The government is proposing to change the valuations of Local Government Pension Scheme (LGPS) funds from three to four years.
This would bring local valuations in line with the government valuation of the LGPS which has moved to a quadrennial cycle.
The Ministry of Housing, Communities and Local Government included the proposal in a consultation on changes to the local valuation cycle and the management of employer risk, launched this week
The consultation wants to ensure that lengthening the cycle would not increase the risks that funds face, with the valuations used to set employer contribution rates and to assess whether funds are on target to meet their future liabilities.
The government is therefore proposing some measures to offset the enhanced risks.
These would allow LGPS funds to undertake interim valuations, and for administering authorities to take action when circumstances change between valuations.
The ministry is planning to enhance the powers of LGPS administering authorities to amend employer contribution rates between valuations.
In addition, the ministry is seeking consultation proposals to enhance flexibility on exit payments, further changes to exit credits, and changes to the non local-authority employers required to offer LGPS membership.
The MHCLG says: “Current regulations require that when the last active member of an employer leaves the scheme, the employer must pay a lump sum exit payment calculated on a full buy-out basis.
“We are seeking views on two alternative approaches that would reduce the cliff edge faced by employers…”
The first proposal to increase flexibility on exit payments would allow funds to defer the triggering of the exit payment for employers with strong covenants.
These would be granted the status of ‘deferred employers’.
The second would allow the recovery of the exit payment to be undertaken flexibly over a period of time where the administering authority does not feel that the employer qualifies as a “deferred employer”.
In 2018 the LGPS regulations were amended to allow the payment of exit credits to employers which are in surplus when their last active member leaves the scheme.
This has led to problems where LGPS employers have outsourced services and used contractual arrangements to share risks with the contractor.
The consultation wants to canvass views of addressing this issue.
The changes to the employers required to offer LGPS membership will remove the requirement for further education corporations, sixth form college corporations and higher education corporations in England to offer new non-teaching staff access to the LGPS.
The consultation will run until 31 July 2019.
