my school's coming out of LGPS DB scheme and putting us into a DC scheme

Cmarch

Has anyone heard of another school coming out of the LGPS? My employer (independent school) is going to. The reason given is that LGPS is not viable and is asking them for additional payments to make up the deficit. They are offering membership in a new DC scheme with a well known provider but are also reducing their contributions

(As a result, my predicted pension upon retirement will no longer stand and the new scheme will only provide approximately one third of the income I was expecting to accumulate over the next 14 years until I reach NPA. I will lose out by about £3000 a year when I retire.)

Also, is the pension I have accumulated so far in the LGPS safe if the scheme is unsustainable. Normally I would leave it in but should I transfer it out into the new scheme if LGPS is so unstable. Would it really collapse, might I lose it all?

I would never have expected to be so vulnerable in a school scheme. Any comments on the situation in general would be appreciated

bigadaj

What this sounds like is that the lgps is increasing charges to your independent school and they have determined they can't afford the costs.

Your accrued pension should be unaffected, you can of course contribute more to make up the shortfall in your future pension.

Kynthia

Have you looked into buying any additional pension with the LGPS before you leave the scheme to see if it's worth it? You don't want to wait until it's too late and regret it, but also you might decide without the employer's contribution it's not for you. The LGPS is safe (not unstable) as it's not a private sector DB scheme, so you should have no problem leaving what you've accrued so far there.

hyubh

Cmarch wrote: »

Has anyone heard of another school coming out of the LGPS?

Being a private school, your employer will be an ‘admission’ rather than a ‘scheduled’ body in the LGPS, meaning it participates in the scheme through an agreement with the local LGPS fund rather than by law, and therefore if it wishes to exit, that is a decision for the school. Such a body exiting the LGPS isn’t unheard of, and indeed another group of admission bodies - contractors who take on previously council staff under TUPE when a function is outsourced - come in and out of the LGPS all the time as they win and lose contracts.

My employer (independent school) is going to. The reason given is that LGPS is not viable and is asking them for additional payments to make up the deficit.

The situation is similar to a private sector company that has its own DB scheme and deciding (like many others have done) to close it due to the cost. The one big difference is that with the LGPS (or indeed, with a multi-employer private sector scheme), stopping future accrual means having to pay off the scheme deficit attributable to current and former employees of the school immediately rather than at the employer’s own leisure. Given the inabliity of the school to change the terms by which its employees earn benefits in the LGPS, the governors/trustees must have come to the conclusion that it’s best to bite the bullet rather than continue to wrack up further pension liabilities. (The CARE LGPS is still a very generous scheme.)

They are offering membership in a new DC scheme with a well known provider but are also reducing their contributions

The big thing they will be saving on isn't current contributions, but doing away with the DB promise - the DC provider isn't going to come knocking in 20 years asking for a deficit to be paid off.

Also, is the pension I have accumulated so far in the LGPS safe if the scheme is unsustainable.

Yes. In a way, being unsustainable for the school indicates it is being charged a realistic employer rate to fund the pension liability being accrued... That said, once the school pays off its exit debt your benefits will be effectively guaranteed by local council taxpayers, and ultimately the government. (LGPS funds don't pay a PPF levy because of this.)

Normally I would leave it in but should I transfer it out into the new scheme if LGPS is so unstable.

No! The LGPS itself isn't unstable at all - the cost to small, private and third sector employers is. Also, if you transferred out, you won't benefit from the sky-high transfer values currently available with many private sector schemes given the different way transfer values are currently calculated in the LGPS.

I would never have expected to be so vulnerable in a school scheme.

If it was literally the school's scheme, you would be somewhat vulnerable. However, it isn't the school's own scheme, its a public sector scheme run by a local authority with tax-raising powers.

AnotherJoe

As suggested, leave current pension where it is, buy additional benefits in existing scheme if possible before it closes, and do what any private sector employee would do in the same position (welcome to real life ) which is pay more into the new DC scheme, or move jobs to one with a better pension.

System

Hi

They can leave as and when they can afford it.

Leaving is very expensive, the liabilities will have to be paid 'up-front'.

Therefore your part is secured.

One drawback to LGPS membership for a private school is that the pension liability can be listed as a debt on the books, meaning that getting a loan to build a new sports hall is not easy, or on the best terms from a potential lender.

The debt side of 'the books' exceed the assets and throws a poor light on it's credit rating.

As said above, leave your LGPS, stiffen your pension pot up by whatever means you can afford.

Silvertabby

Rest assured that your LGPS benefits are secure. Deferred LGPS benefits are fully index linked (to CPI) and so won't lose value. The advice to buy more LGPS pension while you can is good, but as you are leaving you would have to pay for it by means of a one-off lump sum instead of the usual monthly instalments. By all means ask for an estimate, but be prepared for the sum required to be higher than you may expect, as you would be paying the equivalent of your LGPS employer contributions as well as your own.

hyubh

Silvertabby wrote: »

be prepared for the sum required to be higher than you may expect, as you would be paying the equivalent of your LGPS employer contributions as well as your own.

Yes, although the notional employer rate would (probably) be lower than what the school is actually paying (do APCs use the SCAPE discount rate or am I misremembering...?).

Cmarch - see here, if you have't already:

https://lgpsmember.org/more/apc/index.php

kidmugsy

You could all try to insist that your new scheme includes the ability to use salary sacrifice for contributions.

Cmarch

I didn't think that was an option but I can ask, thanks. Not that I have the necessary cash to buy a chunk of pension!