This page is for Derbyshire Pension Fund employers and is based on guidance provided by the Local Government Association (LGA). The following FAQs cover situations you may be encountering on a day to day basis linked to the impact of the coronavirus outbreak.
What are the critical LGPS processes that employers must continue to carry out?
The government has identified that the payment of benefits is an essential public service to be maintained while in this lockdown period. The Pensions Regulator subsequently advised that in order to achieve this, employers need to concentrate on:
- continuing to submit forms and notifications as normal, focusing on cases where employees or their beneficiaries are expecting payments from us (for example retirements, refunds, members deaths)
- submitting the 2020/21 year end return by the 23 April 2021 deadline.
- continuing to pay contributions and submit your CR1 forms on time
What else do employers need to do to maintain service levels?
Providing a personal email address for your employees when completing forms will enable us to contact them via safe and secure electronic communications, and help towards speedier payment processing. If you don’t hold an up to date email address, please contact your employee to obtain it.
Payments to the fund
The FAQs in this section set out that payments to the fund must still be made on time.
Can employers delay or pause the payment of contributions to the fund?
No. All employee and employer contributions must be paid to us by the 19th of the month following that in which the contributions were collected.
Failure to meet this deadline may result in action from us, including the possibility of charges for the additional administration caused. We’ll also be duty bound to report details to The Pensions Regulator.
Can employers defer the payment of strain / shortfall costs?
No. To ensure that payments to scheme members are unaffected, shortfall / strain costs must be paid in full on receipt of the invoice.
Impact on employees
The FAQs in this section answer some of the questions we’ve received about the impact of the coronavirus situation on employees and their LGPS pension.
What information is available for scheme members concerned about their financial situation due to the coronavirus outbreak?
Scheme members should be encouraged to visit the member’s coronavirus page. This includes questions about reducing / ceasing contributions, pension scams and other guidance on how to deal with the financial effects they may be suffering.
An employee is on Emergency Volunteering Leave (EVL). On what pay are employee's and employer's contributions based?
Employer pension contributions during EVL will be based on assumed pensionable pay (APP). Further information on how to work out an employee’s APP, is available in the LGA’s HR and payroll guides.
Employee pension contributions will be based on the amount of the employee’s actual pay during EVL.
An active employee is seconded on emergency staffing to the NHS. How does this affect their pension benefits?
If any LGPS members are seconded on emergency staffing to the NHS, their LGPS pension benefits continue on the same basis as before the secondment.
Who are furloughed staff?
Employees who are being paid under the government's coronavirus job retention scheme are referred to as furloughed staff. More information on this and other employment issues can be found at the LGA's employment law FAQs page.
Is furlough pay pensionable?
Yes. Furlough pay is pensionable pay under the regulations. Employee and employer contributions should be deducted based on the actual pay the furloughed employee receives. Assumed Pensionable Pay does not apply.
Can employers reclaim pension contributions from furlough pay?
While an employee was in the Coronavirus Job Retention Scheme before 1 August 2020, the employer could reclaim the cost of employer contributions up to the minimum required for automatic enrolment, that is 3% of income above the lower limit of qualifying earnings (which was £512 per month until 5 April 2020 and is £520 per month from 6 April 2020). The cost of employer contributions above the 3% minimum fell to the employer.
The employer is unable to reclaim any employer contributions for the period from 1 August 2020.
When determining a scheme member's employee contribution rate from April 1 2020, should furlough pay be used?
Yes. If furlough pay forms all or part of a member's pensionable pay, it should be used to determine the employee contribution rate from 1 April 2020.
Regulations provide that where there is change to employment, or a material change, during the year, the employer can make a further determination and reallocate a member to a different band. If you do this, you must notify the member. This is a discretion under the regulations. For more information see our employer discretions page.
How will furlough pay affect a scheme member's pension build up?
The 2 different types of pension that make up the scheme are final salary and Career Average Revalued Earnings (CARE). Furlough pay affects the parts of the scheme differently as follows:
- CARE: Scheme members will continue to build up CARE pension based on the actual pay they receive. If the furlough pay is less than their normal pay (because the employer chooses not to top up pay to 100%), the pension they build up will also be less. They can choose to buy additional ‘extra’ pension to make up for the pension lost during this period. The employer is not obliged to split the cost with the member but can choose to.
- Final salary: These benefits are usually calculated using the pensionable pay earned in the year before leaving the scheme; however, one of the 2 previous years' pay is used, if higher. This should prevent final salary benefits from being detrimentally affected if the member’s pay is reduced due to being on furlough. Based on our current understanding, if a member’s contract of employment is changed when they are furloughed, they will not have the option to protect their final pay as a calculation of the average of any three consecutive years' pay in the last 13 years.
If a scheme member dies while on furlough pay, how will death in service benefits be affected?
Assumed pensionable pay (APP) is used in the calculation of the death grant and any survivor benefits if a member dies in service. APP is usually calculated using the average pensionable pay the member receives in the 3 months before the pay period in which they die.
If a member receiving reduced furlough pay dies in service, employers should make use of the provision in the regulations that allows them to substitute a higher pay figure to reflect the pensionable pay the member would normally have received.