Employers

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Section One

1 - INTRODUCTION

1.1 Administrative Procedures – the Guide

This guide sets out the responsibilities of all employers under the Local Government Pension Scheme (LGPS) as administered by the Avon Pension Fund and explains the various procedures, which should be followed for the duration of an employee’s membership.

The internal administrative procedures followed by employers vary enormously. It is therefore impossible to produce a guide that reflects these procedural differences.

Wherever possible, the Fund recommends that LGPS forms are raised by departments responsible for obtaining member data, and passed to various appropriate departments within their organisation for completion. This ensures that all necessary information is collated and forwarded to the Pensions Section promptly.

The guide contains a complete set of current forms. Only use current forms. Old forms may not request data required by the current pension regulations.

The Pensions Section holds details of all users issued with a guide on a database, so that whenever a form or a procedure is changed, revised pages will be automatically issued to Pension Communication Officers.

1.2 The Local Government Pension Scheme

The Local Government Pension Scheme is a public service pension scheme for local government employees in England and Wales. Its rules are set out in the Local Government Pension Scheme Regulations 1997 (the 1997 Regulations) which came into effect on 1 April 1998. 

It is administered by County Councils, London Boroughs, lead metropolitan district councils, unitary authorities in England and Wales, the London Pensions Fund Authority and the Environment Agency. These bodies are called Administering Authorities. Bath & North East Somerset Council is the Administering Authority for the Avon Pension Fund. To be able to join the LGPS an employee must work for a Scheme Employer or an employer that has been admitted to the LGPS. 

This Guide should not be treated as an authoritative interpretation of the law. Throughout the guide references are made in bold to the relevant regulation of The Local Government Pension Scheme Regulations 1997, (as amended). A list of all the Pension Regulations is shown in Appendix 10.

There are separate pension schemes for Firefighters, Police and Teachers (including Lecturers). However, the civilian staff of Fire Brigade Authorities, Police Authorities are eligible to be members of the Local Government Pension Scheme. 

1.3 Scheme Employers

A Scheme employer is a body defined as such within the 1997 Regulations. Such employers must participate in the LGPS and their staff are admitted to the Scheme unless they opt out. (See Appendix 3)

1.4 Resolution Body

Some LGPS employers are designated as resolution bodies - i.e. they have the power to decide if an employee or group of employees can belong to the LGPS and pass a resolution accordingly, e.g. Parish and Town Councils, a company under the control of a body listed in Schedule 2 of the LGPS Regulations (see Schedule 3).

1.4 Employers admitted to the LGPS

Provided they meet certain conditions, certain employers can also participate by means of an admission agreement negotiated with Bath & North East Somerset Council, as the administering authority for the Avon Pension Fund. These employers are admitted bodies. The admission agreement can designate which employees are able to join the LGPS.

Following an amendment to the Regulations, private contactors who will be providing a service under best value can decide that the employees covered by the best value arrangement can remain in the Pension Scheme. This is subject to an admission agreement between the Avon Pension Fund, the employer and the service provider.

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2 - JOINING THE PENSION SCHEME

2.1 Pension Starter Pack

This Pack has been designed to advise an employee of his/her rights as regards choice of pension scheme and the right to opt out of the Local Government Pension Scheme. It includes the following:

If the Pack is issued (as requested) then the requirements of the Local Government Pension Scheme and the Occupational Pension Schemes (Disclosure of Information) Regulations 1996 are satisfied. The disclosure regulations require the employee to be given information about the Scheme within 2 months of becoming a member.

2.2 Joining the LGPS – New Employees

All new permanent or temporary employees less than 75 years of age, will automatically become members of the LGPS from the first day of their employment unless notice is given to opt out of the LGPS by the completion of Form LGPS 4. Employees who have the right to join another public service pension are not eligible to join the LGPS this includes firefighters, retained firefighters, teachers and lecturers.

An employer must issue the Pension Starter Pack supplied by the Avon Pension Fund, ideally with the letter of appointment, but in any event within one week of the date the employee commences employment.

In the following cases, employees may not be entitled to become members of the LGPS immediately on appointment:

1. Casual Employees

Casual employees have to elect to join the LGPS. If such an employee wishes to join the LGPS please issue the employee with a Pension Starter Pack. If the Pension Membership Form (Form LGPS 1) is not completed before they commence employment the date of entry to the LGPS will be the beginning of the pay period following the date of completion of this form. Eg if the employee is monthly paid the date of entry will be the 1st of the month following the date of completion of Form LGPS 1. Casual is not defined in the Regulations but could be taken to mean employment of an irregular nature circumstanced by chance and with a day-to-day element about it.

(iii) Employees of admitted bodies

Membership will depend upon the terms of the admission agreement with the administering authority (for instance certain categories of employee may be excluded). If the employee is eligible he/she must be given the Starter Pack and contributions must be taken from the date of appointment.

(iv) Employees of resolution bodies

The employer must decide whether an employee can join the LGPS accordingly to the resolution it has passed. If the employer decides that the employee can join, the Starter Pack must be given to that employee and contributions taken from the date of appointment.

2.3 Employees who have more than one contract — Regulation 12(4)

If an employee has more than one contract with the same or different employers the regulations require that each contract is treated and recorded separately. When the contracts are with the same employer they are often combined and paid under the same payroll number but it is vital for pension purposes that membership is recorded separately for each employment and the Pensions Section informed accordingly.

If a member leaves one of the jobs, the employer must inform the Pensions Section which contract the employee has left and provide the Pensions Section with all the relevant information necessary to process the termination.

2.4 Re-joining the LGPS after Opting-out – Regulation 7(9)

These employees may choose to join the LGPS. If a request is received to join the LGPS please issue the Pension Starter Pack to the employee. The date of entry to the LGPS will be the beginning of the pay period following the date of completion of the Pension Membership Form. Eg if the employee is monthly paid the date of entry will be the 1st of the month following the date of completion of Form LGPS 1.

Employees are not eligible to join the LGPS if they have been a member of the LGPS and subsequently opted out on 2 separate occasions during one continuous period of employment with the same employer (unless it is the policy of the employer to allow such employees to rejoin). Regulation 7(9)(a).

2.5 Members Contribution Rates (Regulations 12, 14 & 16)

New members will pay 6% of their pensionable pay.

Before 1 April 1998 staff employed as manual workers paid 5%. Under the 1997 Regulations a standardised contribution rate of 6% was introduced but the right of those employees who could pay 5% has been protected. This protection applies whilst they remain employed in the same capacity and covers changes of employer where the gap is less than one month and one day (a period which can be extended at the discretion of their employer). This applies to an employee who is currently not in the LGPS and now wishes to join.

Former employees paying 5% who have been transferred out of local government employment due to a service being outsourced and whose employment has now returned to local government are also protected. However, to keep the right to the 5% rate they have to apply to their employer within 30 days of returning to local government employment. This does not apply to an employee who chooses to return to local government employment. 

If an employee who is entitled to pay 5% changes jobs where the new duties can be defined as wholly or mainly administrative, professional, technical or clerical, he/she must pay 6% from the date of the change.

Where an employee opts to pay additional voluntary contributions or added years contributions the Pensions Section will notify the employer in writing of either the additional amount of pension contributions or the additional percentage to collect and the dates the additional contributions are to be collected.

Members’ contributions are limited in total to 15% of pensionable pay and are subject to tax relief.

2.6 Incorrectly deducted pension contributions – Regulation 89(5)

The regulations require that interest should be paid on any refund of incorrectly deducted pension contributions (including added years contributions) paid back to the employee where the refund is made more than 1 month after the contributions were deducted. 

Where the employer refunds incorrectly deducted pension contributions to an employee via the payroll this will have the effect, correctly, of reducing that month’s total payment of contributions to the Pension Fund.

If the refund is made more than one month after the contributions were originally (incorrectly) deducted from the employee’s pay, please notify the Pensions Section of:

a) the name and national insurance number of the employee

b) a monthly breakdown of the employee’s incorrectly deducted contributions

c) the date the refund of the incorrectly deducted contributions was made. It is possible that the refund will be made by the Pensions Section.

The Pensions Section will then calculate and pay out of the Pension Fund any interest that is due on the refund to the employee.

This regulation includes additional voluntary contributions which have been incorrectly deducted.

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2.7 Pensionable Pay – Regulation 13

An employee’s pay is all the salary, wages, fees and other payments paid to an employee for his own use in respect of his employment and any other payment or benefit specified in his contract of employment as being a pensionable emolument.

The expression does not include:

(a) payments for non-contractual overtime,

(b) any travelling or subsistence allowance or any other allowance paid to an employee in respect of expenses incurred in relation to the employment,

(c) any payment made to him on ceasing to hold his employment in consideration of loss of holidays,

(d) any payment accepted by him in lieu of notice to terminate his contract of employment,

(e) the money value to the employee of the provision of a motor vehicle (unless, prior to 1st January 1993, the employee was paying contributions on the value of a motor vehicle, in which case the employee will continue to pay contributions on the value of the motor vehicle for so long as a car is provided by his employer and he does not enter employment with a new employer),

(f) any payment made to an employee as an inducement not to terminate his employment before the payment is made.

Notes: Pension contributions are only paid on the "pensionable pay" in respect of an employee’s "contractual hours". If the employee is a casual employee who has opted into the LGPS pension contributions are payable on all hours worked up to the normal full-time hours (e.g. 37 or 39 per week).

"Contractual hours" are the number of hours the employee is required to work in each of the "contractual weeks"; but where there is any cyclical variation in those hours the contractual hours are the average of those hours over the cycle.

"Contractual weeks" are the number of weeks in every period of 12 months for which (assuming that there will be no unpaid leave of absence) a wage or salary is payable to the employee.

2.8 Pension Membership Form – Form LGPS 1

The Pension Membership Form must be returned to the employer with a copy of the employee's birth certificate. The Form must then be forwarded to the Pensions Section indicating whether or not the date of birth has been verified or not. If the date of birth is not verified at this time, payment of any future benefits or transfer values will be delayed whilst verification is sought.

Form LGPS 2 must be completed in all cases of new members and sent to the Pensions Section whether or not the member has completed Form LGPS 1.

3 - INCREASING BENEFITS

3.1 Buying Extra Membership (Added years) — Regulations 55 - 57

An employee may be able to purchase extra membership by paying additional contributions. Additional contributions are paid in the same way as basic contributions. The sooner an employee starts paying the lower the cost. Contributions commence on the employee’s next birthday subject to a medical certificate as required by the Fund for which the employee meets the cost.

3.2 Additional Voluntary Contributions (AVC’s) — Regulations 60 - 66

Employees can pay AVC’s to increase benefits and/or death benefits. Contributions are made via the employer’s payroll thereby obtaining immediate tax relief.

The in-house provider for the Fund is currently Friends Provident with whom the AVC’s are invested directly. Employees can invest in various options. Any employee who is interested should write to the Pensions Section requesting further information.

3.3 Shared Cost Additional Voluntary Contributions (SCAVC) — Regulations 67 — 72

This section is only applicable to those employers whose policy decision on discretions includes an SCAVC Scheme. (See Section 14.1)

If a SCAVC Scheme has been introduced, contributions are required from the employee and the employer but the contributions from the employee do not have to match those of the employer. The contributions can be used to provide:

• enhanced death benefit lump sum

• an additional pension on retirement

3.4 Converting AVC’s into LGPS membership - Regulation 66(5)

Members who are 50 or over, or any age if retiring on ill health grounds, they can convert AVC/SCAVC’s into LGPS membership providing the AVC contributions commenced before 30 November 2001.  Any converted membership only provides an extra pension not lump sum. Members who are retiring with immediate benefits can buy an annuity through the LGPS instead of the Pension Fund's AVC provider.

As soon as the procedure for retiring someone paying AVCs is started the employee must be given the 'Into Retirement' guide. If the member chooses to convert their AVCs to LGPS membership or an annuity, the Pensions Section will request that future AVC deductions are cancelled. This allows for the conversion to LGPS membership to be completed prior to retirement.

4 - CHANGES DURING EMPLOYMENT

4.1 Changes to an employee’s data which the employer must notify to the Pensions Section – Regulation 108

The following changes must be notified to the Pensions Section using the Notification of Change Form, LGPS Form 3.

1. change of name and or address
2. amendment to date of birth
3. amendment to National Insurance number
4. change of contractual hours, contractual weeks, or whole time equivalent hours
5. change of status from manual worker to officer

When notifying the above variations to the Pensions Section on LGPS Form 3, the surname, forenames, National Insurance number and employer fields must be completed in all cases for ease of identification.

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4.2 Employees who suffer a reduction in pensionable pay or whose rate of increase in pensionable pay is restricted - Regulation 23

Where a pensionable employee has:

1. suffered a reduction in the pensionable pay of his/her employment, either in the same post or on transfer to another post, or
2. his/her rate of increase in pensionable pay is restricted, and
3. the reduction/restriction has resulted from circumstances beyond his/her control.

The employee can ask his/her employer to issue a "Certificate of Protection of Pension Benefits". Employers may also issue the certificate on their own initiative.

A certificate cannot be issued if the reduction in the employee’s pensionable pay is temporary, or is the termination of, or a reduction in, a temporary increase in the rate of pay.

The certificate must specify the date that the material change occurred and must be issued within 12 months of that date.

The issue of such a certificate will provide an effective protection of the final pay, used in the calculation of an employee’s benefits, provided that the person ceases local government employment or changes job within local government employment within 10 years of the change in circumstances. Beyond 10 years, however, no protection is provided.

Where an employer has issued a certificate, the employee can elect to have his/her benefits based upon the final pay earned in:

(i) any one of the last five years prior to his/her cessation of employment, or

(ii) the final pay over any three consecutive years within the thirteen years prior to his/her cessation of employment.

The one year or three year average must end with the anniversary of the date employment ceased.

The protection to the employee is only apparent when his/her benefits, are calculated based upon the final pay he/she has chosen and increased by cumulative percentage increases.

Form LGPS 5 has been provided for the use of employers. The Form incorporates the certification element and informs the employee of the options available for the calculation of his/her benefits. The employer must keep a copy of Form LGPS 5 and send the form to the Pensions Section using Specimen Letter B.

An employer is required by the Regulations to record the information that may be required in the calculation of benefits. Therefore, immediately the Certificate has been issued an employer must be able to provide, a record from which it could calculate, at any given time, the employee’s final pay over any one or three year period within the 13 years ending at that given time.

The issue of a certificate is not seen to be beneficial to an employee who will not qualify for benefits within the next 10 years. The employee may, however, retire on the grounds of permanent ill-health or die in which case benefits will be paid or leave local government employment within the 10 year "life" of the certificate and become entitled to preserved benefits.

If, however, a reduction/freeze in pensionable pay occurs considerably more than 10 years before it is anticipated that the employee will qualify for benefits, the alternative of an award of preserved benefits based upon the higher level of pay in respect of service up to the change, and separate benefits based on a lower level of final pay in respect of service after the change, will need to be considered.

If a full-time or part-time employee reduces their contractual hours but their reduced pay is still related to the same full-time salary/scalepoint a certificate cannot be issued. This is due to the way the benefits for a part-time employee are calculated. In these cases the service is apportioned according to the part-time ratio and the full-time equivalent final pay is used in the benefit calculation

4.3 Voluntary Reductions in Pay — Regulation 32(10)

If an employee with benefit entitlement, i.e. more than 3 months membership or with transferred membership, has recently transferred to a job with the same employer which pays a lower rate of pay, it may be advantageous for them to keep membership separate.

Keeping membership separate allows the earlier period to be calculated at the higher rate of final pay applicable at the time and to be increased by cumulative pension increase.

In these circumstances, members should be referred to the Pensions Section for further details. On retirement, the Pensions Section will automatically check whether it is in the member’s best interest to keep membership separate and, if not, automatically combine it.

4.4 Absence from duty - Approved leave of absence and suspension from duty – Regulations 17 and 18

A pensionable employee who is granted study leave, special leave, or is suspended from duty, with either reduced remuneration or without remuneration is covered by these Regulations.

Period less than 31 days

If a member is absent or received reduced remuneration for less than 31 days, that member MUST pay pension contributions on the remuneration he/she would have received but for the absence/reduced remuneration.

Period in excess of 30 days

If the period of absence or reduced remuneration is for more than 30 days the member may elect, by notice in writing to the employer, to pay contributions for the period of his/her leave of absence/reduced remuneration, up to a total period of 36 months. If the employee elects to pay contributions the service will count in full as a normal period of membership. If contributions are not paid for the period of no pay the period will not count in any way. 

If the period is a period of reduced pay and the additional contributions are not paid the period  will be apportioned.

An employee must notify his/her employer not later than 30 days after his return to duty after the period of absence if he/she wishes to pay contributions for the period.

Employers may, however, wish to inform an employee of his/her right to pay contributions at the earliest possible date. A letter (Specimen Letter C) has been produced for this purpose together with Form LGPS 6.

Notifying the Pensions Section

If an employee is granted leave of absence which does not extend beyond 30 days it is not necessary to notify the Pensions Section. Similarly, if the employee elects to pay contributions beyond 30 days, no notification need be sent. If, however, the employee does not elect to pay the contributions beyond the 30 day period a copy of the notification issued to the employee (Specimen Letter D) must be sent to the Pensions Section. A letter (Specimen Letter E) has been designed to accompany the copy notification.

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4.5 Jury Service – Regulation 17

Payment of pension contributions is obligatory for the whole of the period of absence and not just for the first 30 days only. Employers must ensure that deductions are made on the rate of remuneration that the employee would have received but for the deduction that is made in respect of the Juror’s Allowances, which the employee will have claimed.

The Pensions Section does not need to be informed of any period of jury service, as there will be no break in the employee’s period of membership of the LGPS.

4.6 Maternity/Paternity/Adoption Leave 

As a result of the above regulations, there have been changes to the maternity leave provisions and the introduction of paternity and adoption leave.

These regulations have implications for the Local Government Pension Scheme and the following now applies.

1. During any period of ordinary maternity / adoption leave [i.e. during weeks 1 to 26] or, statutory paternity leave the employee will pay basic pension contributions on the pay actually received. Any Contractual Maternity Pay entitlement will be deemed paid in weeks 7 to 18, regardless of the actual period paid over. If an employee is not in receipt of pay during the period, the basic contributions are deemed paid.

The employer will pay pension contributions on notional full pay.

The service will count as normal for pension purposes i.e. as if the employee had been at work. 

2. During any period of unpaid Additional Maternity Leave or Additional Adoption Leave (i.e. weeks 27 to 52) the unpaid period will not count for pension purposes unless the employee elects for it to count. Such an election would have to be made within the period of 30 days beginning with the day the person returns to work or ceases employment (if earlier), or such longer period as the employer may allow. If the employee makes an election to count the service for pension purposes, the basic employee contributions for the unpaid period will be based on the pay he/she was entitled to receive on the day before the unpaid period began 

If, when a member ceases employment, there is a period of maternity, paternity or adoption leave in the final pay period (normally the last 12 months), the final pay to be notified to the Avon Pension Fund will be the pay or if part time the equivalent fulltime pay the person would have received but for the maternity, paternity or adoption leave absence.

3. If a person is paying additional pension contributions to purchase added years of membership under the Scheme those additional contributions should continue to be paid throughout the whole period of any maternity, adoption or paternity leave as if the employee was still in receipt of full pay.

4. Maternity, Paternity and Adoption Leave:  Reference Table is shown below

Note: If a person is paying additional pension contributions to purchase added years of membership under the Scheme, those additional contributions should continue to be paid throughout the whole period of any maternity, adoption or paternity leave as if the employee was still in receipt of full pay.

The member (or the personal representative in the unfortunate event of her death) may opt in writing to her employer:

to make contributions for the period of unpaid Additional Maternity/Additional Adoption Leave.

Employers may, however, wish to inform an employee of the right to pay contributions at the earliest possible date. A letter (Specimen Letter F) has been produced for this purpose together with Form LGPS 7.

Notifying the Pensions Section

If the employee decides to pay the contributions for the period of unpaid leave it is not necessary to notify the Pensions Section. If, however, the employee does not elect to pay the contributions a copy of the notification issued to the employee (Specimen Letter D) must be sent to the Pensions Section.  A letter (Specimen Letter E) has been designed to accompany the copy notification.

Employees who do not return to their job following a period of absence due to pregnancy

If an employee initially preserves her right to return to work but does not ultimately return to work, one of the following situations will apply:

1. The employee has paid contributions during the period of paid maternity leave but has not elected to pay for any further period, or

2. The employee has paid contributions during the period of paid maternity leave and has elected to continue paying contributions until she decides not to return and resigns.

In situation 1, the employee ceases to count service for pension purposes after the period of paid maternity leave but she remains a LGPS member up to the date she resigned or is dismissed.

In situation 2, the employee continues to count reckonable service to the date to which she has paid contributions. She remains a pensionable employee up to the date she resigned or is dismissed.

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4.7 Unauthorised Absence

Any absence, other than that referred to in Section 4.8, which is not sanctioned by an employer and which would therefore be unpaid does not count as service in any way for pension purposes. If, therefore, an employee absents himself/herself from work it is necessary for the employer to issue a notification to the employee. A letter (Specimen Letter G) has been produced for this purpose. A copy of that notification must be sent to the Pensions Section. A letter (Specimen Letter H) has been designed to accompany the copy of the employee’s notification.

4.8 Absence due to a trade dispute for one or more complete days – Regulations 17 & 18

This absence is initially treated in the same way as any other unauthorised absence, ie the service does not count in any way for pension purposes. There is, however, a provision in the Regulations, which enables an employee to elect to make a payment to the Pension Fund in respect of a period of absence from duty because of industrial action.

This payment is the equivalent of 16% of the pay that the employee would have received but for the absence. If this payment is made, the period of absence will count as pensionable service.

The Regulations actually refer to a “trade dispute” and do not mention such phrases as industrial action or strike action. It will be for employers to determine whether or not the absence of any employees falls within the definition of a trade dispute which is set out in section 218 of the Trade Union and Labour Relations (Consolidation) Act 1992.

If an employee wishes to make a payment to prevent a break in his/her pensionable service, he/she must elect to do so within 30 days of the date he/she returned to work (or ceased employment if earlier), although the employer may extend this time limit.

The payment is based upon the remuneration the employee would have received but for the absence. The regulations do not prescribe how the 16% payment is to be made and it is open to the employer either to require payment in one sum or to accept payment by instalments. 

(a) Notification to the employee

A letter (Specimen Letter I) has been produced to assist employers. The letter encloses a form (Form LGPS 8) upon which the employee can indicate his/her wishes. If the election period of 30 days has elapsed, and the employee has not elected to make the payment, the employer must issue a notification to the employee. A letter (Specimen Letter J) has been produced for this purpose.

(b) Notification to the Pensions Section

If an employee elects to make the payment it will be treated as contributions to the fund, and should be included in the monthly contribution return. There will be no need to inform the Pensions Section that the payment has been made, as there will be no break in the employee’s pensionable service.

If however, an employee does not make the payment, a copy of the notification issued to the employee (Specimen Letter J) must be sent to the Pensions Section.

(c) Absence on strike for less than a day

Where the absence lasts for less than a day, contributions will be payable on the remuneration received for the remainder of the day, which will automatically be treated as pensionable service. Employers are not therefore required to issue any notification to the employee or to the Pensions Section.

4.9 Employees Paying Additional Contributions

Employees who are paying additional contributions to uprate pre-1st April 1972 service for lump sum purposes or who are buying "added years" must pay those additional contributions for the whole period of the absence. These payments must be based upon the pensionable pay the employee would have received but for the absence.

4.10 Employers’ Contributions

(a) Maternity/Adoption Leave

The relevant legislation requires the employer to pay contributions on the notional full pay that would have been paid to the employee if she had not been on maternity/adoption leave. A possible alternative way of complying with this requirement could be to collect employer contributions on the actual (not notional) pay received and leave the additional cost to eventually be met via the employer's contribution rate at the next valuation of the Fund.

This may be a simpler method from a payroll perspective. Such an approach would meet the spirit of the law, although not the letter of the law. Under either method, the employer pays the necessary employer contributions to meet the cost of the scheme membership accruing to the employee.

(b) Leave of Absence

If an employee elects to pay contributions for a reduced / unpaid period of leave of absence the employer should pay his contributions for the period on the notional full pay that would have been paid to the employee if he / she had not been on leave of absence. As in 4.10 (a) above the employer could collect contributions on the pay received and leave the additional cost to eventually be met via the employer's contribution rate at the next valuation of the Fund.

(c) Strike

This is the only absence where the employer does not have to pay his share of the contributions.

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