Next in our series of ebriefings on the Government’s Green Paper: Transforming public procurement; looking at the Chapter 4 proposal to change the basis of contract awards.
For employers with staff in public sector pension schemes, this extra cost will not be offset by higher employee pension contributions or any reduction in the pension benefits.
Until now many schemes paying salary-related benefits have been contracted out of SP2 which meant that participating employers and employees were entitled to pay a lower rate of national insurance contributions. The end of contracting out means that they will no longer be eligible for this lower rate. Employers will need to pay an additional 3.4% of earnings between the lower earnings limit (£5,824 for the 2016/2017 tax year) and the upper accrual point (£40,040 for the 2016/2017 tax year). Employees who are members of contracted out pension schemes will pay an additional 1.4% of their earnings between these 2 thresholds. If this applied in the current tax year, this could mean the employer paying up to an additional £1,163 a year for each employee who was previously contracted out and the employee paying up to an additional £479 a year.
The Pensions Act 2014 does include a power which allows the employer participating in private sector schemes to unilaterally amend scheme benefits in order to offset the costs of additional employer national insurance contributions. Employers can use this “statutory override” to either increase members’ contributions or to reduce the accrual rate of salary related schemes. It is also only available for 5 years.
However, this power is not available in respect of public sector pension schemes such as the Local Government Pension Scheme, the Teachers’ Pension Scheme and the NHS Pension Scheme. Employers will therefore have to fund these extra costs themselves.
At a time where many employers are feeling the squeeze, these unwelcome extra costs may lead employers to consider whether they wish to continue to participate in salary related schemes at all. Employers may therefore decide that they would prefer to close the scheme to new joiners or even to all members. Some employers, such as academies and arms-length management organisations, don’t have this choice as their staff have an automatic right to participate in the relevant public sector schemes.
For more infomration
If you wish to discuss consultation with staff about changes to benefits or contribution rates or scheme closures, please contact Doug Mullen.
The Academies Financial Handbook is updated annually by the Department for Education and the Education and Skills Funding Agency; it contains a number of governance requirements for academy trusts.
Supreme Court publishes key decision for those working in the UK’s gig economy.
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The Building Safety Bill (the Bill) is said to be the most significant and wide-ranging change to the regulatory environment for higher risk building (HRBs) for over 45 years.
On 4 November 2020, the Restriction of Public Exit Payments Regulations 2020 (the Regulations) came into force; exit payments for the public sector were capped at £95,000.
The case was brought by the Official Receiver who sought disqualification orders under section 6 of the Company Directors Disqualification Act 1986 (CDDA 1986) against the seven trustees of Kids Company and its CEO. It illustrates well the tension between the role of a fulltime paid CEO of a large charity and the role of its board as voluntary trustees/directors.
At the end of 2020, The Charity Governance Code was updated or 'refreshed' as it is termed on its website.
Anthony Collins Solicitors is today (Thursday 11 February) revealing the scale of its social impact during 2020.
In their first podcast of this series, current and future trainees will discuss their journey and route to securing a training contract at Anthony Collins Solicitors.
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