ER was a charity participating in the Local Government Pension Scheme (LGPS) because it was delivering services for a local authority and employed staff who had previously been employed by the local authority.
The services contract came to an end in 2019 and as a result ER’s participation in the LGPS also ended. In 2022 the LGPS fund wrote to ER to say that it had carried out a final valuation following ER’s exit from the LGPS and there was a surplus of about £1.5 million.
There was a change to the rules governing the LGPS in 2018, meaning that where there is a surplus the local authority administering the LGPS fund (the administering authority) is required to consider whether it should pay some or all of that surplus to the exiting employer as an exit credit. The administering authority is required to take into account any representations made by the exiting employer. Prior to 2018, there had been no basis for paying an exit credit.
The administering authority made it clear that because the contract for services had been entered into before 2018 when payment of an exit credit was not a possibility, it regarded the payment of any surplus exit credit to ER as a windfall. It indicated that it was considering a payment of around £250,000 but that in making a decision it would also take into account the fact that the local authority said that ER owed it money on the services contract.
We helped ER to draft representations to the administering authority in particular pointing out that it should not consider as a factor any money owing on the services contract. This resulted in a payment from the fund of about £250,000. With charitable funding under particular pressure in the wake of the pandemic, this will enable ER to invest in the services it provides to its beneficiaries.
For more information
If you would like more information please contact Doug Mullen.