Company want to end local government pension scheme

Dionysusjones

Hello all, just a quick update.


The company has offered us £4000 to leave the pension which we have rejected and we have been told it will cost them up to 30m, yes 30 million to exit the pension at the moment. It costs them about 1m a year to finance this LGPS.
The average age of the 200 left is 52 and their main argument is the deficit that they have to pay from time to time.


It really doesn't make sense because if the deficit comes down to a respectable level for them to exit then their unaffordable argument goes out of the window anyway


Any thoughts..

molerat

The £30M is a one off cost, the end, finished, no more liability. Paying it now, or with a defined payment plan, may have tax advantages. To carry on is an open ended liability.

System

Hi

The employer rates can vary between 0% and upto 30%.

As you say, when (if) the employer reaches 'Fully Funded' status, then the liability / costs per year will be zero.

hyubh

Dionysusjones wrote: »

we have been told it will cost them up to 30m, yes 30 million to exit the pension at the moment.

Quite possibly correct - the actuarial valuations done when an employer exits an LGPS fund are usually performed on a wind-up basis. Apart from reflecting what has to happen with a single-employer DB scheme, this is the fairest thing for the remaining employers in the fund, notwithstanding how it can cause older admitted bodies to whinge and moan Kevin the Teenager style.

The average age of the 200 left is 52

That's an expensive membership profile from the fund's point of view (presumably you've all got a fair bit of service too?).

their main argument is the deficit that they have to pay from time to time. It really doesn't make sense because if the deficit comes down to a respectable level for them to exit then their unaffordable argument goes out of the window anyway

I agree with that, i.e. exiting the scheme just brings forward the need to pay off past service deficit. The payments they currently make for it are likely to have a horizon of 15 years or so, and not be calculated on the wind-up basis mentioned previously.

A more honest rationale would be that the CARE scheme in itself is too generous, with the protections for pre-2014 service being too strong, which is particularly important given the membership profile here. If this were their own scheme they could fiddle about capping what pay is counted as pensionable, mess around with the accrual rates, limit pension increases to the statutory minimum, etc., but it isn't and they can't.

Dionysusjones

Thanks all for your replies, the deficit has actually gone up a couple of million since they announced their desire to leave the LGPS.
With working in the office I have found out they are sorry they let the cat out of the bag too early so to speak with regards to exiting the pension and the current amount of 30m is far too big to leave at the moment.
Someone else I know have said they will have to pay the said amount in full and not in instalments.
They will be still paying off the 30m loan when everyone currently in the pension is well gone and watching Cheryl Cole presenting loose woman and Ant and Dec on Countdown..

chiefie

Do you work for a housing association ?

Dionysusjones

Hello chiefie


Yes I do, in the deep South..


I feel this Auto enrolment has had an impact on the decision to end our pension, and we are going to pay for it.

hyubh

Dionysusjones wrote: »

I feel this Auto enrolment has had an impact on the decision to end our pension

Very unlikely - apart from anything else, the admission agreement with the fund may well be a closed one preventing new entrants even if the directors have gone all doolally and were thinking of putting new starters into the LGPS.

chiefie

Many housing associations face this problem. They encourage new starters away from the lgps. The costs of keeping up lgps pension contributions can be extraordinarily high as the workforce ages. Having said that you are not foe profit. I would insist via the unions that they fulfil the 15 year promise. The unions should get hold of the original tupe/transfer documentation. The financial director should have been on top of this and projected the costs a long time ago. Good luck.

Dionysusjones

Hello again all, it is now twelve months since we first found out their intention to leave our LGPS. They say they have now told the LGPS that they will be leaving but have not said when.
They have now offered us £5000 which started at £2000 and then £4000 and say it will be the final offer and if accepted will be tax free and put into our Christmas pay.
If they can end our LGPS without our consent why do they keep offering more money.
Someone has told me that if we accept the £5000 we are actually volunteering to leave and it then affects the deficit and could save them millions.
Nobody in work including all the union officials can tell me why they seek our approval so much to end this scheme when everyone keeps telling us they can do it legally anyway..