Agenda item

-        Strategic Director of Resources to report.

Councillor Akhtar, Deputy Leader, introduced a report by the Strategic Director of Resources, setting out the recently published proposals to change the Local Government Pension Scheme from April, 2014.

The proposals, set out in Appendix 1 of the report submitted, were being circulated for consultation.  They had been the subject of extensive work including representatives of the recognised Trade Unions.  It was proposed that they would come into effect from April, 2014, with various protections for employees within 10 years of their normal retirement date as at April, 2012.

In addition, the Government was introducing measures to ensure that as many employees as possible were covered by an occupational pension scheme.  As a result, it was proposed that eligible Council employees who were currently not members of the scheme be automatically enrolled from a determined ‘Staging Date’ based on employee numbers.  In the case of Rotherham this would be 1^st March, 2013.  Affected employees could then still elect to ‘opt out’ but every 3 years Councils would be required to re-enrol them.

Based on current opt-out numbers, there would be a requirement to auto-enrol 2,693 employees in the Scheme at the 1^st March, 2013 staging date.  Given current earnings of those employees and an employer contribution rate of 12% (excluding the usual additional 5.9% for historical shortfalls) the potential cost of the auto-enrolment was estimated at over £1.5m per annum.

It was expected that many of the employees would immediately opt-out again but the numbers were unknown.  Overall there was the potential that the Council could face an increased liability for Local Government Pension Scheme pension employer contributions within the current or future financial years.

The Legislation currently allowed for a deferment for current optants-out until the end of the transition period.  Presently this was October, 2016 but the Department for Work and Pensions was consulting on whether to allow a further opportunity to extend the period potentially until October, 2017.

The deferral process did not require Pensions Regulator approval but an employer was required to notify the affected employees of the transition delay within 1 month of the staging date.

The Teachers Pension Scheme was not initially providing an opportunity to defer but later notifications were suggesting a short term deferment of 1 year might yet be possible.

The South Yorkshire Pensions Authority was recommending employers take the transitional delay option but confirmed that it remained an employer decision.  Discussions with SYPA suggested that a deferred date of 1^st March, 2016, could be the most advantageous date for employers based on impact on Actuary calculations for the next valuation whilst still reducing the immediate potential cost.  This was being considered from a pensions perspective and advice would be taken into account to enable Councils to make the most advantageous choice.

Resolved:-  (1)  That the proposals in respect of the new Local Government Pension Scheme from April, 2014, be supported.

(2)  That the ability to apply to defer the automatic enrolment for eligible employees beyond the staffing date originally outlined for councils of Rotherham’s size, be approved.

(3)  That it be noted that the auto-enrolment compliance affected the Teachers’ Pension Scheme although it was not yet clear if some short term deferment may be possible in respect of this Scheme.