Why are there any discretions in a statutory scheme?
The Local Government Pension Scheme (LGPS) is a statutory pension scheme so its rules are laid down under Act of Parliament. However, the scheme’s regulations do allow an employer some flexibility to enhance members’ benefits. These discretions typically involve early access to benefits or improving the benefits received by members.
All Scheme employers participating in the LGPS in England or Wales must formulate and publish a ‘statement of policy’ regarding the discretions they have the power to exercise, confirming how the employer will handle these discretions and any associated costs. A copy should be sent to Peninsula Pensions. New employers must do this within three months of becoming an LGPS employer and all employers should review their discretions policy at least annually to ensure its relevance to their organisation and scheme members.
While there are numerous discretions in the regulations, only a few require the employer to have a written policy statement. This is because exercising these discretions could result in costs for the employer when enhancing the benefits received by members.
What you need to do
- Formulate your policy and publish your decisions for all the mandatory discretions. You may wish to consult your employees and unions before making or changing your policy
- Send a copy of your policy to Peninsula Pensions within 3 months of becoming a new employer with the Devon County Council or Somerset Council pension funds.
- If you decide to amend the policy, you must publish the revised policy and send a copy to us within one month of making the changes. Please note that it has to be published for one month before you can exercise any new decisions.
- Academies need their own policy but it’s acceptable to have one policy for Multi-Academy Trusts to cover all academies within that Trust.
If you have any questions or need any help with your policy, Please contact our Employer & Communications Team direct by email at email@example.com
Award of additional pension by employer
You can choose to award a member any amount of additional pension up to the maximum amount allowed for that year but only if your discretions policy allows. The maximum amount is increased each April by Pensions Increase Orders – please see the Additional Pension Contributions page for this year’s purchase limit.
The additional pension would be payable in full at the member’s normal retirement age or on retirement for Tier 1 or 2 ill health cases but would be actuarially reduced for early payment in all other cases. There are no survivors’ benefits attached to the award so only counts for the members pension.
This is only available to active members of the scheme, or those leaving on redundancy or efficiency. The award can be made up to 6 months after the member has retired on redundancy or efficiency grounds, but you will have to pay the amount required as an immediate one-off cost at least four weeks before the member leaves.
You need to be aware that any pension bought by you isn’t reduced in the cases of redundancy or efficiency retirements so will incur an additional strain cost.
Forfeiture of pension rights after conviction for employment-related offences
There have been a couple of cases where former LGPS members have been convicted of employment-related offences. We therefore thought it was appropriate to remind all employers of your ability to forfeit a member’s LGPS pension rights if the reason they ceased employment related to these offences.
Regulation 91(1) of the LGPS 2013 Regulations states:
91. -(1) If a member is convicted of a relevant offence, the former Scheme employer may apply to the Secretary of State who may issue a forfeiture certificate.
(2) A relevant offence is an offence committed in connection with an employment in which the person convicted is a member, and because of which the member left the employment.
(3) Where a former Scheme employer applies for a forfeiture certificate, it must at the same time send the convicted person and the appropriate administering authority a copy of the application.
(4) Where a forfeiture certificate is issued, the member’s former Scheme employer may direct that any of the member’s rights under these Regulations are forfeited.
(5) The former Scheme employer must serve a notice of its decision to make a direction on the member.
(6) A forfeiture certificate is a certificate that the offence-
- (a) was gravely injurious to the state, or
- (b) is liable to lead to a serious loss of confidence in the public service
(7) If the former Scheme employer incurred loss as a direct consequence of the relevant offence, it may only give a direction under paragraph (4) if it is unable to recover its loss under regulation 93 (recovery or retention where former member has misconduct obligation) or otherwise, except after an unreasonable time or at disproportionate cost.
(8) A direction under paragraph (4) may only be given if an application for a forfeiture certificate has been made by the former Scheme employer before the expiry of the period of three months beginning with the date of conviction.
If you wish to investigate forfeiture, please contact the Employer and Communications Team for assistance in the first instance.