Employer Focus - February 2021

This bulletin from the Staffordshire Pension Fund, focuses on the key responsibilities and actions required by employers in the submission of their annual employer returns as at 31 March 2021.


 

Important information for scheme employers and payroll departments  Back to top

  • Submission of year end pension data returns - deadline 23 April 2021
  • Revised employer and employee pension contributions effective from 1 April 2021

Submission of year end pension data returns

Employers will be familiar with this annual business critical and regulatory requirement, to maintain the accuracy and integrity of all the Fund members' pension data. This also enables the Fund to issue our members' annual benefit statements by 31 August 2021.

Deadline for employer's submission (except employers using i-Connect)

The submission of data for the financial year ending 31 March 2021 must be received by Pensions Services no later than 23 April 2021, so that we can comply with the requirement to issue annual benefits statements within statutory time limits. This deadline will allow for data validation processes to be completed and any necessary data cleansing to be performed prior to the issue of our members' annual benefit statements.

Please note: failure to respond by 23 April 2021 will result in the late issue of members' annual benefit statements, which constitutes a breach of law. This means the Fund has a legal requirement for the breach to be reported to the Pensions Regulator. This exposes both you, as the employer and the Fund to reputational and also the risk of financial penalty.

Employer guidance

To assist employers with completing their annual return we have a dedicated area of the Pension Fund’s website, which contains all the necessary documentation for completion including guidelines and supporting information.

This includes the following:

LGPS Payroll Guide

If you are uncertain of the data that should be supplied, then please refer to this guide. The guide sets out the requirements for payrolls with respect to the LGPS (external link to a PDF document).


 

Revised employer pension contributions effective from 1 April 2021  Back to top

As a participating employer in the Staffordshire Pension Fund, unless you are a contractor operating on a fixed contribution rate admission basis, you will previously have received notification of your employer's 2019 valuation schedule which outlines your organisation's expected employer LGPS contribution rate for the three years commencing 1 April 2020.

To assist payroll managers, details of the employer contribution rates due from 1 April 2021, for all participating employers in the Staffordshire Pension Fund, can be found on our website.

Please note: if the contribution rate your organisation pays is fixed for the life of your current contract, the Fund actuarial valuation will not alter the contribution rate payable.


 

LGPS members contribution banding from 1 April 2021  Back to top

This table sets out the members' contribution bands which will be effective from 1 April 2021. These are based on the pay bands for 2020-21 as increased by the September 2020 Consumer Price Index (CPI) figure.

Please ensure your HR and payroll teams take the necessary action to implement the changes from 1 April 2021.


 

Important - CARE pay that should include assumed pensionable pay (APP)  Back to top

Assumed pensionable pay provides a notional pensionable pay to ensure a member's pension is not affected by any reduction in pensionable pay, due to a period of sickness or injury on reduced contractual pay or no pay, or relevant child related leave, or reserve forces service leave.

Why is APP so important?

Since 1 April 2014, a member's pension has been linked to their earnings in each financial year. For every year they are a member of the scheme they add pension to their individual account.

The pension added each year is based on 1/49th of earnings for that year (1/98th if the member has opted to be a member of the 50/50 section of the scheme).

The pension account is then revalued each year by change in the consumer price index (CPI) up to their retirement date. This is known as a career average revalued earnings (CARE) pension.

Example calculations of CARE pensions for the financial year 2020-21

Member A

A member who earns £20,000 from 1 April 2020 to 31 March 2021 will build up 1/49th of that pay towards their pension account for that year.

i.e. £20,000 x 1/49th = £408.16 per annum pension

Member B

If we take an identical member who has been on reduced pay of £15,000 due to sickness or relevant child related pay during the same period 1 April 2020 to 31 March 2021.

i.e. £15,000 x 1/49th = £306.12 per annum pension

  • Member A's pension = £408.16 p.a. versus Member B's pension = £306.12 p.a. a difference of £102.04 per annum.
  • In this example the member has 'lost pension' of £102.04 per annum, plus future changes in line with consumer price index (CPI).
  • This will result in a lower member's or spouse's pension than they are entitled to under the LGPS regulations.

Consequence

In this example, as the member is on reduced pay due to sickness or relevant child related pay, the employer must include a notional APP of £5,000, thereby increasing the pensionable pay to the amount the member would have received had they not been on reduced pay.

Under the LGPS regulations the employer is required to ensure a notional APP is included in the member's pensionable pay which is notified to the Fund in their organisations year end returns. The member's pension contribution is based on actual pay plus APP.

The example above is only a summary of assumed pensionable pay. For more detailed information of how APP is calculated, please see the LGPS HR guide to the 2014 scheme (external link to a PDF document).


 

Coronavirus job retention scheme - furlough  Back to top

The Pension Fund needs to be aware if any scheme members have received  furloughed pay, in order that any earlier pay protection can be considered should the member leave within 12 months of the furlough period ending, and also to avoid the Pensions Section needing to contact your payroll teams regarding unexpected reductions in the member's remuneration.

A simple spreadsheet return is available on our website, which should be completed at the beginning and the end of the furlough period.

All completed forms should be sent in an encrypted format or via Staffordshire County Council's secure file transfer (SFT) system to:


 

Further information   Back to top

To further assist employers, see the Local Government Association (LGA) website which contains all the latest information including Covid-19 webinars for LGPS employers and frequently asked questions.

If you require any further information or clarification, please do not hesitate to get in touch: