COVID-19 FAQs for LGPS employers

This page will be updated as new information becomes available, so please revisit regularly.

If you represent an LGPS employer, you may wish to view a recording of one of the webinars we delivered covering the impact of COVID-19 on scheme employers. Please use the links below to access the webinar recordings.

COVID-19 webinar for LGPS employers in England and Wales

COVID-19 webinar for LGPS employers in Scotland

COVID-19 webinar for LGPS employers in Northern Ireland

> Furloughed staff

Who are furloughed staff?

Employees who are being paid under the Government's Coronavirus Job Retention Scheme are referred to as furloughed staff. More information on this and other employment issues can be found at the LGA's workforce update - job retention scheme and COVID-19 employment law FAQs page.

Is furlough pay pensionable?

Yes, furlough pay is pensionable pay under the regulations. Employee and employer contributions should be deducted based on the actual pay the furloughed employee receives. Assumed Pensionable Pay does not apply.

Can employers reclaim pension contributions from the coronavirus job retention scheme?

Employers can only claim pension contributions for furloughed employees up to the minimum required for automatic enrolment, that is 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and £520 per month from 6th April 2020 onwards). The cost of employer contributions above the 3% minimum will fall to the employer. On 29 May 2020, the Government announced that, from August 2020, employers will no longer be able to reclaim any pension contributions.

How will furlough pay affect pension build up?

Members will continue to build up CARE pension based on the actual pay they receive. If the furlough pay is less than their normal pay (because the employer chooses not to top up pay to 100%), the pension they build up will also be less. They can choose to buy additional pension to make up for the pension lost during this period. The employer is not obliged to split the cost with the member but can choose to. The employer could choose to award additional pension to the member, based on the pension 'lost' during a period of reduced pay.

Final salary benefits are usually calculated using the pensionable pay earned in the year before leaving the scheme; however, one of the two previous years' pay is used, if higher. This should prevent final salary benefits from being detrimentally affected if the member’s pay is reduced due to being on furlough.

In our view, if an England & Wales member’s contract of employment is changed when they are furloughed, they will not have the option to have their final pay calculated as the average of any three consecutive years' pay in the last 13 years.

A certificate of protection in Scotland will not apply because the pay reduction is temporary.

How will being on furlough leave affect a member’s death in service benefits?

Assumed pensionable pay (APP) is used in the calculation of the death grant and any survivor benefits if a member dies in service. APP is usually calculated using the average pensionable pay the member receives in the three months before the pay period in which they die.

If a member receiving reduced furlough pay dies in service, employers should make use of the provision in the regulations that allows them to substitute a higher pay figure to reflect the pensionable pay the member would normally have received.

How will being on furlough leave affect salary sacrifice benefits?

The Government’s coronavirus job retention scheme guidance states that all the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of a salary sacrifice scheme. Where the employer provides benefits to furloughed employees through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the job retention scheme.

When determining the employee contribution rate on 1 April 2020, should furlough pay be used?

Yes, if furlough pay forms all or part of a member’s pensionable pay it should be used to determine the employee contribution rate on 1 April 2020.

Regulations in England & Wales and Northern Ireland provide that where there is change to employment, or a material change during the year, the employer may make a further determination and reallocate a member to a different band. In Scotland, a further determination must be made if there is a permanent material change to the terms and conditions of a member's employment during the year. The employer must notify the member when they reallocate them to a different band.

Further information is available from the LGA guide on discretionary policies and SPPA employer guidance for the assessment of member contribution rates.

> Contributions

Can employers delay or pause paying employee contributions?

No, regulations confirm that employee contributions must be submitted to the administering authority in line with the timescales in the Pensions Act 1995. That is, by either the 22nd (where they are paid electronically) or the 19th of the month following the last day of the month in which the contributions are deducted. If an employer fails to submit employee contributions on time, paragraph 148 of TPR Code 14 states that where ‘the scheme manager has reasonable cause to believe that the failure is likely to be of material significance to the regulator in the exercise of any of its functions, they must give notice of the failure to the regulator and the member within a reasonable period after the end of the prescribed period’.

Can an administering authority delay receipt of the valuation rates and adjustment certificate beyond the first anniversary of the valuation date?

Regulations state that the rates and adjustments certificates must be obtained before the first anniversary of the valuation date unless the Secretary of State/Scottish ministers/Northern Ireland Department for Communities (the Department) agrees to a later date.

Can administering authorities allow employer contribution ‘holidays’?

In our view, regulations confirm that an administering authority may determine the intervals for employer contribution payments, as they consider appropriate. There must be at least one payment per year. Whatever intervals are set, the total contributions due for the year, as set out in the rates and adjustments certificate, must be received by year end. Each payment must equal the appropriate proportion of the total contributions due for the year as determined by the authority.

There is no provision for non-payment 'holidays' where employer contributions are not paid during the year. Any employer seeking to defer employer contribution payments should discuss this with the administering authority. The administering authority must consider any risk to the fund's cash flow requirements and may have agreed a policy on this issue.

What happens if employer contributions are received late?

If an employer fails to pay contributions on time, regulations confirm that the administering authority may levy interest of base rate plus one percent from the due date to the payment date daily with three monthly rests. If the late payment is likely to be of material significance to the regulator, then the late payment will also be reported to the Pensions Regulator, in accordance with Paragraph 147 of TPR Code 14.

If an employer is in severe financial difficulty, can an administering authority force them out of the scheme to avoid further build-up of liability?

No, except for in Northern Ireland, regulations confirm that the only circumstances, outside of the conditions of the admission agreement, in which an employer ceases membership is if there are no active members (an exiting employer) or if the administering authority considers it likely that they will become an exiting employer.

An employer in Northern Ireland may be required to cease active membership to protect the solvency of the fund or prevent liabilities falling on other employers with the agreement of the Department.

Can administering authorities use the ‘deferred employer’ route or other flexibilities to better manage employers who exit the scheme?

The deferred employer route is not currently available in the LGPS. However, in England & Wales, MHCLG is considering the possibility of bringing forward these and other proposals for flexibility on exit payments included in the May 2019 consultation.

Current regulations in England & Wales provide that an administering authority may recover an exit payment over such period of time they consider reasonable. They can only suspend the employer’s liability to pay an exit payment if there is an expectation that the employer is likely to have one or more active members contributing to the fund within the period specified in the suspension notice. Any suspension can be for a maximum of three years. The employer must continue to pay contributions as reasonably required by the authority during that time.

In Scotland, current regulations provide that an administering authority can suspend an employer’s liability to pay an exit payment indefinitely. However, if a suspension notice is served, the regulations provide that the employer must continue to pay contributions as determined by the actuary until the suspension notice is withdrawn.

In Northern Ireland, regulations provide for an exit payment to be deferred with the approval of the Department during which time contributions continue to be paid by the employer as determined by the actuary. If there is a material change in circumstances, the exit date may be varied with the approval of the Department.

Can an employer defer payment of strain costs?

Regulations confirm that this is an administering authority discretion which may be limited by the Funding Strategy Statement (FSS). For example, an FSS may state that strain costs must be paid immediately except in exceptional circumstances and only for ill health cases. Employers seeking more flexibility in this area during the crisis should discuss it with the administering authority.

> Emergency Volunteering Leave, Secondment, Re-employment and Reserve Forces Leave

What employee and employer contributions are payable if a member takes Emergency Volunteering Leave (EVL)?

Employer pension contributions will be based on assumed pensionable pay (APP). Employee pension contributions will be based on the amount of the employee’s actual pay during emergency volunteering leave. All scheme discretions (administering authority and employing authority) should operate in the same way as if the member were receiving normal pay.

An active member is seconded as part of the emergency staffing; how does this affect their pension benefits?

If any LGPS members are seconded on emergency staffing to the NHS, their pension benefits continue on the same basis as before the secondment.

A deferred or pensioner member is part of the emergency staffing; how does this affect their pension benefits?

Deferred and pensioner LGPS members who return to work in local government or are offered contracts of employment with the NHS (as part of emergency staffing) will have access to pension provision in the appropriate pension scheme. If they are issued with an NHS voluntary agreement, it does not constitute an employment contract and therefore they will not have access to the NHS pension scheme.

If an LGPS pensioner returns to work, will their pension be affected?

Some administering authorities have a policy to abate a member's pension if they return to local government employment. The Government’s policy is that pensioners who return to roles as key workers should not be financially penalised for helping tackle COVID-19. On 19 March, the England & Wales Scheme Advisory Board (SAB) sent a letter to the chairs of pension committees to that effect.

Employers and returning employees may wish to check the administering authority's abatement policies.

Is it compulsory to abate compensatory added years if a member returns to work?

A Scottish employing authority must abate a member’s compensatory added years (CAY) if:
  • the person returns to work and is employed by Scottish LGPS employer or a relevant English or Welsh employer (regardless of whether the person re-joins the LGPS), and
  • the earnings from their re-employment exceed specified criteria
When the re-employment ends the CAY could be permanently abated depending on the length of re-employment.

Similar rules apply in England and Wales; however, we do not envisage these members will be re-employed to assist with the COVID-19 response as it has not been possible to award added years since 2006.

What happens when a member is on reserve forces leave?

The Ministry of Defence (MOD) expects to mobilise up to 3,000 armed forces reservists to assist in the Government’s COVID-19 response. LGPS members on reserve forces leave can choose to remain in the LGPS. If an employee chooses to remain in the LGPS, their contributions will be based on Assumed Pensionable Pay (APP).

The employer must tell the MOD the APP figure, the amount of basic employee and employer contributions and details of any additional contributions the member is paying. The MOD will pay the contributions to the administering authority. Any payments made by the employer to a member who is on reserve forces leave are non-pensionable.

> Information for scheme members

What information is available for members who are concerned about their financial situation due to COVID-19?

Employers in England and Wales should encourage members to look at the member FAQs. These include questions about reducing or stopping contributions, pension scams and other guidance on how to deal with the financial effects they may be suffering.

> Life assurance payments

Are payments under the NHS and Social Care Coronavirus Life Assurance Scheme (England) paid in addition to an LGPS death in service payment?

Yes, the scheme specifies that payments are separate to and regardless of other registered pension scheme benefits. A summary note on the scheme is available on the COVID-19 page of the SAB website. Further information is also available from the life assurance scheme page on the NHSBSA website. The NHSBSA have also provided additional Scheme information for employers, which covers how to make a claim.

Have the Scottish and Welsh Governments introduced Coronavirus Life Assurance schemes?

The Scottish Government has introduced a special temporary scheme called the NHS Scotland Coronavirus Life Assurance Scheme (Scotland). The Scheme may provide a lump sum and survivor benefits to families of frontline NHS staff who die as a result of COVID-19. The Scheme is designed for those who do not qualify for full death benefits under the NHS pension schemes. On 24 May 2020, the Scottish Government announced plans to make a one-off payment of £60,000 when a social worker dies without death in service cover in their contracted pension scheme. The Scottish Government is working with Local Government, social care providers and trade unions on the details.

On 27 April, Welsh Ministers published a written statement confirming that they will establish a similar life assurance scheme to the English NHS and Social Care Coronavirus Life Assurance Scheme. Further details are awaited.

> Pension administration

What pension administration activities should employers focus on?

The Pension Regulator's (TPR) COVID-19 guidance for trustees and public service schemes recommends that administrators focus their activities on making sure they deliver critical processes. For the LGPS, we recommend that employers prioritise:
  • providing leaver and pay information for retirements
  • providing pay information for any death in service
  • paying employer and employee contributions and providing supporting information within agreed timescales.
Any employer that is having difficulties in completing these pension administration tasks should contact the administering authority urgently.

What if an employer cannot supply accurate pay information?

An employer working at a reduced capacity due to COVID-19 may not be able to supply accurate pay details in respect of a retiring LGPS member within the normal timescales. An employer in this position should discuss this issue with the administering authority. The administering authority may have adopted one or more of the following process changes:
  • Accepting leaver information electronically instead of requiring paper forms
  • Accepting estimated pay information from the employer
  • Using pay information from a previous year to estimate the LGPS benefits payable.
If estimated pay figures are used, employers must provide accurate pay information as soon as they are able to. A final calculation of the member's benefits will then be performed and any corrections made.

Will employers be able to progress ill health retirement applications?

We contacted the Association of Local Authority Medical Advisers (ALAMA) who confirmed that the instruction below has been posted on their website:

‘During the current COVID-19 crisis, it is important to continue to progress ill health retirement applications. It is also particularly important that assessments remain fair and reasonable, and that should include requesting GP and specialist reports as required. There has never been a requirement for these assessments to be face to face, therefore paperwork reviews, with telephone clarification if needed, is the most appropriate way to progress these.

If it is not possible to get reports, an assessment should be based on whether reports are likely to influence your decision further, and whether you have enough objective evidence to make an opinion. Opinions should always be ‘on balance of probability’. There will be times when you simply don’t have sufficient objective evidence to support ill health retirement, and you have been unable to get clinical reports. You should suggest that the applicant requests copies of clinical reports direct from their GP.’

What happens if there is a delay in progressing an ill health retirement application or tier three review?

Each case will be different and will need to be assessed on its own merits. However, where an employee is reaching the end of their sick pay the employer could put them back on full pay or, if applicable, furlough them. The LGA workforce update: job retention scheme has more information on this.

In England and Wales, any delay could affect the date from which a post-2014 deferred pension is paid on ill health grounds, or the date that a Tier three pension is upgraded to Tier two. Employers may wish to ask IRMPs to include information in their report about any delay due to COVID-19 that has affected the member's application.

> Governance and resilience

Will the Pensions Ombudsman’s service be affected?

The Pensions Ombudsman (TPO) temporarily stopped processing new enquiries or complaints because of COVID-19. The TPO COVID-19 update confirms that from 22 April 2020 TPO can process new applications that are submitted by email. Their phone lines are open Monday to Friday between 9am and 5pm. TPO staff are unlikely to receive any applications or correspondence sent by post during the lockdown period.

They will, wherever possible, use their discretion to extend the three year time limit for new applicants affected by this period of restricted service.

What should an LGPS employer do if they breach service level agreements within the Pension Administration Strategy?

The Pension Administration Strategy is a voluntary agreement between the administering authority and the employers. If either party is experiencing difficulties in meeting the agreed targets, they should discuss this with one another.

> Annual Scheme Events

Will there be any relaxation of the deadline for issuing 2019/20 annual benefit statements?

Administering authorities must issue annual benefit statements to active members by 31 August 2020. Administering authorities can only produce benefit statements if employers supply them with the member data they need. If an employer is struggling to provide monthly or annual data, they should discuss this with the administering authority as soon as possible.

TPR’s update for trustees, employers and administrators confirms that they understand many non-critical services may be affected and this may include delays in producing annual benefit statements.

In addition, TPR’s update on reporting duties and enforcement activity confirms that they have decided they can adopt a more flexible approach to what they expect to be reported in a number of areas (including annual benefit statements) due to the COVID-19 situation, and when enforcement action would be appropriate under the current circumstances. These easements remain in place until 30 June 2020. On 16 June 2020, TPR updated the guidance, stating that, from 1 July 2020, reporting requirements return to normal. TPR will continue to assess breaches on a case-by-case basis and respond pragmatically to COVID-19 related breaches.