Introduction
The regulations governing the pension arrangements allow greater Scheme flexibility for both employers and members, and in particular give employers greater scope for local decision making.
Each Scheme employer must formulate and keep under review their policy concerning the exercise of their functions in awarding additional pension to members and in operating early retirement and flexible retirement provisions including those related to redundancy and compensatory payments. Policy decisions must be publicised to members.
In addition to these mandatory policy decisions there are many other areas where discretionary policy decisions can be made by employers.
Key Principles
In formulating policies Scheme employers must have regard to the extent to which the exercise of the functions could lead to a serious loss of confidence in the public service and be satisfied that the policy is workable, affordable and reasonable having regard to the foreseeable costs.
Purpose of the policy statements
LPPA will consult with employers on how they exercise the key discretionary powers. They are not required to approve employers’ policy statements, but full disclosure of the information should take place before they can be put into operation. There are naturally variations between employers. LPPA helps and, where necessary, takes any appropriate action in cases where an employer’s policy is likely to lead to undue costs to the Fund.
Changing Policy Statements
It would be unreasonable to expect an employer’s policy statements to be “cast in stone”; employment conditions are subject to change and a policy, once regarded as fair and impartial may, over time, come to be seen as outdated and unreasonable. The Scheme rules therefore allow for a revised statement to be issued.
Any change to the discretions exercised under the LGPS Regulations can take immediate effect from the date the Scheme employer agrees the change.
However any change to the discretions exercised under the Discretionary Compensation Regulations 2000, the Discretionary Compensation Regulations 2006 or the Injury Allowances Regulations 2011 cannot take effect until one month after the date the Scheme employer publishes a statement of its amended policy.
Where, as a result of a review, a Scheme employer determines to amend their policy, they must send a copy of the statement of the amended policy to LPPA within a month of the revision.
Statement of Policy template
Appendix A of the guide provides a template for employers to use, if they wish, to produce a written statement of policy in relation to its exercise of certain discretionary functions available under the pension scheme regulations. The form includes the areas where a mandatory decision is required as well as other suggested areas of discretion where it might be considered prudent for a policy statement to be made.
Specifically the template form is broken down into 3 parts:-
Part A – Covers areas where mandatory written policy statements have to be published in relation to the requirements under the Local Government Pension Scheme regulations.
Part B – Covers areas where although mandatory written policy statements are not required it would be useful for employers to establish a clear policy intention in relation to the exercise of the employers functions under the Local Government Pension Scheme regulations.
Part C – Covers areas where mandatory written policy statements have to be published in relation to the requirements under the Local Government discretionary payments and compensation regulations.
In respect of the mandatory policy requirements, a written statement should be published indicating the policy which is being applied by that employer in the exercise of its functions. A copy of the Scheme employer’s policy decisions should be sent to LPPA.
Further Guidance
The Local Government Pensions Committee (LGPC) has published a document which details all the discretions that are possible under the LGPS regulatory framework. The following link will take you to an area of administration guides produced by the LGPC where the full list of discretions can be viewed. In addition more detailed guidance is available highlighting the issues employers should consider in determining policy statements.
http://lgpsregs.org/resources/guidesetc.php
The LGPC discretions list includes administering authority discretions. Each fund (in addition to its discretionary policy requirements as a scheme employer) must also formulate policy decisions under the Scheme regulations.