COVID-19 FAQs for LGPS administrators
> Governance and resilience
What activities should administering authorities and employers focus on?
- paying existing pensioners
- processing new pensions benefit cases
- dealing with bereavement cases
Should an administering authority allow electronic signatures and documents?
We recommend that administering authorities speak with their audit department and agree a pragmatic way of working during this period of uncertainty. Although it does not apply to the LGPS, administering authorities may find the Government advice for employers carrying out right to work checks useful.
Can LGPS authorities suspend the payment of CETVs?
Should the TPR transfer warning letter be sent to LGPS members requesting CETVs?
TPR has also asked that schemes actively monitor the number of requests for CETV quotes and which advisers are supporting the members’ requests. If any unusual or concerning patterns emerge, such as spikes in CETV requests or the same adviser across a multitude of requests, LGPS administering authorities should email the FCA.
Will the Pensions Ombudsman’s service be affected?
They will, wherever possible, use their discretion to extend the three year time limit for new applicants affected by the current COVID-19 pandemic.
What approach will TPR take to breaches of law during this period?
From 1 July 2020, reporting requirements returned to normal.
When assessing whether to take enforcement action, TPR will assess breaches of administrative and compliance requirements on a case-by-case basis and respond pragmatically where the scheme can demonstrate COVID-19 related reasons for any breaches.
What should administering authorities do if they breach service level agreements within their Pension Administration Strategy?
> Payment of benefits
Can an administering authority pay pension benefits without the latest pay information?
- calculate a member’s provisional annual pension (BCE 2) and lump sum (BCE 6). These values could then be revised when the actual pay information is received – the recalculation would result in revised BCEs.
- make a ‘payment on account’ of a pension commencement lump sum (PCLS) – possibly to the value of a 3/80th lump sum, where one is payable. This would be an early payment of a PCLS, which can be paid up to six months before the BCE date. The payment is not, at this point, considered for the lifetime allowance (LTA). When the administering authority receives the actual pay information, they could calculate and pay the annual pension (BCE 2) and revise the PCLS (BCE6) and at that point consider the member’s LTA.
Will employers be able to progress ill health retirement applications in the current climate?
‘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 request 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?
In England and Wales, any such 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. MHCLG has confirmed that an administering authority will need to make a local decision in this type of case. To help them make their decisions, employers and administering authorities may wish to ask IRMPs to include in their report information about any delays due to COVID-19 that have affected the member’s application.
Are payments under the NHS and Social Care Coronavirus Life Assurance Scheme (England) paid in addition to an LGPS death in service payment?
Have the Scottish and Welsh Governments introduced Coronavirus Life Assurance schemes?
Can employers delay or pause paying employee contributions?
Can an administering authority delay receipt of the valuation rates and adjustment certificate beyond the first anniversary of the valuation date?
Can administering authorities allow employer contribution ‘holidays’?
Deferrals of contributions are only allowed in the limited circumstances set out above and there is no provision for non payment 'holidays' where contributions are not recovered during the year. If, as a last resort, administering authorities consider deferring the commencement of payments to later in the year it is imperative they consider the risks to the fund. These include but are not limited to the risk of the employer not being able to meet the full amount by year end and the risk to the fund’s cash flow requirements. As any approach to contribution deferral should be applied consistently authorities may wish to consider agreeing a policy position. Although not directly applicable to the LGPS, administering authorities should be mindful of guidance issued by TPR on this matter, which was substantially revised on 16 June 2020.
What happens if employer contributions are received late?
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?
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?
- suspend liability to pay the exit payment for a period of up to 3 years where the administering authority is of the reasonable opinion that the employer is likely to have one or more active members within the suspension period (the employer must continue to pay contributions as reasonably required by the authority during that time)
- enter into a written agreement with the employer for that employer to defer their liability to pay an exit payment (deferred debt agreement). The employer would continue to make contributions at the secondary rate
- spread the exit payment over such period as the authority considers reasonable.
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?
> 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)?
It should be noted that the provisions covering emergency volunteering leave in the Coronavirus Act 2020 have not yet been commenced by the Government.
An active member is seconded as part of the emergency staffing; how does this affect their pension benefits?
A deferred or pensioner member is part of the emergency staffing; how does this affect their pension benefits?
Should an administering authority abate a member’s pension if they return to work?
Is it compulsory to abate compensatory added years if a member returns to work?
- the person returns to work and is employed by a 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
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?
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 that must be paid 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.
> Wage support schemes
What wage support schemes are available?
The Government has previously announced that it intends to replace the Coronavirus Job Retention Scheme with the Job Support Scheme Open and the Job Support Scheme Closed. You can find more information on these from the LGA Workforce team.
Is pay funded by government pensionable?
Can employers reclaim pension contributions?
The employer is unable to reclaim any employer contributions for the period from 1 August 2020.
How will being in a support scheme affect pension build up?
If the pay received is less than normal (because the employer chooses not to top up pay to 100%), the pension they build up will also be less. The member may be eligible to buy additional ‘extra’ pension to make up for the pension lost during this period. In England, Wales or Northern Ireland, the employer is not obliged to split the cost with the member but can choose to. In Scotland, the employer cannot pay the entire cost. 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 while in a support scheme.
In our view, if an England & Wales member’s contract of employment is changed when they are put into a support scheme, 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 reduction is temporary.
What happens if the member’s contractual hours are reduced?
Where this happens, it will impact on some calculations, such as the final pay calculation and the underpin calculation.
The final pay calculation for a member who is in part-time employment is based on the pay that would have been paid for a single comparable whole-time employment. In this case, a single comparable whole-time employment could be the employment assuming the member was working whole time and was not in the support scheme. This means that you will need to be careful when grossing up part-time pay to full-time pay as the pay for the unworked hours may not represent the pay a whole-time employee would have earned for those hours (for example, the pay under the support scheme may be capped and may be worked out on pay earned in a previous period).
For the purposes of working out the final salary part of the underpin, the membership should be recorded based on the contractual hours and the whole-time contractual hours.
How will being in a support scheme affect a member’s death in service benefits?
If a member receiving reduced 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 in a support scheme affect a member’s ill-health benefits?
If a member receiving reduced pay retires with an enhanced ill-health pension, 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 in a support scheme affect salary sacrifice benefits?
We await government guidance regarding the Job Support Schemes (Open and Closed).
When setting the contribution rate at an April review, should the reduced pay be ignored?
Regulations in England & Wales and Northern Ireland provide that where there is a 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 if they reallocate a member 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.
> Information for scheme members
What information is available for members who are concerned about their financial situation due to COVID-19?
How should members contact the scheme during the pandemic?
> Annual Scheme Events
Will there be any relaxation of the deadline for issuing 2019/20 annual benefit statements?
Meanwhile, TPR’s update for trustees, employers and administrators confirmed that they understand many non-critical services may be affected and this may include delays in producing annual benefit statements.
TPR’s update on reporting duties and enforcement activity confirms that TPR will assess breaches on a case-by-case basis and respond pragmatically where the scheme can demonstrate COVID-19 related reasons for any breaches.
Will there be any relaxation to the timescales for publishing the 2019/20 pension fund annual report?
MHCLG have requested that funds inform the LGA ([email protected]) of any 'knock on' issues arising from the Accounts and Audit (Coronavirus)(Amendment)Regulations 2020 to enable them to keep the matter under consideration. The LGPS regulations require that the annual report and accounts are published by 1 December 2020.
The view of the Scottish Government is that 'the provisions made in the Coronavirus (Scotland) Act 2020 are sufficient to allow each authority to determine its own timetable for Annual Accounts'. Scottish Ministers consider that 'it seems reasonable that alocal authority publishes its Annual Accounts no later than 30 November 2020'.
> Pensions Tax
Will there be any relaxation of the deadline for sending an AFT return to HMRC?
In Pension Schemes Newsletter 121, HMRC extended this easement to cover the AFT returns for 1 April 2020 to 30 June 2020 (filing and payment deadline 14 August 2020) and for 1 July 2020 to 30 September 2020 (filing and payment deadline 14 November 2020). In these cases, the scheme needs to put ‘AFT return – Pension Schemes Newsletter 121’ in the subject line of the email.
In Pension Schemes Newsletter 124, HMRC further extended the easement until 31 March 2021. HMRC has confirmed to us that this means that the easement now also covers the AFT returns for 1 October to 31 December 20 and for 1 January to 31 March 2021.
Will there be any relaxation of the deadline for filing an event report?
In Pension Schemes Newsletter 121, HMRC extended the easement until 31 October 2020 and then, in Pension Schemes Newsletter 124, further extended it until 31 March 2021.