Is the LGPS to be saddled with a new valuation cycle?

Estimated reading time: 2 minutes

As you are more than likely to be aware, Ministry of Housing, Communities & Local Government (MHCLG) has recently issued a consultation on a number of proposed changes to the Local Government Pension Scheme (LGPS) in England and Wales. This covers a number of areas, including:

  • Moving from triennial to quadrennial local Fund valuation cycles from 2024 and how we get there
  • Allowing revisions to employer contribution rates between valuations via interim valuations and in what circumstances
  • Allowing “exiting employers” to remain in the Scheme as “deferred employers” with no exit payment due and continuing to be responsible to meet their liabilities that remain in the Scheme
  • Where exit payments are still due, a greater degree of flexibility in recovering them from employers
  • Some potential changes to paying exit credits and addressing issues with pass-through arrangements
  • Removing the requirement for higher and further education bodies to have to put non-teaching staff into the LGPS

Responses are sought to 19 questions by 31 July 2019.  We are preparing a briefing note to assist Funds in preparing their response over the next 2-3 weeks and will of course be submitting our own response.

We are largely supportive of most of what is being proposed but will still have a lot to say; the devil is in the detail and, as ever, we also need to think through any unintended consequences.

"A lot can happen in four years so is extending the funding valuation cycle appropriate?"

A lot can happen in four years so is extending the funding valuation cycle appropriate? Will a four year roll forward to estimate an employer’s assets and accounting liabilities be accepted by auditors reviewing the FRS102 and IAS19 disclosures?

When is it “appropriate” to adjust contributions based on an interim valuation? What could be deemed appropriate by one Fund might be different to another Fund.

Allowing further education bodies to be given the option of no longer offering staff LGPS membership could increase pension costs for them in the short term. What criteria do you use in deciding to treat employers as deferred employers? What is the risk of being challenged?

If there is a payment plan, does this mean you should revisit the debt position at subsequent valuations?

Where risks are shared between letting authorities and contractors how do you decide if the employer is entitled to exit credit or not? If so, how much?

All these questions (and more) need to be answered so watch this space for our briefing note.

The consultation can be found here.