Archived decisions


	Hampshire County Council
	Pension Fund Panel		Item 10
	23 May 2008
	Admitted Body Status - response to Government consultation
	Report of the County Treasurer and Director of Human Resources

Contact: Nick Weaver, (01962) 847587; email: [email protected]

1 Summary

1.1 The Department for Communities and Local Government (CLG) issued a consultation on Admitted Body Status (ABS) provisions. The consultation closed on 10 April 2008.

1.2 ABS provisions were introduced so that contractors for local authority functions could provide transferring employees with continued access to the Local Government Pension Scheme (LGPS).

1.3 However the ABS provisions have not always been applied as originally intended. CLG are now seeking views on whether further guidance or regulatory changes are needed to make these provisions work in practice.

1.4 Hampshire County Council submitted a response supporting provision of additional guidance but not any statutory changes. The current regulations allow maximum flexibility for contracting out agreements.

2 Recommendation

That the administering authority's response to the consultation be noted, so that there is no additional risk from any changes to the guidance or regulatory regime for admitted bodies on the Pension Fund.

3 Admitted Body Status

3.1 Admitted Body Status (ABS) provisions were introduced in 1999 so that contractors who take on local authority services or functions can retain staff transferring from that authority within the Local Government Pension Scheme (LGPS).

3.2 ABS provisions also enable members of the LGPS to remain in the scheme and continue to accumulate benefits under the one pension scheme whilst their employment is transferred between different contractors.

3.3 Contractors do not have to opt for ABS, they only have to offer a broadly comparable pension scheme to transferring employees.

4 Consultation on ABS provisions

4.1 Communities and Local Government (CLG) issued an informal consultation paper seeking views on the operation and potential future arrangements for admission bodies in the Local Government Pension Scheme, in the context of local government outsourcing.

4.2 The consultation proposed three approaches:

· to issue new guidance to ensure that the original intentions of the provisions are followed in practice

· to introduce minor changes to the regulations to tighten up the application of the provisions

· to make major changes to the regulations, such as an obligation for all contractors to take admitted body status in the LGPS.

4.3 The consultation closed on 10 April 2008.

5 Response to the informal consultation

5.1 Hampshire County Council has two roles in the LGPS as it is both an employing authority and the administering authority for the Hampshire Pension Fund.

5.2 From an administering authority point of view, the employer and contractor must share the pension risk so that no additional risk falls onto the Pension Fund. The consultation proposals therefore only affect Hampshire County Council which as an employing authority might let contracts to third parties.

5.3 The current regulations allow maximum flexibility in letting contracts. Each contract can therefore be decided according to what best fits the individual circumstances. The response to the consultation is therefore to support the proposal for additional guidance but not to agree to any regulatory changes.

5.4 The response to the consultation questionnaire is attached in Appendix 1. It was submitted on 10 April.

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:

1	Published works
2	Documents which disclose exempt or confidential information as defined in the Act.

None.

Appendix 1

ADMISSION BODY ARRANGEMENTS IN THE LOCAL GOVERNMENT PENSION SCHEME QUESTIONNAIRE

INTRODUCTION

1. This questionnaire accompanies the consultation document for admission arrangements in the local government pension scheme.

2. Only responses received using this questionnaire will be considered as part of the consultation exercise.

PERSONAL DETAILS

Name: Jon Pittam

Position: County Treasurer

Organisation: Hampshire County Council

EXPLORING THE APPROACHES IN DETAIL

Approach one: Provide revised guidance re-emphasising the original intentions

[Paragraphs 31-36 of the consultation document]

Question 1 do you think revised and updated guidance re-emphasising the original intentions of ABS would assist in a better understanding of the current arrangements?

Yes

Unsure

Please provide any comments in the box below

The current regulations allow the greatest flexibility for letting contracts.

From an administering authority point of view, it does not matter how risk is shared between employer and contractor, as long as no risk falls on the Pension Fund.

From the employer's point of view, leaving the regulations as they stand means that each contract can be separately considered to allow for greatest possible choice.

Additional guidance for all parties involved would be a positive development but this should not be statutory.

Question 2 Are there any specific issues that the guidance should focus upon in addition to those contained at paragraph 36 of the accompanying consultation document?

Yes

Unsure

Please provide any comments in the box below

Provision of pension cost information should be included in the tender information. As it currently stands, experienced and well resourced contractors have an unfair advantage over smaller ones who may not have thought through the pension costs and implications. These smaller contractors may have otherwise been able to offer the employer the greatest value for money.

Question 3 how formal should revised guidance be? Should it be statutory or simply authoritative but informal?

Statutory

Authoritative

Unsure

Please provide any comments in the box below

In order to retain flexibility, it is important that the guidance is advisory but not statutory. The guidance will aid understanding and provide clarity over the process.

Making it statutory could limit contractors' ability to enter, employers' ability to gain greatest value for money etc.

Approach two: Make minor regulatory modifications to make the existing framework work better

[Paragraphs 37-39 of the consultation document]

Question 4 do you think this approach would help to address the concerns raised by stakeholders about ABS provisions?

Yes

Unsure

Please provide any comments in the box below

We feel that these changes could be addressed in advisory guidance which would ensure the arrangements could be applied flexibly in all cases.

Question 5 is there a need for regulatory provision specifically to deal with any surplus at the end of a contract?

Yes

Unsure

Please provide any comments in the box below

We would not want to see this as a statutory change (eg to make a refund of a surplus compulsory in all cases) but our actuary has advised that to refund a surplus from the pension fund will require a change to the Regulations.

Question 6 should annual actuarial monitoring of contracts to check staff and other variations be required in future?

Yes

Unsure

Please provide examples and details in the box below

This can be covered by the advisory guidance but should not require a change to the regulations.

The need for this will vary according to the contractor's tolerance to variability of pension cost so should be specified between the employer and contractor on an individual basis.

Question 7 should an annual review of indemnity cover be required?

Yes

Unsure

Please provide examples and details in the box below

This can be covered by the advisory guidance but should not require a change to the regulations.

Question 8 should a prepared risk assessment be published locally?

Yes

Unsure

Please provide examples and details in the box below

This can be covered by the advisory guidance but should not require a change to the regulations.

If becomes compulsory, could increase costs of outsourcing therefore our preference is that it remains a consideration rather than being required.

Question 9 should local authorities be required to provide a statement as part of the bidding process about actuarial aspects of ABS?

Yes

Unsure

Please provide examples and details in the box below

This can be covered by the advisory guidance but should not require a change to the regulations.

Question 10 are there other clarifications/amendments that should be considered for the ABS regulations?

Yes

Unsure

Please provide examples and details in the box below

Approach three: Consider the possibility of introducing some broader regulatory changes which enhance the options available, while at the same time, avoiding any conflict with the key policy basis of ABS.

[Paragraphs 40-55 of the consultation document]

Pass-through arrangements

Question 11 should pass-through arrangements be seriously considered?

Yes

Unsure

Please provide any comments in the box below

Pass through can currently be considered under the existing regulations - there should be no change from this position.

Question 11a if so, should it be simply an available mechanism, recommended as an available option, the default option, or are there substantial business and other reasons for it to be made mandatory where the admitted body route is followed?

Available option

Default

Mandatory

Please provide any additional comments in the box below

Question 12 what would be an appropriate apportionment of costs inherent in providing continued access to the LGPS? [For example, please state which risks should be the responsibility of contractors and/or the local authority]

Please provide details in the boxes below

Local authority Contractor

Question 13 what are the implications of sharing these costs for all interests?

Please provide any additional comments in the box below

Question 14 should the precise apportionment of costs be subject to a degree of local flexibility? Should these be considered independently?

Yes

Unsure

Please provide any additional comments in the box below

By keeping the regulations as they are and issuing authoritative guidance, maximum local flexibility can be achieved.

Question 15 should contractors also be liable for costs arising from changes in actuarial assumptions that are not specific to the scheme, such as mortality, which would fall on contractors whatever pension scheme they provided?

Yes

Unsure

Please provide any additional comments in the box below

It should not be statutory. In some circumstances it might be desirable for contractors to be liable to these type of costs. An agreement to this effect can be written under the current regulations but should not be statutory as it may not always be appropriate for the contractor to take on this sort of risk.

Question 16 should the contractor be given the benefit (i.e. a reduction in contribution rate or a refund on exit) if the changes have a downward rather than an upward effect on costs?

Yes

Unsure

Please provide any additional comments in the box below

Question 17 although contractors would not inherit past service liabilities, how should the effects of their decisions on past service liabilities would need to be taken into account?

Please provide any additional comments in the box below

We do not understand the question.

Question 18 if the outgoing contractor has no liability under a terminal valuation and the incoming contractor does not inherit past service liabilities how could accrued deficits be dealt with when a contract passes from one contractor to another?

Please provide any additional comments in the box below

We do not understand the question.

Mandatory Admission Agreements when ABS is the contractor's preferred method of providing pension provision for transferring local authority employees.

Question 19 are there reasons to re-consider the current position that it is for the contractor to decide whether to offer an open or a closed admission agreement, provided he complies with the general guidance on outsourcing, fair deal and two tier workforce?

Yes

Unsure

Please provide details in the box below

Question 20 should the provision of open admission agreements be a mandatory?

Yes

Unsure

Please provide details in the box below

Cap and Collar

Question 21 do cap and collar arrangements have merit? Are they suitable for regulatory treatment within the LGPS framework?

Yes

In part

Unsure

Please provide any comments in the box below

Question 22 what is your preferred status for cap and collar arrangements?

Available option

Mandatory

Do not agree with Cap and Collar

Please provide any further comments in the box below

FURTHER CONSIDERATIONS

Question 23 should different considerations apply to second and subsequent generation contracts from those which apply to first generation contracts?

Yes

Unsure

Please provide details in the box below

Question 24 are there other issues or approaches in addition to those set out in the consultation document which might usefully be considered?

Yes

Unsure

Please provide details in the box below

SUMMARY OF OPTIONS

Question 25 would any of the three approaches proposed in the consultation document effectively address concerns raised about ABS provisions set out at paragraphs 21-23 of the consultation document?

Yes

Question 26 which option do consider most appropriate?

Approach one

Approach two

Approach three

Part of approach

three

Mixture of

these approaches

Another approach

All three

Approaches

Please insert any comments in the box below

Question 27 how should any of the proposed changes be implemented?

Through guidance

Through contract

arrangements

Through regulation

Please insert any comments in the box below

Thank you for responding to this consultation exercise. Please send this form to Darren Kristiansen at Communities and Local Government at [email protected]

This content is archived

1 Summary

2 Recommendation

3 Admitted Body Status

4 Consultation on ABS provisions

5 Response to the informal consultation