The deduction of employee contributions in the 2014 LGPS is governed by regulation 9 of the Local Government Pension Scheme Regulations 2013 (effective from 1 April 2014). The contribution rate depends on the annual pensionable pay that the member is receiving in the pay period in which 1st April falls for that employment (or as at the commencement date of membership if later). Unlike the 2008 LGPS, the annual pay used is NOT the full time equivalent. The employer should round down the annual pensionable pay to the nearest whole pound, and assign the contribution rate as per the following table
|Band||Pensionable pay range for an employment||Employee Contribution rate for that employment|
|1||Up to £14,600||5.5%|
|2||£14,601 to £22,900||5.8%|
|3||£22,901 to £37,200||6.5%|
|4||£37,201 to £47,100||6.8%|
|5||£47,101 to £65,900||8.5%|
|6||£65,901 to £93,400||9.9%|
|7||£93,401 to £110,000||10.5%|
|8||£110,001 to £165,000||11.4%|
|9||£165,001 or more||12.5%|
The table above applies as at 1 April 2021. The values are revised each year as at 1st April, and the new tables will be published each year on the website. The new tables apply to the pay period around which 1 April falls, and the new rate will be applied for that entire pay period.
When applying the band from the above table, you should disregard any reduction in pensionable pay which arises as a consequence of the following –
- The actual or assumed enjoyment by the member of any statutory entitlement during any period away from work;
- Child-related leave;
- Leave of absence with permission;
- Sick leave;
- Leave due to injury;
- Reserve forces leave; or
- Absence due to a trade dispute.
So, for example, an employee on leave of absence for 6 months will have their tiered contribution banding assessed on 12 months pay.
The employer must re-assess the contributions every 1st April. The new rate will apply from the start of the pay period in which 1 April falls. It is important that you assess the appropriate rate in a reasonable and consistent manner.
The employer can choose to re-assess the contribution rate where there has been a material change which affects the member’s pensionable pay during the financial year. You may wish to have a policy describing the circumstances in which you will re-assess contribution rates.
Note that if a person holds more than one contract of employment and these are treated as separate jobs, each job (and the pensionable pay from that job) is assessed separately when determining the contribution rate for each job. Thus, one job could have a rate of 5.8% and the other a rate of 6.5%.
Employee Contributions – Notification to Employee
When an employer makes a decision about an employee’s contribution rate they must (under regulation 73) notify the employee in writing as soon as reasonably practicable. This means that when a contribution rate is first assigned for a new scheme member, or if a change to the banding is applied, or someone moves from 50/50 to main section or vice versa, you must notify the employee. The notification should contain the address from which further information can be obtained. The notification must also tell the employee that they have the right of appeal and that any appeal must be made within six months of the date of the letter.
Under the terms of the Local Government Pension Scheme Regulations 2013 (as amended) your employee contribution rate will be xx.xx% from <start date of next pay period>.
For more information about this see the employee guide to the scheme on the website. Access the Brief and Full guides by clicking on ‘Local Government Pension Scheme’, ‘Joining the Scheme’ and then ‘Enrolment Documents’. You have the right to appeal against this decision to the adjudicator (i.e. this is the person who we have appointed to consider appeals). Such an appeal must be lodged within 6 months of the date of this letter or such longer period as the adjudicator may allow. If you were then unhappy with the adjudicator’s decision, you may ask the pension fund, within 6 months of the adjudicator’s decision, to undertake a further review. Further information on appeals, including application forms, is available on the website. The adjudicator’s job title is xxxxx and their address is xxxxxxx.
Suggested wording of notification letter –
Election for the 50/50 Section
The temporary voluntary reduction of employee contributions is governed by regulation 10 of the Local Government Pension Scheme Regulations 2013.
A member may elect to pay half contributions by giving written notice to the scheme employer. The employer must reduce the contribution rate to half that shown in the contributions bandings table from the pay period following the election.
This is known as the “50/50 Section” of the scheme, where the member pays half the contributions to receive half the benefits. The employer continues to report full salary to LPPA for determining the member’s pension pot, but when calculating benefits an accrual rate of
1/98th will be used instead of 1/49th, for the period that a member is paying to the 50/50 section of the scheme.
Whilst an employee is paying half contributions, the employer continues to pay the full employer contributions as specified in the Fund valuation rates and adjustments certificate.
The member can cancel this election at any time, again by giving written notice to the scheme employer. Again, the employer must re-instate the full contribution rate from the pay period following the election.
A member in the 50/50 section of the scheme must be moved back to the main scheme from the beginning of the first pay period following –
- The member’s automatic re-enrolment date*
- Going onto no pay as a result of sickness or injury provided that the member is still on no pay at the beginning of that pay period
- Going onto no pay as a result of ordinary maternity leave, ordinary adoption leave or paternity leave provided that the member is still on no pay at the beginning of the following pay period
*this is the date that will normally be 3 years following the employer’s AE staging date.
A member can choose to apply for the 50/50 section of the scheme as many times during their employment as they like. Any election for either the main section or the 50/50 section is effective from the start of the next pay period – you cannot have a pay period which contains both main and 50/50 contributions.
If the member is purchasing Additional Pension Contributions (APCs) for any reason other than the purchase of lost pension, these APCs must cease if the member elects for the 50/50 section. Other additional contributions e.g. added years, ARCs and AVCs will continue at the same rate as before the move to the 50/50 section.
Note that cumulative of pensionable pay for the main section and for the 50/50 section must be kept separately for the purposes of reporting for determining the amounts to go in each member’s pension pot. See the Employer Guide Section on “Submission of Information”.
Member 50/50 election process
If a member is interested in the 50/50 Section you can direct them to the 50/50 Option webpage (in the active member area of the website). There is a form for them to complete which must be sent to the employer. There is no need to forward this to LPPA, as notification will be given in the regular LGPS2014 Data Collection File. The same form can be used to elect to return to the main section.
When an employee elects to move to the 50/50 Section of the scheme, regulation 10 (7) states that the employer must give the member information about the effect on benefits.
Below is suggested wording of a communication to the member regarding their 50/50 election:
Thank you for your election to move to the 50/50 section of the Local Government Pension Scheme.
From <DATE> you will pay half your normal contribution rate, and you will start to build up half the normal pension. Your contribution rate will be xx.xx% which will be deducted from your pensionable pay from this date.
You can return to paying full contributions and building up full pension at any time.
For further information about the Scheme and the 50/50 section please see the “50/50 Option” webpage and the “Brief Guide to the LGPS”
There is a modeller which shows the effects of moving to the 50/50 section at www.lgps2014.org – see “How does my pension account work”.
Whilst you are a member of the Local Government Pension Scheme your pension pot will grow. You can keep track of your pension pot and work out your likely pension at retirement by logging into your online account.
You have the right to appeal against this decision to the adjudicator (i.e. this is the person who we have appointed to consider appeals). Such an appeal must be lodged within 6 months of the date of this letter or such longer period as the adjudicator may allow. If you were then unhappy with the adjudicator’s decision, you may ask the pension fund, within 6 months of the adjudicator’s decision, to undertake a further review. Further information on appeals, including application forms, is available from the website. The adjudicator’s job title is xxxxx and their address is xxxxxxx.
Employer contributions must be paid on a monthly basis to the relevant pension fund authority. The employer must pay the amount specified in the rates and adjustments certificate in the valuation report, or as specified by the Pension Fund actuary where an employer is new to the fund. An amount expressed as a percentage of pensionable pay, must be calculated based on each member’s pensionable and/or assumed pensionable pay if applicable (see the section below about assumed pensionable pay and the table at Appendix I).
The employer must also pay over to the fund any employer contributions payable in respect of Shared Cost Additional Pension Contributions (regulation 16).
Other amounts payable to the fund by the employer include the cost of early retirement, also known as “Pension Strain”. This is covered by the employer guide section on “Retirements” – it is very important that you read this as early retirements can result in the employer paying large extra payments to the pension fund.
The employer contribution rates are decided for each three year period based on the triennial valuation of the pension fund. For example the valuation as at 31 March 2013 determines employer contribution rates for the three year period from 1 April 2014 to 31 March 2017. The rates are determined based on the assets and liabilities of the pension fund, but will vary between employer depending on employer payments and experience, for example change in number of pensionable employees, pensionable pay, number of ill health retirements, longevity of pensioners.
Payment Over of Contributions
The payment over of contributions is linked with the reporting of pensionable pay received, which is covered in the Employer Guide section.
The 2014 LGPS regulations state that each payment to the fund should be accompanied by a statement showing, for the pay period –
- Total pensionable pay under the main section
- Total employee contributions under the main section
- Total pensionable pay under the 50/50 section
- Total employee contributions under the 50/50 section
- Total employer contributions for both sections
- Total employee Additional Pension Contributions
- Total employer Additional Pension Contributions
Contributions Payable During Absence
For more information on contributions payable during absence please see https://www.lppapensions.co.uk/employers/absence-pay/
Furlough due to Covid-19
Furlough pay received by members is pensionable. Employee and employer contributions should be deducted based on the actual pay the furloughed employee receives. Assumed Pensionable Pay does not apply.