LOCAL GOVERNMENT PENSION SCHEME (ADMINISTRATION) REGULATIONS 2007
LOCAL GOVERNMENT PENSION SCHEME
(AMENDMENT)(No 2) REGULATIONS 2007
1. On 29th January and 14th February, we consulted on two sets of draft regulations relating to the general administration of the scheme, to be read in conjunction with the LGPS (Benefits, Membership, Contributions) Regulations 2007. Paragraph 2 of the 14th February letter highlighted the fact that the draft provisions were incomplete and that the further provisions would be circulated for comment at the earliest opportunity.
2. The consultation exercise on the LGPS (Administration) Regulations ended on 23 March and it will be some weeks before decisions on the comments made by consultees are made. In the meantime, it is felt that stakeholders should be aware of the progress that has been made to these draft regulations since 14th February and, in particular, the main issues raised by consultees during the statutory consultation process.
3. What follows therefore is not an exhaustive list of responses but is an attempt to summarise those general issues and concerns that have been raised by consultees, either by way of individual written responses or from meetings attended by CLG officials, eg, OAG and Technical Group and Pension Officer Group meetings which have proved useful and informative. Although this letter concentrates on the responses to the Administration Regulations consultation exercise, attached at Annex A is a summary of the main points arising from the parallel exercise on the Amendment No 2 regulations.
General
4. Some concern has been expressed about the interaction between the Benefit and Administration Regulations 2007 and whether it would be possible to amalgamate the two. At this late stage, and in view of our undertaking to give stakeholders the longest possible lead in time, amalgamating the two sets of regulations would not be a practicable proposition. But this does not rule out the possibility that some re-ordering might be possible in the future.
5. Paragraph 3 of our 14 February letter sought comments on proposals to remove three specific sets of provisions from the new administration regulations, ie, return of contributions; abatement and forfeiture. Based on the comments received to date, it is likely that the amending regulations will reflect the support of respondents for retaining the right to a return of contributions, as opposed to the proposed refund of salary resulting from an incorrect deduction. There was also some support, though to a much lesser extent, to remove the powers that administering authorities have to abate LGPS pensions in accordance with their local policies. However, a minority of consultees expressed a strong desire for these powers to be retained and given that the local discretion provided to an administering allows an authority to choose whether or not to abate LGPS pensions, it is likely that no action will be taken as part of this exercise to remove the power. On forfeiture, there was clear support for its removal from respondents, but there are public policy issues if such a step was proposed. It is likely therefore that it will be retained in the new look scheme for the time being, but that the issue of its ongoing activity will be raised within the MOCOP group.
Specific Provisions
Regulation
7(3)
6. It has been suggested that this requirement may no longer be necessary. We will check the position with HMRC and delete the provision if permitted.
Regulations
11 and 14
7. Given that draft regulation 16 enables scheme members to purchase additional membership via additional monthly contributions, it has been suggested that the specific provisions of regulations 11 and 13 could be classed as redundant. We will explore the possibility of removing these provisions.
Regulation
12
8. There is a general belief that scheme members who belong to the reserve forces, should not be required to pay contributions in order for any lost membership resulting from reserve forces leave to count towards their pension. It has been suggested that in these circumstances, the contributions should be deemed to have been paid. If accepted, this would not affect the arrangement whereby the employers’ contributions are recovered from the MoD, etc.
Regulation
13 - Contributions during trade dispute absence
9. Several commentators have suggested that the rate of 16% mentioned in draft regulation 13(1) should be revised to include an element representing the employer’s contributions as well. This would however, represent a significant policy change and could not be effected without a further period of formal consultation. It is not therefore proposed to proceed with any consideration of this issue as part of the current exercise.
Regulation
16(2)(b) - Payment of additional monthly contributions
10. It has been suggested that it should be the
relevant LGPS employer or administering authority who
should be responsible for any medical certification, and not self-certified by
the scheme member applying for an AMC.
Regulations
18 - 30 - Additional voluntary contributions
11. At the recent meeting of the LGE Technical Committee, it was proposed that this entire section of the draft regulations should be condensed to no more than several, general enabling powers and in doing so, remove all the prescription originally proposed. The LGE undertook to draft replacement provisions and we will consider their contribution sympathetically.
Regulation
35 - Accounts and Audit
12. At draft regulation 35(1)(a), it has been suggested that the reference should be to the “summary revenue account”. We will check the position with CIPFA and amend accordingly.
Regulation
40 - Circumstances where revised actuarial valuations, etc)
13. There is some uncertainty whether the requirement to obtain a revised actuarial valuation, etc under draft regulation 40(2) when an admission agreement ceases to have effect, applies to all admission agreements, or just those subject to an admission agreement funds under draft regulation 34. We will consider this and clarify if required.
Regulation
45 - Administration costs increased by employing authority’s level of performance
14. We have been advised that labelling these re-charge or recovery costs as administration charges may have VAT implications. To avoid this, the provisions could be amended so that the references are made to just “additional costs”. There has also been some discussion about the need for two discretionary powers within the same provision. Draft regulation 45(1) states that draft regulation 45(2) applies where, in the opinion of the appropriate administering authority, it has incurred additional costs. Regulation 45(2) then goes on to offer a further discretion in as much that it then gives the administering authority the choice as to whether or not it intends to issue a written notice to an employer to recover the additional costs. Opinion is divided as to whether or not the word “may” where it appears in draft regulation 45(2) should be replaced with “must” and we will therefore be seeking further advice on the suitability of any such change.
15. The term “employing authority” appears frequently throughout regulation 45. We are aware that this may be too narrow a term as it may exclude LEA schools who have contracted out their payroll and pension scheme administration that has been contracted out to third party administrators. We have undertaken to replace this term with an alternative which encompasses all scheme employers involved in supplying payroll and other information to administering authorities.
Regulation
66 - Exchange of information by authorities
16. The comment has been made that these provisions might sit more comfortably in Part 7 (Policy Statements and Information) of the draft regulations. We will take this suggestion on board.
Regulation
70 - Annual benefit statements
17. It has been suggested that the date by which the first statements must be published under draft regulation 70(2) should be extended to April 2010. We will consider the implications of such a change and amend accordingly.
Regulations
72 and 81 - Mis-sold pension rights, etc
18. These provisions were included in the 1997
scheme regulations on the basis that as at some future date, they would be
revoked. The FSA deadline for the re-instatement of mis-sold
pension cases has long since expired and we have been asked whether these
provisions can now be removed from the scheme. Given that the very small number
of individuals with outstanding claims would still be able to seek redress
directly from their personal pension plan provider, we would be sympathetic to
any such change, although consideration would need to be given as to whether
the new administration regulations should offer, perhaps, a six month final
“cooling” off period before the curtain finally comes down. Another alternative
would be to leave the existing provisions in the 1997 regulations on the
statute book after
Regulations
80 and 82 - Right to count credited period, etc
19. Given that they refer to periods of service and rights accrued under the 1997 scheme regulations, we are minded to accept the suggestion that draft regulations 80(5) and (6) and 82 should be deleted and inserted in the regulations dealing with the transitional arrangements.
Next Steps
20. The above comments (including those summarised at Annex A), together with those received in response to the statutory consultation exercise over the past few weeks, will be fully considered before any final decision is taken on the content and format of the new administration regulations. In this context, it is important to re-iterate the statement made in Brian Town’s letter of 22 December that the new administration regulations will comprise all the extant provisions of the 1997 regulations, less those pertaining to the provisions on benefits and entitlement which feature in the Benefit Regulations 2007. On this basis, it cannot be assumed that policy changes to the extant provisions of the 1997 regulations raised by consultees for addition or deletion in the new administration regulations can be taken forward for consideration.
Yours faithfully,
Bob Holloway
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Annex A
LOCAL
GOVERNMENT PENSION SCHEME (AMENDMENT)( NO 2)
REGULATIONS
SUMMARY
OF CONSULTATION RESPONSES
All of the proposals are being taken
forward, but with some modifications.
Governance Statement
The first Statement including the new
compliance report element will have to be published by
The relevant statutory guidance will be issued a reasonable time in advance, to allow authorities time to consult on their approach and prepare their Statement.
The statutory guidance will be circulated in draft to enable stakeholders’ comments/suggestions to be considered before the guidance is finalised.
A working group of the Governance Subgroup, which will do the initial work on preparing the guidance, has been constituted.
Annual report
CLG was not proposing that pension funds should need to have an annual actuarial valuation, in order to provide the required information on funding. The wording of the regulation will be changed to make it clear that it is only necessary to state the funding level as at the last triennial actuarial valuation. (If a fund wishes to provide more recent funding information that they have anyway for other purposes, they can do so.)
The report will not now have to include the whole text of pension fund documents that are already published elsewhere - ie the Funding Strategy Statement, Statement of Investment Principles, Governance Policy Statement, and Communications Strategy. Instead, the annual report should say that these documents exist, and give clear information on how they can be accessed/obtained - ideally in a range of formats so that all Scheme interests can see them easily (for example in hard copy by post, on a website, etc). The fund authority may choose to include a summary of one/more of these documents in their annual report, as is customary now in some cases.
The first annual report will cover the financial year [2007/2008] and its publication date will be determined following a meeting with CIPFA, the Audit Commission and other interested parties to be held shortly.
The regulation will be amended so that annual reports on authorities’ performance on administration - as proposed in draft regulation 76C(2)(f) - will become an additional element in the pension fund annual report, in relevant instances.
Pension Administration Strategy
There is no longer any deadline or time limit associated with this provision. Administering authorities may make use of the power when convenient.
The wording of the regulation is intended to allow authorities to adopt a different approach to different types of employer if they consider this appropriate (for instance, large and small employers).
Various drafting
improvements have been suggested and are being considered - for example, the
definition of “employing authorities” should be broad enough to include all
bodies from whom the administering authority requires accurate and
timely information relating to scheme members.
.
Pension focal points (pension liaison officers) are intended to be covered in draft regulation 76C(2)(a). Non-statutory guidance to be issued later will include material on this topic.
The regulation will seek to make clearer the distinction between the dual roles that an administering authority has - as the pension fund administering authority and also as an employing authority.
Additional costs charging power (poor
performers)
Various drafting improvements will be made - for example to seek to avoid any potential problems with VAT.