COVID-19 – important information

Help and support on pension queries during the Coronavirus outbreak

We hope everyone is managing to stay safe and healthy during these difficult times and learning to adjust to different home and work environments.

Like other organisations, we’re following government advice regarding COVID-19, and are now working remotely. This means we can’t offer our normal telephone or postal service during this time. So please don’t call or send us any letters or forms by post. The employers inbox will still be monitored regularly and this is the best way to contact us. A member of the team will then be in touch using the most appropriate method.

We also expect that during these unprecedented times there’ll be extra pressure on our case work services and we will be focussing on helping those most in need. Please only get in touch with member queries where these are urgent issues. For example, we will not provide estimates on strain costs for restructuring/redundancies more than 12 months away or based on more than 2 scenarios. This will allow us to focus on assisting those most in need.

There are a number of planning tools available within Employer Self Service which can give you indicative values for different types of retirements and deferred benefits etc.

We’ve also adapted some frequently asked questions from the LGA’s website to help with any queries you may have.

COVID-19 FAQs for employers

What activities should employers focus on?

TPR’s coronavirus (COVID-19) guidance recommends that employers focus their activities on the key risks to pension savers like:
• processing new pensions benefit cases
• dealing with bereavement cases
Other areas that should continue to receive attention are ensuring receipt of employee contributions and the provision of member information to reduce the risk of scams and support effective decision making.

Will employers be able to progress ill health retirement applications in the current climate?

The Local Government Association (LGA) contacted the Association of Local Authority Medical Advisers (ALAMA) who confirmed that the instruction below has been posted on their website:

‘During the current COVID-19 crisis, it is important to continue to progress ill health retirement applications. It is also particularly important that assessments remain fair and reasonable, and that should include requesting GP and specialist reports as required. There has never been a requirement for these assessments to be face to face, therefore paperwork reviews, with telephone clarification if needed, is the most appropriate way to progress these.

If it is not possible to get reports, an assessment should be based on whether reports are likely to influence your decision further, and whether you have enough objective evidence to make an opinion. Opinions should always be ‘on balance of probability’. There will be times when you simply don’t have sufficient objective evidence to support ill health retirement, and you have been unable to get clinical reports. You should suggest that the applicant request copies of clinical reports direct from their GP.’

What happens if there is a delay in progressing an ill health retirement application or tier three review?

Each case will be different and will need to be assessed on its own merits. However, where an employee is reaching the end of their sick pay the employer could put them back on full pay or, if applicable, furlough them. The LGA workforce update: job retention scheme has more information on this.

The LGA have asked MHCLG (for England and Wales) about the possibility of backdating the effective date for deferred benefit applications under the 2013 regulations and tier three reviews, where the benefit is uplifted to a tier two. These are both currently effective from the date of the employer’s determination.

Will the life assurance payment for care workers in England, announced by the Health Secretary, be paid on top of any pension benefits?

Although full details of the new life assurance scheme are not yet available, we understand that any payment would be in addition to pension scheme benefits for care workers that are covered by the scheme and are also LGPS members.

Can employers delay or pause paying employee contributions?

No, regulations confirm that employee contributions must be submitted to the administering authority in line with the timescales in the Pensions Act 1995. That is, by the 19th of the month following the last day of the month in which the contributions are deducted. If an employer fails to submit employee contributions on time, paragraph 148 of TPR Code 14 states that where ‘the scheme manager has reasonable cause to believe that the failure is likely to be of material significance to the regulator in the exercise of any of its functions, they must give notice of the failure to the regulator and the member within a reasonable period after the end of the prescribed period’.

What happens if employer contributions are received late?

If an employer fails to pay contributions on time, regulations confirm that the administering authority may levy interest of base rate plus one percent from the due date to the payment date daily with three monthly rests. Paragraph 147 of TPR Code 14 also requires that where the ‘scheme manager has reasonable cause to believe that the failure is likely to be of material significance to the regulator in the exercise of any of its functions, the scheme manager must give a written report of the matter to the regulator as soon as reasonably practicable’.

If an employer is in severe financial difficulty, can an administering authority force them out of the scheme to avoid further build-up of liability?

No, regulations confirm that the only circumstances in which an employer ceases membership is if there are no active members (an exiting employer) or if the administering authority considers it likely that they will become an exiting employer.

A member is on emergency volunteering leave, on what pay are employer and employee pension contributions determined?

Employer pension contributions will be based on assumed pensionable pay (APP). Employee pension contributions will be based on the amount of the employee’s actual pay during emergency volunteering leave (EVL) . All scheme discretions (administering authority and employing authority) should operate in the same way as if the member were receiving normal pay.

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

If any LGPS members are seconded on emergency staffing to the NHS, their pension benefits continue on the same basis as before the secondment.

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

Deferred and pensioner LGPS members who return to work in local government or are offered contracts of employment with the NHS (as part of emergency staffing) will have access to pension provision in the appropriate pension scheme. If they are issued with an NHS voluntary agreement it does not constitute an employment contract and therefore, they will not have access to the NHS pension scheme.

What happens when a member is on reserve forces leave?

The Ministry of Defence (MOD) expects to mobilise up to 3,000 armed forces reservists to assist in the Government’s COVID-19 response. LGPS members on reserve forces leave can choose to remain in the LGPS. If an employee chooses to remain in the LGPS, their contributions will be based on Assumed Pensionable Pay (APP).

The employer must tell the MOD the APP figure, the amount of basic employee and employer contributions that must be paid and details of any additional contributions the member is paying. The MOD will pay the contributions to the administering authority. Any payments made by the employer to a member who is on reserve forces leave are non-pensionable.

Who are furloughed staff?

Employees who are being paid under the Government’s Coronavirus Job Retention Scheme are referred to as furloughed staff. More information on this and other employment issues can be found at the LGA’s Employment Law FAQs page.

Is furlough pay pensionable?

Yes, furlough pay is pensionable pay 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.

Can employers reclaim pension contributions from furlough pay?

Employers can only claim pension contributions for furloughed employees up to the minimum required for automatic enrolment, that is 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).

How will furlough pay affect pension build up?

Members will continue to build up CARE pension based on the actual pay they receive. If the furlough pay is less than their normal pay (because the employer chooses not to top up pay to 100%), the pension they build up will also be less. They can choose to buy additional ‘extra’ pension to make up for the pension lost during this period. The employer is not obliged to split the cost with the member but can choose to.

Final salary benefits are usually calculated using the pensionable pay earned in the year before leaving the scheme; however, one of the two previous years’ pay is used, if higher. This should prevent final salary benefits from being detrimentally affected if the member’s pay is reduced due to being on furlough.

The LGA’s view is, if a member’s contract of employment is changed when they are furloughed, they will not have the option to have their final pay calculated as the average of any three consecutive years’ pay in the last 13 years.

How will being on furlough leave 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 make use of the provision in the regulations that allows them to substitute a higher pay figure to reflect the pensionable pay the member would normally have received.

When determining the employee contribution rate on 1 April 2020, should furlough pay be used?

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.

Regulations provide that where there is change to employment, or a material change, during the year, the employer can make a further determination and reallocate a member to a different band – if they do this, they must notify the member. This is a discretion under the regulations – for more information see the LGA guide on discretionary policies.

What information is available for members who are concerned about their financial situation due to COVID-19?

We have a dedicated page that cover’s members COVID-19 FAQs on our website which includes; questions about reducing/ceasing contributions, pension scams and other guidance on how to deal with the financial effects they may be suffering.

We’ve also updated our members site to reassure them that their pension savings aren’t affected by the falls in the stock markets and to update them on how best to get help and support on their pension.

Thank you for your understanding during these unique times.