Do you want your employees to join the Local Government Pension Scheme automatically?

Introduction

As part of changes ahead of the new automatic enrolment obligations, amendments are being made to the LGPS Administration Regulations affecting how employees are enrolled into the LGPS. These changes apply to all employers from 1 October 2012, regardless of their staging date. The changes could create additional liabilities for employers, unless action is taken.

In this Alert:

• Key points
• Automatic enrolment
• New hires
• Existing employees
• Action required

Key points

• From 1 October all “eligible employees” will be automatically enrolled into the LGPS, and will no longer have to apply for membership.
• A company with an outsourcing contract for the public sector or a service provider connected to a local authority may be affected if that employer has signed an admission agreement to allow employees access to the LGPS.
• There are variations in how admission agreements define “eligible employees” but in some cases this may include new hires, as well as those who transferred from the public sector under the Fair Deal.
• Employers who are concerned about these changes should consider seeking legal advice.

Automatic enrolment

In their current form, the Administration Regulations provide that employees of community or transferee admission bodies may only become LGPS members if they, or the class of employees to which they belong, are designated in the relevant admission agreement as being eligible. Then, in order to actually become a member, an eligible employee must apply in writing to his/her employer.

The Regulations will change the way in which employees of admission bodies become members of the LGPS from 1 October 2012. The changes being made by amending Regulations are separate from an employer’s automatic enrolment duties, which do not apply to that employer until its staging date. The changes are being made to ensure that the LGPS is a qualifying auto-enrolment scheme going forward. In auto-enrolment schemes, members cannot be required to take any positive action to gain entry.

The upshot is that, from 1 October 2012, the Administration Regulations will be amended so that if a member is designated as eligible under the admission agreement, they will automatically become a member of the LGPS on the day that this designation has effect.

New hires

If an admission agreement is an “open” agreement so that all employees of an admission body are eligible to be members of the LGPS (not just those transferring from the public sector), then from 1 October 2012 any new employees hired after that date will automatically become members. So, in these cases, urgent action is required if a company does not want those employees to join the LGPS (with the potential for additional liabilities).

Existing employees

There is some uncertainty as to the impact on existing employees of admission bodies who may be eligible to join the LGPS, but have not opted to do so.

We understand that the Department for Communities and Local Government has been asked to confirm whether it is intended that employees who are eligible, but have not exercised the right to join the LGPS, will automatically become members on 1 October 2012.

Action required

We recommend that all employers who have signed an admission agreement for participation in the LGPS consider seeking legal advice in advance of 1 October 2012 on the terms of their admission agreements, to determine the likely impact of the changes and the options available