Pension contributions procedural policy
This is the Pension Contributions Procedural Policy for the Staffordshire Pension Fund ("the Fund"), part of the Local Government Pension Scheme ("LGPS") managed and administered by Staffordshire County Council (“Administering Authority”).
Scheme employers are required to pay over all contributions to the administering authority within overriding time limits set out in legislation[1]. However, even before the introduction of the overriding legislative requirements, the LGPS contained – and still contains – its own provisions regarding the payment of contributions[2].
[1] See regulation 16 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 as substituted by regulation 48 of the Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 and amended from 1st July 2012 by the Automatic Enrolment (Miscellaneous Amendments) Regulations 2012 and from 1st November 2013 by the Automatic Enrolment (Miscellaneous Amendments) Regulations 2013.
[2] See regulations 67 and 69 of the Local Government Pension Scheme Regulations 2013.
This document sets out the roles and responsibilities of Scheme employers with regards to the payment of employee and employer pension contributions, and any extra charges, including:
- the pay-over statement (CTR1)
- monitoring and recording the pay-over of contributions
- reporting any late pay-over to the Pensions Regulator
- interest for late payment
- Additional Voluntary Contributions (AVCs)
Please note: if you outsource your payroll function to a payroll service provider, it is important that the contract and service level agreement (SLA) between you, the “Scheme employer”, and the provider clearly set out the responsibilities in relation to the pay-over of pension contributions.
This policy will be reviewed periodically or following any material change in legislation.
Employers are required to complete a monthly return (CTR1) detailing the breakdown of the contribution payment made.
The completed CTR1 should contain the following information:
- A breakdown of contributions for the main section of the scheme.
- A breakdown of contributions for the 50/50 section of the scheme.
- Details of any payments made in respect of an Additional Pension Contributions (APCs).
- Details of any refunds issued through the employer’s payroll.
- Details of any underpayment of pension contributions.
Please note that if an employer is onboarded to i-Connect and submitting monthly data, the Fund will, where possible, use the i-Connect data to determine the contribution breakdown and there will be no need to submit a CTR1.
The information from the monthly CTR1 (or i-Connect submission) received from each employer is entered into the “Contributions Control Spreadsheet”.
The Contribution Control Spreadsheet includes 12 monthly tabs where each individual employer’s payments will be recorded during the financial year.
The data from the CTR1 (or i-Connect submission) will be analysed to determine that the correct contribution rates have been applied. A 0.5% tolerance level has been built into the control system and any contributions that deviate from the certified rates by the stated tolerance level will be highlighted and reviewed by the Employer and Funding Team to determine if this needs to be queried with the employer.
The data from the CTR1 (or i-Connect submission) will be used to allocate the payments received to the employers account on the Integra accounting system. Any instance where the payment received does not agree with the CTR1 (or i-Connect submission) will be queried with the employer before the payment is allocated to an employer account.
A monthly reconciliation is carried out between the contribution control spreadsheet and the data in the Integra system any discrepancies between the two systems are investigated and any adjustments required are actioned.
Employee and employer contributions must be paid to the Fund within 19 days beginning on the day after the deduction is made, or within 22 days if paid electronically.
A late payment control sheet is kept detailing all late contribution payments from each employer and the action taken in each instance.
If a contribution payment is received after the 22nd day of the month it will be considered late:
- the first late payment received from an employer will be followed by an email to remind them of the contribution payment due date;
- the second late payment received from an employer will be followed by a formal letter informing them of the regulatory due date and the consequences that can arise from repeated late payment of contributions; and
- further late payments will result in a final warning letter.
Copies of example letters that will be sent by the Fund are shown in Appendix A and Appendix B.
Should further late payments continue, the incident will be recorded on the Fund’s “Breaches Log” and the circumstances will be reviewed by the Management Team. Materiality factors will be considered and a decision on whether to report the employer to the Pensions Regulator (TPR) will be made.
Under regulation 71 of the LGPS 2013 regulations the Fund has the right to charge interest, calculated at one per cent above base rate, on late contribution payments.
The interest charge will only be issued to the employer if the total cost exceeds £10.
If a contribution payment is not received by the last day of the month in which it is due, it will be considered as a potential case for charging interest.
An employer will be allowed one late payment per annum before being charged interest. In the event that an employer makes a second late payment and the Fund decides to make an interest charge, the first late payment will also be subject to a charge.
Any payments received in respect of an interest charge will be accounted for separately to the normal pension contributions.
When the Fund is notified of a problem where there has been a late payment of contributions payable to the Staffordshire Pension Fund’s AVC provider, they will assess why the payment failure has occurred before taking steps to resolve the matter. The following steps will be taken.
- Investigate any apparent employer failure to pay contributions in accordance with the legal requirements.
- Contact the employer promptly to alert them to the payment failure and to seek to resolve the overdue payment.
- Discuss the matter further with the employer as soon as practicable to find out the cause and circumstances of the payment failure.
- Ask the employer to resolve the payment failure and take steps to avoid a recurrence in the future.
The Fund will undertake to communicate with both the scheme member and the appropriate AVC provider to adjust the member’s AVC Fund value so there is no loss of investment income because of the payment failure.
The employer may be asked to make a payment to the AVC provider to cover the cost for loss of investment income depending upon the reason for the payment failure.
If you require further information about anything in, or related to, this Pension Contributions Procedural Policy, please contact:
Lee Mountford – Pensions Employers and Funding Manager
Email: lee.mountford@staffordshire.gov.uk
Telephone: (01785) 276464
Copies of example letter templates that will be sent by the Fund can be accessed here:
If you wish to print out this information, please select the document below: