Section 3 - Eligibility to join the LGPS – employers and employees

Scheme employers are listed in ‘Schedule 2’ of the Local Government Pension Scheme (LGPS) Regulations 2013:

Part 1 - scheduled bodies include:

• County councils and district councils;
• Police and crime commissioners/chief constables; and
• Academies, universities, free schools and studio schools.

These employers have to participate in the LGPS and don’t have the option to offer an alternative pension arrangement. All staff are contractually enrolled into the LGPS from the first day of their employment.

Part 2 - designation bodies (formerly resolution bodies) include:

• Precepting authorities (town and parish councils).
• These employers can make the LGPS available to some or all of their employees.

Part 3 - admission bodies – these are bodies which participate in the LGPS under an admission agreement. This is a contract between the body, the London Borough of Southwark Pension Fund (the Fund) and usually another Scheme employer. They fall into two categories:

1. Community admission bodies - these include organisations which have a community of interest with a Scheme employer, bodies which local authorities give grants to, housing corporations and bodies representative of local authorities and their officers.
2. Transferee admission bodies - these include organisations which have contracted to take over a function of another employer and many of their members will have transferred across under TUPE Regulations.

Part 4 - deemed employers – a mixture of employers where another body (usually) is deemed to be the Scheme employer.

All staff employed by a scheduled body should be contractually entered into the Scheme on the first day of employment (unless their contract is for less than three months or they are casual workers.

Staff who are employed by a designating or an admitted body and have been deemed to be eligible for membership should also be contractually enrolled into the scheme.

Employees cannot join or remain in the Scheme after the eve of their 75th birthday. Those employees eligible for membership of another public sector pension scheme (although there is some dual eligibility for the LGPS and the National Health Service pension scheme), and those employed by an admission body who are members of another occupational scheme, are also not eligible for membership.

It is important that when staff are appointed or promoted, they are given the correct information about their pension position by the employer, including details of any options available. Read Section 25 - First instance decisions for more.

These employees have the right to opt-in to the LGPS by requesting and completing a starter form available from their employer. They should only be automatically entered into the Scheme if:

• Their contract is extended, making it longer than three months;
• They have reached their automatic enrolment date (which may or may not be the date they start work); and
• They are an eligible jobholder on their first day of employment.

For example, a person appointed on, say, a two-month contract, can only elect to join the LGPS. However, if they were then appointed on a second two-month contract they would be brought in automatically at that point (because they’re now on a contract of three or more months).

Staff who have previously opted out of the LGPS can make a choice so long as they meet the above criteria for scheduled, designating or admission bodies, by requesting and completing a starter form available from their employer.

An eligible jobholder is someone who is eligible for membership, but who isn’t an active member in that employment and who doesn’t ask their employer to join the Scheme. Nevertheless, they become an active member on the automatic enrolment date or automatic re-enrolment date relating to that employment. Read Section 5 – Automatic enrolment (AE) for more.

This is a person who is eligible for membership but is not an active member in that particular role or job. They can ask their employer to join the Scheme. If they do, they become an active member in that particular role or job with that employer, in the main section of the Scheme on the first day of the payment period following their application.

Members can be an active member of the LGPS in all of their particular roles/jobs, some of them or none of them, across several employers who participate in the LGPS.

If a member becomes re-employed with an employer that offers membership of the LGPS, then this will have an impact on any benefits already accrued under the Scheme, whether they are being paid or not.

There are two types of re-employment:

1. A re-employed member with deferred benefits (benefits that have not yet come into payment); and
2. A pensioner member (where benefits are already in payment).

There can also be situations where a member has both deferred benefits and pension benefits. However, they are treated separately, and the rules apply individually to each.

If an employee who has deferred (preserved) benefits and re-joins the LGPS, they will have the option to join their earlier benefits with their new record, unless the deferred benefits are as a result of opting-out on or after 11 April 2015. They have 12 months from re-joining the scheme to make their decision (although the employer has the discretion to extend this time limit).

If the member decides not to add their periods of membership together, then two records will be held for the member, and on retirement, two pensions will be payable. Separate annual benefit statements will be sent for each pension record.

A member who opts to keep their benefits separate, cannot in the future, revisit this decision and choose to join their benefits together at a later date. However, if they re-join the pension scheme again, they will have the option of amalgamating their previous benefits to their current role.

From time to time you may employ a person who already receives a pension from LGPS, either from the Fund or elsewhere. Although there is nothing in the Regulations to prevent you from doing this, it is important to be aware of the possible effect on the pension being paid.

During the period of re-employment – no matter how short – the annual rate of the employee's pension may be reduced if, together with the annual rate of salary payable in the re-employment, it exceeds the annual rate of salary at their retirement. Inflation between retirement and re-employment will be allowed for in this calculation.

On cessation of the re-employment, the pension (if reduced) will be re-instated to its then current value including any pension increase that has accrued in the meantime.

Additionally, if the employee has contributed to the LGPS during the period of re-employment, they will be entitled – immediately or later – to further benefits from the LGPS.

It’s the employee’s responsibility to inform Southwark Pension Services that they have or will be employed in another employment covered by the LGPS, so that it can be determined whether the re-employment will affect their pension in payment.

This situation is called abatement and each administering authority must have an abatement policy in place. As the abatement policy is at the discretion of the administering authority, it’s important for employers to realise that a different policy may apply for every administering authority in the LGPS.

Employers should not assume that the policy operated by the Fund will be the same for any other fund, and should therefore seek assistance, if required, from the original fund that the employee is receiving a pension benefit from. It is also important to note that abatement applies where the employee is entitled to join the LGPS, irrespective of whether they actually join or not.

Particular care must be taken when re-employing a pensioner who was awarded compensatory added years under the Discretionary Payment Regulations (not funded augmentation added years) when they retired on the grounds of redundancy or in the interests of efficiency. Compensatory added years were abolished from 1 October 2006 so this section can only apply to redundancy/efficiency retirements before that date.

It is possible after their re-employment terminates, that a pensioner (despite having contributed to the LGPS during re-employment) might be in no better position overall. This is because any benefits earned from the Fund during re-employment may be deducted from the enhanced benefits funded by the employer, which were awarded to the pensioner at retirement. Indeed, if the pensioner opts not to join the LGPS during re-employment, after their second retirement they could be in a worse position because ‘notional’ Scheme benefits might be deducted from the enhancement with no LGPS benefits to compensate.

The important aspect is the period of enhancement awarded on retirement, and if it were less than the potential service to age 65, the above worst scenario would not apply in its entirety.

It is suggested that, if you are contemplating re-employing a local government pensioner, you should contact Southwark Pension Services for guidance.

Any member can opt-out of the scheme at any time after their commencement date and does so by completing an opt-out form.

Alternatively, the member can phone Southwark Pension Services to arrange for one to be sent to them. The employer must not issue the member with an opt-out form, as this can be seen as coercion not to join the Scheme, which in turn could incur a fine from The Pensions Regulator (TPR).

Employees cannot complete a form before starting employment, as all employees have to be bought into the Scheme on the first day of employment. They can complete a form on their first day if they so wish, and if the opt-out request is actioned by the employer’s payroll department before the time of their first pay, they may not pay any contributions. They will cease to be an active member from the next available pay period after the date they have signed the form.

If they have opted out within three months of joining, their pension contributions must be refunded through their employer’s payroll, less any statutory deductions. The employee must be treated as having never joined the Scheme in relation to that opt-out election. The form must be sent to Southwark Pension Services via post.

If they have more than three months but less than two years’ membership in the LGPS – including any previous membership or transferred membership – they can still receive a refund of contributions less any statutory deductions from Southwark Pension Services. A copy of the form, once processed by the employer, must be sent to Southwark Pension Services confirming that they have ceased their membership of the scheme, via post.

An employee who has opted out of the Scheme can choose to opt back in at any time in the future. An employee is free to opt-out of the Scheme and re-join as many times as they wish. A member of the LGPS can also choose to join the 50/50 section of the Scheme. Read Section 4 - The 50/50 section for members for more.

The rules regarding entry to the Scheme and the various options available, are quite complex and the above guidelines are a simplification. If an employee, when appointed, appears to have a complicated pension history, (perhaps they come from another local authority or are already in the Scheme) please seek guidance from Southwark Pension Services.

• When you have made your first instance decision on whether or not a member of staff is eligible to join the LGPS, you are legally required to inform them in writing, including their right of appeal against your decision (you should tell them if you’ve brought them into the LGPS automatically, as appropriate);
• Inform all those eligible for entry who won’t automatically be brought into the LGPS of their right to opt in; and
• Scheme employers must provide an employee with information about the LGPS within one month of them either becoming a member of the LGPS or being eligible to join the LGPS.

Read Section 25 - First instance decisions for more.

For each new member, you will need to complete and submit a starter form to Southwark Pension Services. If you are a large employer, or need to submit a bulk notification, this may be done using a spreadsheet, please speak to Southwark Pension Services first to discuss the process on 020 7525 4924.

The Pension Administration Strategy (PAS) details the forms required for members of the LGPS. All pension forms MUST be signed off by the authorised signatories of the employer. We ask that you fill in and return a contacts details form, so that we know who the authorised signatories are.