Employer Focus - March 2020
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 2020.
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Important information for scheme employers and payroll departments Back to top
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 Fund members' pension data. This also enables the Fund to issue our members' annual benefit statements by 31 August 2020.
Deadline for employer's submission (except employers using i-Connect)
The submission of data for the financial year ending 31 March 2020 must be received by Pensions Services no later than 24 April 2020, in order 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.
Important
Failure to respond by 24 April 2020 will result in the late issue of members' annual benefit statements, which constitutes a breach of law.
It further invokes a legal requirement for the breach to be reported to the Pensions Regulator, exposing both the employer and the administrator to the risk of censure and financial penalty.
Employer guidance
To assist you with completing your annual return we have a dedicated area of our website, which has all the necessary documentation for completion including guidelines and supporting information.
This section has help with the following:
LGPS payroll guide
If you are uncertain of the data that should be supplied, then please refer to this guide. It sets out the requirements for payrolls with respect to the LGPS.
Revised employer pension contributions effective from 1 April 2020
As a participating employer in the Staffordshire Pension Fund, unless you are a contractor operating on a fixed contribution rate admission basis, you will 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 2020, 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 contribution banding from 1 April 2020 Back to top
The table below sets out the contribution bands which will be effective from 1 April 2020. They are based on the pay bands for 2019/20 as increased by the September 2019 consumer price index (CPI) figure of 1.7%.
Please ensure your HR and payroll teams take the necessary action to implement the changes from 1 April 2020.
| Band | Pensionable pay range | Main scheme contribution rate | 50/50 section contribution rate |
|---|
|
1
|
Up to £14,600
|
5.5%
|
2.75%
|
|
2
|
£14,601 - £22,800
|
5.8%
|
2.90%
|
|
3
|
£22,801 - £37,100
|
6.5%
|
3.25%
|
|
4
|
£37,101 - £46,900
|
6.8%
|
3.40%
|
|
5
|
£46,901 - £65,600
|
8.5%
|
4.25%
|
|
6
|
£65,601 - £93,000
|
9.9%
|
4.95%
|
|
7
|
£93,001 - £109,500
|
10.5x%
|
5.25%
|
|
8
|
£109,501 - £164,200
|
11.40%
|
5.70%
|
|
9
|
£164,201 or more
|
12.50%
|
6.25%
|
Important - CARE pay that should include assumed pensionable pay (APP) Back to top
Assumed pensionable pay provides a notional pensionable pay to ensure the members 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. 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 their earnings for that year (1/98th if they have opted to be a member of the 50/50 section of the scheme).
The pension account is then increased each year by 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 2019/20
Member A
A member who earns £20,000 from 1/4/2019 to 31/03/2020 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 1/04/2019 to 31/03/2020.
i.e. £15,000 x 1/49th = £306.12 per annum pension.
So:
- 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 increases 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.
Please note
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 example above is only a summary of assumed pensionable pay. For more detailed information of how APP is calculated, please see the HR guide to the 2014 scheme from the LGPS web site.
If you require any further information or clarification, please do not hesitate to get in touch: