Local government pension scheme and academies: You shall not pass!

A pass-through agreement is a common way for academies to share the risks of participation in the Local Government Pension Scheme (LGPS) when outsourcing services. However, the Department for Education (DfE) has confirmed that all academy trusts which are looking to implement pass-through arrangements are required to get approval from the Education, Skills and Funding Agency before they enter into such an agreement.

Although there is no guidance which directly addresses the issue of approval for pass-through agreements, the DfE has confirmed to us that this requirement is derived from the Academy Trust Handbook.

Notably, the DfE has said that a pass-through agreement will not be approved where the LGPS members have never been directly employed by the academy trust. This would, for instance, cover the situation where an outsourcing contract was established by the local authority before the school became an academy and the academy is now looking to re-tender that arrangement. In that situation, the employees will never have been employed by the academy trust and so approval will not be granted.

This also means that academies who are unable to gain approval will be in a difficult situation when seeking to outsource or retender services such as catering and cleaning, as bidders may often insist upon a form of pass-through agreement as a condition of their bid. Even where bidders are prepared to take on all the risks, it seems likely that academy trusts without approval will have to pay a premium price to reflect the risks that bidders are taking on.

We are running a webinar for academies and local government funds looking to understand the position better. For more information and to book your place, click here.

For more information

If you would like to know more about the LGPS, pass-through arrangements or out-sourcing for academies, please contact Doug Mullen.

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