Many of the new Academies have faced problems and inconsistent treatment in respect of the Local Government Pension Scheme (LGPS). As an Academy the Academy Trust becomes a Scheme Employer under the LGPS meaning that non-teaching staff are eligible for membership of the pension scheme.
With the number of Academy conversions now significant (by December 2011 there were 1463) this has become a major issue. The process of conversion to an Academy to date has brought with it uncertainty, risk and costs in respect of the LGPS employer pension contribution and more specifically any pension fund deficit. To date our experience shows that there is a significantly different stance across authorities.
In general terms when a maintained school converts to an Academy the new employer LGPS contributions rates are based on an actuarial assessment. This can result in a different employer contribution rate for each Academy within the Local Authority. Occasionally, we have seen reduced rates. More commonly the employer contribution rate has been increased and has provided a “hidden cost” of an Academy conversion. This has been particularly acute when the actuarial assessment has attempted to make good any pension fund deficit over the seven year contract term for an Academy rather than the lifetime of the employees.
This repayment period of seven years has been seen with the East Ridings Pension Scheme and has seen Academy contributions rise to over 60%. This is very unfair considering other parts of the country have a deficit repayment period of 20-15 years.
Help may be at hand though. On 22 December 2011, a letter to all Local Authority Leaders and Chief Executives from Michael Gove and Eric Pickles addresses exactly this point.
In the letter it makes specific reference to the fact that Academies continue to receive funding from the public purse and should not be treated less favourably than remaining maintained schools. Furthermore, Mr. Gove states “Where a maintained school converts to Academy status it is the Governments intention that the overall costs for the Academy as a participant in the Scheme should not increase.” The letter goes on to talk about pooling arrangements whereby an Academy would be pooled with other employers (the Local Authority) and how they are permissible within the pension framework.
The result of a pooling arrangement would be a consistency in contribution rate between the remaining maintained schools and the new Academy. The letter goes on to say that “where an Academy wishes to be pooled, administering authorities positively consider this” Although this letter and advice isn’t binding at this stage the closing remarks express very clearly the government’s intention “If it is found that inconsistencies or unjustifiably high employer pension contributions to the LGPS remain, consideration will be given to what other steps, including regulatory changes, would be needed”
If you are already paying or it is proposed that you have higher employer LGPS contribution rates, contact your Local Authority and / or your LGPS administering authority.
A full copy of the letter and supporting schedules can be found at.