Contact: Nick Weaver, (01962) 847568; email: [email protected]

1 Summary

1.1 This report provides an update on the `new look' Local Government Pension Scheme (LGPS) and the first major employer outsourcing.

1.2 There have been minor changes to the new scheme regulations but Communities and Local Government (CLG) have not yet completed the proposed three parts of the legislation. They hope to have this in place by the end of next month.

1.3 Southampton City Council outsourced 800 employees to Capita on 1 October 2007. The pension arrangements were of critical importance and in the course of the work key principles were established to protect the Fund.

1 Recommendations

a) That the current position be noted.

b) That the County Treasurer reports in full to the Panel when all three parts of the proposed legislation are in place.

2 New look LGPS

2.1 A report containing the latest position on the proposals for the new look LGPS was presented at the Pension Fund Panel in May 2007. This summarised the changes and recommended a full report be submitted once all three parts of the legislation were in place, anticipated to be during the summer 2007. The three sets of regulations will cover (1) Benefits, Membership and Contributions, (2) Transitional arrangements and (3) Administration.

2.2 However there has been little progress since May 2007 and CLG now hope to have all three parts of the legislation fully in place by the end of December 2007.

2.3 The minor changes since the last report have been:

June 2007 Publication of proposed amendments to the Benefits, Membership and Contributions regulations to correct and clarify drafting errors

Publication of draft Transitional regulations

July 2007 Further updated draft Administration regulations issued

Formal consultation on 85 year rule protections (closing date October 2007)

August 2007 Invitation to respond to consultation regarding allowing augmentation up to six months after an employee has left.

3.4 A further update on the status of the new look scheme will be submitted at the next meeting.

3 Protections to the 85 year rule

3.1 CLG have set out a formal consultation on the extension of full protection of the 85 year rule to 2020 (current provision is for full protection to 2016, with tapering protections to 2020). The 85 year rule allows contributors to retire at the age of 60 onwards if their age and LGPS service total at least 85 years.

3.2 Hampshire County Council's response was not to support the proposal both because tapering protections are more equitable and there are no employment policy or labour market objectives that could be applied in order to justify objectively and reasonably an extension of the current protections.

4 Award of augmentation after an employee leaves

4.1 The new compensation regulations allow employees to use part of their redundancy payment to buy additional pension. This extra decision adds time to the process which at the moment must be completed before the member leaves employment.

4.2 CLG are inviting responses to a proposal to amend the regulations to allow employers to augment service up to six months after an employee has left.

4.3 The amendment will ensure the new compensation regulations are consistent with the previous arrangements, which also allowed for added years to be granted up to six months after the employment ceased.

6 Outsourcing

6.1 Outsourcing local authority services to the private sector usually involves the transfer of local authority employees to the private sector. The safeguarding and continuance of existing LGPS pension arrangements are of critical importance to transferring staff and often become the single biggest challenge for both the local authority and the contractor to overcome.

6.2 This objective can usually be achieved by way of a legal agreement between the Fund employer, the administering authority and the contractor that confers admitted body status on the contractor.

6.3 Southampton City Council have recently been through this outsourcing process, involving the transfer of approximately 800 employees (of whom 650 are scheme members) to Capita Business Services on 1 October 2007.

6.4 This case has been treated as an example case for future outsourcing, establishing several key principles:

· continued participation in the Scheduled Bodies Group by Southampton City Council

· no material financial impact on the Group from the outsourcing

· no exposure of the Group to `private sector' actions.

6.5 In order that the interests of both the Pension Fund and the employer were fairly represented, specialist lawyers were appointed to act exclusively for the Fund and the Fund's actuaries set up a `Chinese wall' between the actuaries representing the Fund and the Fund employer.

Section 100D - Local Government Act 1972 - background documents

The following documents discuss facts or matters on which this report, or an important part of it, is based and have been relied upon to a material extent in the preparation of this report.

NB: The list excludes:

None.

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