Academies & the Local Government Pension Scheme

1. Academies & the Local Government Pension Scheme Presented by Andy Cunningham October 2013

2. Agenda • Introduction • Converting to Academy status: Finance Arrangements • HR responsibilities • Payroll responsibilities • Accounting responsibilities - FRS17 • LGPS 2014 and Government Consultations 7. Questions

3. 2. Converting to Academy Status: Finance Arrangements a). Pre-Academy Status • All non-academy schools are ‘pooled’ with their relevant Local Authority (LA) e.g. Swindon Borough Council or Wiltshire Council. • This means: • All schools & their relevant LA’s contributions, transfers in etc are paid into a single ‘pot’. • All pensions, transfers out etc are paid out of the same pot. • (cont.)

4. 2. Converting to Academy Status: Finance Arrangements a). Pre-Academy Status (cont.) • This means: (continued) • Cross-subsidies exist and a single contribution rate covers both schools and their relevant LA • Note: Under the LGPS Regulations, non-academy schools are not defined as an ‘employer’ (only the LA is defined as one) hence this financial position for non-academy schools is consistent with the Regulatory position.

5. 2. Converting to Academy Status: Finance Arrangements b). Academy Status • Academies are set up as a standalone employer in the Fund • from the point of conversion. • This means: • A new academy is given its own ‘pot’ and a portion of the LA assets is moved from the LA pot to the new academy pot in-line with the staff’s pensions which are also moving (‘pension liabilities’) although this would include a deficit amount.

6. 2. Converting to Academy Status: Finance Arrangements b). Academy Status (cont.) • This means: • All academy contributions, transfers in etc are paid into the academy’s own pot. • All pensions, transfers out etc relating to the academy are paid out of the academy’s own pot.

7. 2. Converting to Academy Status: Finance Arrangements c). Summary and other points • For both non-academies and academies, as the amount of assets and liabilities go up and down in their respective pots, this will change how much you need to pay. • However, as an academy’s pension liabilities are significantly smaller than the LA’s, their position is likely to vary more. • (cont.)

8. 2. Converting to Academy Status: Finance Arrangements c). Summary and other points (continued) • New employer contribution rates are determined every three years as part of the triennial valuation (2013, 2016, 2019 etc) and they are also reviewed at the point of conversion. • Costs: • We recharge the actuarial costs involved in an academy converting (£3000) to the new academy. • There is no direct cost for the triennial valuation (note that our administration costs are paid for out of all employers’ contributions)

9. 3. HR Responsibilities As academies are standalone employers from a LGPS pension perspective, each academy is responsible for its own HR In particular i). Ill Health – a LGPS member should not be dismissed on Ill Health grounds without first being assessed against the 3 tiers. ii). Redundancy – any LGPS member who is made redundant an aged 55 or over is entitled to early receipt of their pension (without reductions) – this may create a ‘strain’ on the employer involved; we re-charge for this cost at the time. (cont.)

10. 3. HR Responsibilities In particular (continued) iii). Employers’ Discretions Policy - Academies are required to create their own policy in relation to matters such as: Early Retirement, flexible retirement and agreeing to increase members pensions. Non- academies come under the relevant LA’s discretion policy. (Note: the situation regarding ill-health and redundancies applies to all employers, it is just a change in responsibility that applies for academies)

11. 4. Payroll Responsibilities Broadly speaking these are: • Deduct the correct amount of employee and employer contributions and pay these across to us (by 19th of the month following the deduction) • Send us monthly contribution returns to accompany the payments sent. (cont.)

12. 4. Payroll Responsibilities Broadly speaking these are: (continued) • Complete the information we require to notify us of new starters, change of details (e.g. hours, address etc), leavers and retirements. • Answer other ad-hoc data queries we have Note: if you use an outside payroll provider, we strongly recommend that you consider the above as part of your contract.

13. 5. FRS17 - Introduction • FRS 17 is an accounting standard • The report assesses the Employer’s Pension Liabilities as at a certain date • The report provides all the disclosures for your accountant to insert within your Annual Report • FRS 17 is NOT the Triennial Valuation and it doesn’t determine employer contribution rates.

14. 5. FRS17- Do I need one? • New employers need to liaise with their Auditors • Wiltshire Pension Fund will contact you to confirm your requirements • Assumptions for Report ultimate responsibility of Directors of your organisations

15. 5. FRS17- What is the process? • Wiltshire Pension Fund commission the reports • You are required to confirm: • Choice of report (FRS17 ) • The accounting Basis (CIPFA, Stand FRS17, FReM) • Acknowledgement of Fee • Confirmation of Assumptions to be used • Acceptance of Terms of Engagement

16. 5. FRS17- Who Do I Contact? • Catherine Dix (catherine.dix@wiltshire.gov.uk) • Tel 01225 713698 • Mark Anderson (mark.anderson@wiltshire.gov.uk) • Tel 01225 718299

17. 6. LGPS 2014/Government Consultations LGPS 2014 • The LGPS is changing significantly in April 2014. • Leading up to April 2014, we will providing presentations and meetings with employers and members detailing the changes (employer responsibilities will still be similar)

18. 6. LGPS 2014/Government Consultations Government Consultations • Due to the poor economic climate in recent years leading to increasing employer contribution rates; and • Discrepancies between LGPS Funds over the treatment. The Government is currently consulting on academies role in the Local Government Pension Scheme so, depending on the outcome of the consultation, some of the financial information mentioned earlier may change.

19. Any Questions?