.
Registering with the Pension Regulator
All employers must register with TPR and provide information about how they have complied with their duties. This information must be submitted within five months of the duties start date. The declaration can be submitted on TPR's website.
Whilst registering, you may find the following pieces of information useful:
- The LGPS PSTR number is 00328742RS
- The Pension Scheme registry number (PSR) is 10079120
- Employer Pension Scheme Reference: Leave this blank
Certificate of Compliance
If you are asked about a certificate of compliance for the LGPS (to show that it is a Qualifying Scheme) you can pass on the following information provided by the Local Government Association (LGA)
"The LGPC Secretariat has obtained confirmation from the Department of Work and Pensions (DWP) which confirms that as the LGPS is a public sector, final salary, contracted-out occupational scheme there is no requirement for employers using the scheme to self-certify that it meets the quality requirements for being an automatic enrolment scheme. Guidance published in July 2012 by the DWP entitled Automatic Enrolment: Guidance for employers on certifying defined benefits and hybrid pension schemes outlines (in section 2.6) that final salary schemes that are contracted-out of the state second pension automatically qualify as automatic enrolment schemes. The contracting-out certificate is taken as evidence that the scheme satisfies the quality requirements. The LGPC Secretariat has been informed by DWP that when this guidance is next updated it will be amended to more clearly reflect that employers using the LGPS do not require a certificate of compliance."
You can find a copy of the contracting-out certificate here.
Explanation of some key terms:
Staging Date
An employer's staging date is set in law as of 1 April 2012 and is the date the automatic enrolment duties apply to them. New employers have a 'duties start date' instead of a staging date.
Duties start date
The duties start date is the date a new employer's automatic enrolment duties start from. It is the date the new employer's first worker begins to be employed i.e. the date the first worker's contract of employment with the employer takes effect. A new employer is deemed to be:
- An employer who becomes an employer on or after 2 April 2017 and does not have a PAYE scheme and has not paid PAYE income before 1st October 2017;
- An employer who first pays PAYE income in respect of any worker on or after 1 October 2017
Eligible Johholders, Non-eligible Jobholders and Entitled Workers
A definition of these can be found in the Eligibility of New Employees into the LGPS section.
Qualifying Pension Scheme
For employers not required under legislation to use the LGPS for new staff, for example admitted bodies, and are considering using alternative provisions, a definition can be found here.
Employee Safeguarding
The workplace pensions reform introduces new duties and safeguards that all employers must adhere to. The safeguards are intended to protect individuals, meaning there are certain things the employer must not do, both before a person starts working for them and once that person is a member of a pension scheme with that employer.
Full details of the safeguards can be viewed in TPR's detailed guidance no.8 - a summary is provided below:
- An employer must not, as part of the recruitment process, make any suggestion that success in applying for a job may be conditional on opting out of the pension scheme.
- An employer cannot seek to induce a member of either the LGPS or the TPS to opt out of the scheme.
- An employer cannot treat a worker unfairly or dismiss a worker on account of the worker trying to enforce their automatic enrolment rights.
Contractual Enrolment
Under the regulations that govern the LGPS most new employees are contractually enrolled into the relevant pension scheme. As the LGPS is a qualifying scheme for automatic enrolment, employees that are contractually enrolled will be unaffected by automatic enrolment unless they elect to opt out of the LGPS.This means that rather than having to work out which employees need to be put into an automatic enrolment pension scheme, employers who participate in the LGPS will just put all of their employees in as long as they are under age 75 and have a contract of employment for 3 months or more.
Where employees are 'contractually enrolled' they have to agree to join the pension scheme, and to have contributions deducted from their salary. This consent is normally given when accepting the terms set out in the employment contract.
If a member opts out, the employer will be required to re-enrol the member into the LGPS approximately every three years on a set re-enrolment date, if they are an eligible jobholder.
Automatic enrolment sits alongside contractual enrolment and requires that employers, from their staging date or duties start date, continually monitor their workforce and take certain actions in respect of employees who are not contributing to their workplace pension scheme at specified times.
The employer may choose not to automatically enrol a member if:
- the member opted out of the LGPS within 12 months of the date they are due to be automatically enrolled
- the member has given notice of their resignation or retirement, or them been given notice of dismissal.
- the employer believes that the member holds a lifetime allowance protection, such as Primary, Enhanced or Fixed Protection.
Postponement
An employer may postpone automatically enrolling an employee into the LGPS for a maximum period of three months. One of the reasons an employer may choose to do this is if they are employed on a short term contract for less than three months; another reason may be where the employee is paid arrears of salary that cause their earnings to exceed the earnings trigger for automatic enrolment where their earnings would normally be below the trigger. Your employer can only use postponement from:
- their staging date (the date that automatic enrolment applies to the employer)
- the employees first day of employment
- the date they were eligible to be automatically enrolled
50/50 section of the LGPS
The LGPS offers its members the opportunity to pay a lower rate of contributions in return for a lower rate of pension build up - this is called the 50/50 section of the LGPS.
The 50/50 section operates in tandem with the automatic enrolment provisions meaning that members who elect for the 50/50 section of the scheme will be automatically re-enrolled back into the main section of the scheme from the first pay period after the employer's cyclical automatic re-enrolment date, regardless of whether they are an entitled worker, non-eligible jobholder or an eligible jobholder.
For more information please see the LGA guide on automatic enrolment.
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