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Admitting employees of
non-scheme employers (admission bodies) to the LGPS

General

Your employees will be able to join the LGPS once you have set up an admission agreement.

For this to happen your organisation must be a body as defined in Schedule 2 Part 3 Paragraph 1 of the Local Government Pension Scheme Regulations 2013. To meet this definition you must be either:

  • (a) a body which provides a public service in the United Kingdom which operates otherwise than for the purposes of gain and has sufficient links with a Scheme employer for the body and the Scheme employer to be regarded as having a community of interest (whether because the operations of the body are dependent on the operations of the Scheme employer or otherwise);
  • (b) a body, to the funds of which a Scheme employer contributes;
  • (c) a body representative of
    • (i) any Scheme employers, or
    • (ii) local authorities or officers of local authorities;
  • (d) a body that is providing or will provide a service or assets in connection with the exercise of a function of a Scheme employer as a result of-
    • (i) the transfer of the service or assets by means of a contract or other arrangement,
    • (ii) a direction made under section 15 of the Local Government Act 1999 (Secretary of State's powers),
    • (iii) directions made under section 497A of the Education Act 1996; or
  • (e) a body which provides a public service in the United Kingdom and is approved in writing by the Secretary of State for the purpose of admission to the Scheme.

For admissions under paragraph 1(d) the scheme employer must also be party to the admission agreement.

Which employees can join?

You select (the technical term is designate) which employees join the scheme. They must be under age 75.

‘Designated’ employees with contracts of three months or longer must join from the first date of their employment or designation.

Designated employees with contracts of less than three months must join from their automatic enrolment date. They can also apply to become a member.

For admissions under paragraph 1 (d) above only employees of the admission body who are employed in connection with providing the service may be members of the scheme.

Financial implications

Unlike unfunded public sector schemes like the NHS, police and civil service schemes, the LGPS is funded, which means pension benefits are paid both from investment assets and the contributions members and employers pay.

Member contributions

Members contribute between 5.5% and 12.5% of their pensionable pay.

Employer contributions

Employer’s contributions are a percentage of their pay at the rate the fund’s actuary sets before you join the pension scheme. There’ll be a charge for the actuary’s assessment.

Employer contributions are at a level that makes sure the fund will be able at retirement to cover future member and dependent benefits.

The fund is ‘valued’ every three years when employer contributions are also re-assessed.

Contributions – general

Member and employer contributions are based on members’ remuneration, which includes

  • all salary, wages, fees and other payments you make to the employee for their own use, for their employment, and
  • any other payment or benefit specified as pensionable in their contract of employment.

Members who pay income tax get full tax relief at their highest marginal rate on their contributions.

The LGPS is contracted out of the State Second Pension.

Members over the age of 55 who are dismissed from employment because of redundancy or business efficiency, or by mutual consent because of business efficiency, can take their pension benefits immediately as long as

  • they’ve completed two years’ membership of the scheme, or
  • transferred in previous pension rights.

Please note that this may apply when you end a fixed-term contract.

You would pay a lump sum to meet the extra cost of paying benefits early.

Protecting your admission

As part of the admission process you must assess, taking actuarial advice into account, what your level of risk would be if your admission was terminated early because of your insolvency, winding up or liquidation.

Since this assessment must be to our satisfaction, and that of the scheme employer for admissions under paragraph 1(d), you should normally have it done by our actuary.

If the actuary finds that the level of risk requires it, you’ll need to arrange an indemnity or bond to meet that risk. The indemnity or bond must be with

  • a) a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to accept deposits or to effect and carry out contracts of general insurance
  • b) a firm in an EEA state of the kind mentioned in paragraph (5) (b) and (d) of Schedule 3 to that Act, which has permission under paragraph 15 of that Schedule (as a result of qualifying for authorisation under paragraph 12 of that Schedule) to accept deposits or to effect and carry out contracts of general insurance, or
  • c) a person who does not require permission under that Act to accept deposits, by way of business, in the United Kingdom.
  • If an indemnity or bond is not appropriate for your organisation, you would instead need to secure a guarantee, that we approve, from
  • a) a person who funds the admission body in whole or in part
  • b) in the case of an admission body falling within the description in paragraph 1(d), the Scheme employer referred to in that paragraph
  • c) a person who
    • i. owns, or
    • ii. controls the exercise of the functions of
    • the admission body, or
  • d) the Secretary of State in the case of an admission body
    • i. which is established by or under any enactment, and
    • ii. where that enactment enables the Secretary of State to make financial provision for that admission body.

What happens next?

If you wish to seek admission please complete the enclosed form(s). Once we receive the completed form back we will review the information you have provided and confirm if you are able to join the fund.

When your admission is complete we’ll send your welcome pack, which tells you all about the scheme and about us, including how to pay your pension contributions. Your Pension Fund Representative will arrange to demonstrate our administration procedures and will be your first point of contact for future pension queries.

Need more information or help?

To make sure your application to join us is as smooth as possible we have a dedicated team to help you. Please contact them on 01274 434526, or email pensions@wypf.org.uk