Introduction
This section deals with new joiners to the Local Government Pension Scheme (LGPS).
All employers who participate in the LGPS and who have passed their staging date (within the meaning of the Pensions Act 2008) will need to consider their “Automatic Enrolment” (AE) responsibilities to their employees under both that Act and the Local Government Pension Scheme Regulations.
In this guidance, it will be noted at relevant points where you will need to also refer to information issued by The Pensions Regulator and/or the Local Government Employers (LGE) in relation to the Pensions Act 2008 (otherwise known as the auto-enrolment legislation).
Please note that nothing in this guidance overrides the terms of the Local Government Pension Scheme regulations or other related legislation.
Eligibility for LGPS
Eligibility to join the LGPS will depend on the status of the employer. The following people can be active members of the 2014 scheme:
(1) Employees of Scheduled bodies;
(2) Employees of Resolution bodies if designated as being eligible;
(3) Employees of admission bodies if designated as being eligible; and
(4) Certain other employees (as specified in part 4 of Schedule 2 of the LGPS regulations 2013 – includes employees of Governing Bodies, Coroners and Police & Crime Commissioners).
However, the following cannot be active members of the 2014 scheme:
(1) A person entitled to membership of another public service scheme in relation to that employment (except some employees who are entitled to be members of the NHS scheme – see LGPS 2013 regulation 4 for more details. The other exception is with regard to members on reserve forces leave);
(2) A person aged 75 or over;
(3) An employee of an admission body who is a member of another occupational scheme in relation to the employment.
Note that a member must be taken out of the scheme when they reach age 75.
Automatic Entry (under LGPS regulations)
Eligible employees automatically become members of the 2014 Scheme on the day their employment begins. If they are not eligible on their start date but become eligible on a later date (for example where they are designated as being eligible by an admission body at a later date) then they are brought in to the scheme automatically from the date they become eligible.
If a person is employed under a contract of less than 3 months, or does not have a contract of employment except on the days they attend work (“casual members” – see separate section below), they are not automatically brought into the scheme from the start date.
Instead, they become a member from the earliest of the following:
(1) On the employee’s automatic enrolment date (the day on which they become an eligible jobholder).
Under Automatic Enrolment rules, unless you operate postponement for casuals and those who have contracts of less than 3 months, the employee’s auto enrolment date could be the start date of employment – if they meet the definition of “eligible jobholder” on that date.
(2) If the member applies to become a member, upon the first day of the payment period following that application (see section on “Opting In” below).
(3) From the start of the payment period following an extension to the contract so that it lasts for 3 months or more.
Contributions
When arranging pension scheme membership you will need to assign an employee contribution rate – see the Employee Contributions section on the “Contributions” page.
Initially when a person is brought into the LGPS they will be brought into the main section of the scheme and pay full contributions.
Opting Out – Employees who do not wish to join
You must not encourage your workers (including potential new starters) to either not join the Scheme or opt out. The law prohibiting this was effective from 1 July 2012 for all employers.
If, after receiving information about the scheme in the appointment letter, the employee decides to opt out of the LGPS, they can complete an ‘Opt out’ form – which must be completed by the employee and returned to the employer.
Please note, the employer is not permitted to issue any opt out form to the employee.
An opt-out notice cannot be signed or dated by the employee prior to the employee becoming an active member, or, if later, receiving information about the pension scheme.
When the employer receives the opt out form they should take action to cease deduction of contributions at the end of the payment period during which notice is given (unless the employee specifies on the form a different date which may not be earlier than the date the form is given). If they have opted out before being a member for three months, then the person should be treated as not having been an active member in that employment on that occasion, and employee contributions should be refunded through payroll (with appropriate adjustments for PAYE tax and NI) LPPA needs to know about all new starters regardless of whether they stay in the Scheme even if you refund their contributions through payroll.
If the person opts out with three months or more membership, the employer will need to complete a “Leaver form”. This will be used by to arrange a refund, preserved benefit, or retirement benefit.
Under AE Legislation the Pensions Regulator requires that employers keep opt out forms for at least four years. You may wish to incorporate this in your records retention policy.
The LGPS (Amendment) Regulations 2015 state that deferred CARE benefits resulting from opt out notices effective from on or after 11 April 2015 cannot be aggregated with any future active CARE benefits. This will have significant implications if the member were to re-join and subsequently retire on redundancy or ill health grounds, for example. However, note that irrespective of the reason for the deferred benefits, those benefits may be combined to any continuing concurrent active record.
Opting In
An employee who has previously chosen not to become or remain a member of the Scheme in an employment can elect to rejoin. There is no restriction on the number of times a member may opt-out and the rejoin.
Automatic Enrolment
In addition to arranging automatic entry of employees to the LGPS under LGPS rules, employers must also monitor age and earnings for Automatic Enrolment Purposes. This is a requirement of the Pensions Act 2008. For more information about automatic enrolment see The Pensions Regulator website www.thepensionsregulator.gov.uk. The “detailed guidance” on this website describes minimum requirements for employers for enrolling employees, writing to members and potential members, and keeping records.
If you have passed your staging date, there will be situations where you will need to automatically enroll employees into the LGPS. If someone is eligible for membership but is not an active member (they have opted out or do not have a contract for 3 months or more), you will need to enroll them to the LGPS** as follows:-
From the date on which an employee becomes an eligible jobholder for the first time;
or
Eligible jobholders on your re-enrolment date.
Before the 2014 LGPS, employers could choose a qualifying scheme for Auto Enrolment purposes that wasn’t the LGPS. The LGPS regulations didn’t put any requirement on employers to re-enroll members at any time (even though the Pensions Act required re- enrolment to a qualifying scheme).
Under the Local Government Pension Scheme regulations 2013, employers are now required to re-enroll those people who are eligible to be active members at their automatic enrolment date**, or automatic re-enrolment date** to the LGPS.
** If the employee is already a member of a qualifying scheme at these points they do not need to be moved to the LGPS.
When you automatically enroll someone to the LGPS because they are an eligible jobholder, you need to provide that person with information as specified in the Pensions Act 2008, within 6 weeks of the enrolment date.
Under AE Legislation the Pensions Regulator requires that employers keep information about scheme members for specified periods. You may wish to incorporate this in your records retention policy – see www.thepensionsregulator.gov.uk for more details.
Whilst monitoring non-members to assess whether they need to be re-enrolled to the LGPS under Automatic Enrolment legislation, you will also need to monitor members of the 50/50 section of the scheme. A member in the 50/50 section of the LGPS needs to be returned to the main section of the scheme at the beginning of the first pay period following your re – enrolment date (normally 3 years from your initial staging date). This would happen irrespective of what category of worker they are for the purposes of the Pensions Act 2008.
Multiple Employments
Frequently, members have more than one job with the same or different employers. When the jobs are with the same employer, it is important that they are recorded separately and paid under different pay reference numbers. LPP must be notified of each new appointment accordingly and will record membership separately for each employment.
An employee can be a member of the scheme in one job and opt out in respect of another job if they wish.
Before Appointment
You may wish to notify applicants for positions of employment of eligibility to join the LGPS and the valuable benefits they can build up.
Appointment Letter
Regulation 90 states that within 3 months of the member becoming an active member the employer must write to the member for the following documents: –
(a) A statement in writing listing all the member’s previous periods of employment; and
(b) Copies of all notifications previously given to the member under the LGPS regulations.
In addition, an employer must inform the new member of the start date in the scheme and contribution rate which will apply (under regulation 73), and the right of appeal.
Under Automatic Enrolment legislation, you need to provide information about the scheme to new members.
Casual Employees
Casual members do not have a contract of employment except on the days they attend work. Therefore, a casual member who attends work on the Monday to Friday of one week has only amassed a contract of 5 days. When they attend work the next week they effectively start a new contract of employment. It is unlikely therefore that they will become eligible for automatic entry under the LGPS regulations (although their age and earnings might make them eligible for automatic enrolment under the Pensions Act 2008). However, as stated above, casual employees can opt to join the LGPS if they wish.
Councillor Members
From 1 April 2014 no new councillors can join the scheme. Councillors who were active members on 31 March 2014 may only remain in the Scheme until the end of the term of office which that member was serving on 1 April 2014.