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Nilgosc


COVID-19 Employer FAQs

NILGOSC/LGA COVID-19 Webinar

On 28th May, the LGA held a webinar to provide information about your duties as an LGPS employer, and the steps to take during the COVID-19 pandemic. The Webinar can be downloaded here (MP4, 36MB). 

 

Questions

Answers

Employer Scheme Administration

What are the most important Scheme administration tasks for employers during this period?

We acknowledge that the next period is likely to be particularly challenging and disrupting and employers may need to prioritise their Scheme administration tasks. NILGOSC strongly recommends that employers prioritise:

  • providing NILGOSC with information on new retirees to allow us to process and pay new pensions
  • provide information on deaths so that death grants and survivor benefits can be paid as promptly as possible
  • continue to pay over employer and employee contributions promptly
  • continue to advise NILGOSC of any new members
  • complete and submit annual returns.

In addition, the Pension Regulator (tPR) has provided coronavirus (COVID-19) guidance for employers and pension administrators. The guidance will be updated over the coming weeks so you may wish to regularly check the link. tPR has said that it recognises that some administrative breaches of the law may occur and they will maintain a proportionate and fair approach to any action they make take.

Do employers still need to complete their annual returns? 

Yes. NILGOSC has a statutory duty to issue annual pension benefit statements and pension savings statements. We cannot do either of these without the information that you provide on annual returns. The deadline for submitting annual returns for the 2019/20 year is 30 April 2020.

We have suggested Ill-health retirement for one of our employees – will this process be affected?

No. Upon receipt of the relevant paperwork NILGOSC will arrange a face to face assessment for your employee with the Committee doctor.  Due to the current COVID-19 pandemic, they may be required to complete a COVID-19 health screening questionnaire.  Should NILGOSC determine that Ill-health benefits can be paid, claim forms will be issued promptly.  NILGOSC remains fully functional for all key member service delivery functions and we will continue to deliver great service to our members with minimal disruption.

 

Re-employment, Secondment, Redundancy, Emergency Volunteer Leave and Reserve Forces Service Leave

Can employers re-employ NILGOSC pensioners or deferred members (Returnees)

Yes. There is nothing to prevent a pensioner or deferred member being re-employed. They should be automatically re-entered into the Scheme from the first day of employment, unless the contract is for less than three months. NILGOSC should be notified of the ‘new’ member in the normal way.

Where the contract is for less than three months, the employee is also enrolled:

  • when the contract is extended beyond three months or, if earlier,
  • if they ask to join the scheme
  • or if they hit their automatic enrolment or automatic re-enrolment date (and are an eligible jobholder under the AE legislation).

For the majority of pensioners there is no change to their existing pension payment because of the new pensionable earnings. However, a few retired Scheme members who are in receipt of additional compensatory pensions may have to have the compensatory pension reduced – they must advise NILGOSC immediately should they become re-employed.

 

An active member is seconded as part of emergency staffing; how does this affect their pension benefits?

If any Scheme member is seconded to the NHS as emergency staff, then their pension benefits continue on the same basis as before the secondment on the assumption that pension contributions continue to be paid by the employer and employee.


A deferred or pensioner member is part of emergency staffing; how does this affect their pension benefits?

Deferred and pensioner Scheme members who return to work in Local Government or are offered contracts of employment with the NHS as emergency staff will have access to the appropriate pension scheme e.g. LGPS (NI) Scheme for Local Government and the NHS Scheme for the NHS. If they are issued with an NHS Voluntary Agreement, it does not constitute an employment contract and they will not have access to the NHS pension scheme.

 

What is the impact on pension if an employer authorises unpaid leave?

If an employer authorises unpaid leave for less than 30 consecutive days, employee and employer pension contributions are paid to cover the period of absence. The member’s pension will be unaffected.
If the absence is for longer than 30 consecutive days, pension contributions are made for the first 30 days of the absence only. After this the member will not build up any pension for the period unless they choose to pay Additional Pension Contributions (APCs) to purchase the amount of lost pension. If a member chooses to pay APCs and they make their election within 30 days of returning to work, the cost is split between the member and employer.
More information on unpaid leave is in section 5.3 of the Employer Guide.

What is the impact on member pensions if an employer makes staff redundant? 

If a member is made redundant and aged 55 or over their pension is payable immediately and unreduced because of early payment. The cost of paying this pension early is charged to the employer as a strain cost and immediate payment is due.
If the member is made redundant and under age 55, their pension benefits are deferred and payable from their normal retirement age. There is no strain cost to the employer as the pension is not payable. Members can choose to have their pension brought into payment earlier (from they reach age 55) or later than their normal retirement age. The pensions will either be reduced in the case of early payment or increased for late payment in accordance with Government Actuary Department guidance.
 

How is Emergency Volunteer Leave treated under the Scheme? 

Emergency Volunteer Leave (EVL) relates to a new volunteering scheme that allows employees to take unpaid statutory emergency voluntary leave to volunteer in health and social care authorities. If a member takes EVL then their Scheme pension benefits continue to build up as though they were working normally. The member pays contributions on the actual pay, if any, that they receive from their employer and the employer pays contributions to the Scheme based on the Assumed Pensionable Pay (APP). Effectively EVL is treated the same as Ordinary Maternity, Paternity or Adoption Leave. Employers may wish to refer to section 5.2 of the Employers’ Guide regarding Relevant child-related absences.

How does an employer treat those called up on Reserve Forces Service leave? 

Section 5.6 of the Employers’ Guide sets out the administration process for those on Reserve Forces Service leave. There are no changes to this procedure.

Furloughed Pay

Is furlough pay pensionable? 

Furlough pay arises under the Coronavirus Job Retention Scheme, which is where an employer may keep an employee on the payroll even though they are unable to operate or have no work for the employee to do because of COVID-19. The employer can pay 80% of the employee’s wages up to a monthly cap of £2,500 and recover these wage costs from HMRC. Employers may top this up above 80%. This is known as being on ‘furlough’. Under the Coronavirus Job Retention Scheme employers may only recover minimum employer pension contributions of 3%. As the employers’ contributions to the LGPS(NI) are generally much higher than this, employers will be unable to recover the shortfall and will have to fund the difference themselves. 

On 29 May 2020, the Government announced that, from August 2020, employers will no longer be able to reclaim any pension contributions. In addition, from 1 September, employers will have to start paying 10% of the employee’s wages (and can recover 70% from HMRC) and from 1 October the employer’s share will increase to 20% (and can recover 60% from HMRC).  The Coronavirus Job Retention Scheme closes on 31 October 2020.   Furlough pay is pensionable under the regulations. Employee and employer contributions should be deducted based on the actual pay the furloughed employee receives. Assumed pensionable pay does not apply in these circumstances.

How will furlough pay affect build-up of pension? 

Members will build up CARE pension based on the actual pay received. If the furlough pay is 80% of what the member would normally receive then the pension they will build up will be 80% of what they would normally have built up. The member can choose to buy additional pension to make up for the pension that was ‘lost’. The employer may split the cost of this additional pension purchase with the member but is not obliged to do so. The employer could also choose to award additional pension to the member, based on the pension ‘lost’ due to the pay reduction. Employers may wish to check their policy statements regarding this discretion.
Any pension benefits that a member may have that are final salary benefits (relating to membership before 1 April 2015) are usually calculated on the final year’s pay or the best one of the last three years if an earlier pay is higher. This should prevent the final salary element of a member’s pay being affected by being on furlough.
It is also sometimes possible that where a member’s final salary pay in a continuous period of employment is reduced or restricted the average of any three consecutive years’ pay in the last 10 years may be used if that is higher.

Should furlough pay be used to determine an employee’s contribution band? 

Yes. If furlough pay forms all or part of a member’s pensionable pay it should be used to determine the employee contribution rate on 1 April 2020. It is also possible for an employer to reallocate a member to a different band during the year. If they do so, they must inform the member. Employers may wish to check their policy on allocation to contribution bands. See section 2.2 of the Employers’ Guide for more information on contribution banding.

How will being on furlough affect a member’s death in service benefits? 

Assumed Pensionable Pay (APP) is used in the calculation of the death grant and any survivor benefits if a member dies in service.  APP is usually calculated using the average pensionable pay the member receives in the three months before the pay period in which they die.  If a member receiving reduced furlough pay dies in service, employers should use the provision that allows them to substitute a notional pay figure to reflect the pensionable pay the member would normally have received.

 

Contributions

Can employers take a contribution holiday? 

No. Once the actuary certifies the contributions for a year then they must be paid over in that year. NILGOSC provided all employers with the 2019 Valuation Report on 31 March 2020. This report included the actuary’s Rates and Adjustments Certificate that states the minimum contributions that are payable each Scheme year from 1 April 2020 to 31 March 2023. NILGOSC expects all employers to remit their monthly contributions as set out in the Employer Guide (Section 13.2), Pensions Administration Strategy (page 5) and Funding Strategy Statement (section 5.2.2). Any employers with financial difficulties should contact NILGOSC directly.

Can members take a contribution holiday? 

No. The Scheme is contributory. A member, in normal circumstances, must either pay contributions at their rate of pensionable pay while in the main section or they can elect to be in the 50/50 section and pay half the contributions and their pension will then build up at half the rate. Some members may find the 50/50 section helpful in cases of financial hardship rather than opting out. If a member wishes to stop paying into the Scheme they would have to opt out. They can obtain an opt-out form from the NILGOSC website.

Can members make contributions to NILGOSC in respect of temporary jobs outside of NILGOSC employers e.g. temporary jobs with NHS or supermarkets while on zero pay?

No. Members can only make contributions to the Scheme in respect of their earnings from a Scheme employer.

 

Can employers delay paying over employee contributions? 

No. In the Employer Guide (section 13.2) NILGOSC asks employers to pay over employer and employee contributions by the first working day of the month following the month to which the contributions relate. If a payment is received more than 10 days late then interest may be charged. By law employee contributions must be paid over by either the 22nd (where they are paid electronically) or the 19th of the month following the last day of the month in which the contributions were deducted. If an employer fails to pay over the contributions in time and NILGOSC has reasonable cause to believe that the failure is likely to be of material significance to the Pension Regulator then it is required to give notice to both the Regulator and the member.

What happens if an employer pays over its contributions late? 

NILGOSC may charge interest on the late payment at the rate of base rate plus one percent from the due date to the payment date with three monthly rests. If NILGOSC has reasonable cause to believe that the failure is likely to be of material significance to the Pension Regulator (tPR) then it must give a written report to tPR as soon as reasonably practicable.
 

Can an employer defer payment of strain costs e.g. redundancy costs? 

No. NILGOSC’s Funding Strategy Statement (section 5.3.1) requires immediate payment of strain costs resulting from early retirements, augmentation of membership, additional pension and any other one-off strain costs.

What happens if an employer is in severe financial difficulty? 

Any employer in such a position should contact NILGOSC. If it appears likely that an employer may not be able to meet its obligations to the Scheme NILGOSC may seek Departmental approval to require the active members to cease future accrual. Once there are no active members, the employer will become an exiting employer, an exit valuation normally takes place and an exit payment is likely to be due. In some circumstances it may be possible to defer the exit valuation although employer contributions continue to be payable or to agree payment of the exit amount over a defined period.

Will employer contribution rates be affected by the pandemic? 

Following the 2019 triennial valuation of the Scheme, the actuary has just set the employer contribution rates for the next three years from 1 April 2020. Due to uncertainty regarding the impact of the COVID-19 pandemic on the funding of the Scheme the actuary and the Committee have reserved the right to review and increase the employer contributions for the years 2021/22 and 2022/23. 

Value of Pensions

Will the value of Scheme pensions be affected by the pandemic? 

No. Pensions are not linked to stock market performance – they are based on salary and how long a member has paid in. Pensions in payment will not be affected.
The only exception is Additional Voluntary Contributions (AVCs). It is possible that the value of AVCs may have reduced. Members may wish to check the value of their Prudential AVC on the Prudential website.

The Pensions Regulator Guidance

The Pensions regulator has published a set of guidelines for employers