Many employers taking on local authority services uncover hidden LGPS pension liabilities

Organisations that undertake the running of services outsourced by local authorities find themselves with employees who have all the skills and knowledge needed to do a great job from the start.

But as admitted bodies providing employees with access to the Local Government Pension Scheme (LGPS), many encounter unexpected liabilities that can prove costly.

Substantial scheme deficits and yearly hikes in contribution rates are a financial strain that few admitted bodies can ignore. And specific risks such as cessation debts and early retirement entitlements in redundancy programmes can come as an unpleasant surprise.

Even the most skilled finance directors can struggle with the complexities of Defined Benefit schemes. Without specialist knowledge, they may end up with more liabilities than they bargained for.

How can First Actuarial help?

First Actuarial is a market leader in providing pension advisory services to LGPS admitted bodies of every size of business. We offer innovative solutions to support employers through funding agreements and cessation debts, providing detailed knowledge and extensive experience of LGPS.

We help gauge LGPS risks at pre-contract stage

At First Actuarial, we can help mitigate some of the risks that LGPS presents. We help organisations gain a full understanding of what LGPS membership entails before they take on a new contract. We can provide actuarial assistance to make sure any potential risks are priced into your bid. These risks include:

  • Service contribution rates increases – These may occur as a result of changes in membership profile or actuarial assumptions, for example.
  • Funding deficits – The risk of a funding deficit arising after the employee has been transferred is significant, especially with longer-term contracts.
  • Special event funding – Any future redundancies can incur considerable early retirement costs for the employer, due to contractual entitlements of older employees. We can estimate the potential cost of early retirement to your organisation.
  • Cessation debt – We can carry out due diligence on what could be a huge cost if your organisation exits the LGPS.

We help negotiate cessation debts

Cessation debts can arise when the employer decides it wishes to leave the LGPS, or if it ceases to have active contributing employees at any stage. The cost can be devastating, posing a major financial risk to any admitted body. With increases in the size of cessation debts, many LGPS funds are prepared to negotiate on either the level or the timing of the debt. We can support you through this process, negotiating with the local authority to reach an agreement. We have been instrumental in developing innovative solutions which now include arranging for all pension liabilities and assets to be passed back to the original council. This effectively removes any cessation liability risk for the employer.

Why choose First Actuarial?

We have worked with the majority of the LGPS funds across the UK and know how they work. This has given us a detailed knowledge of the benefit structure of the LGPS scheme and how it has changed over time.

We have experience working with the different LGPS actuarial advisers and the different versions of funding strategies adopted. We have negotiated directly with many of the funds, helping employers to reduce costs and mitigate against the risk of future cessation debt payment.

We give clear advice, and the information we provide is comprehensive but concise. Just as importantly, we have the human touch. We can communicate the complexities of the LGPS scheme in clear and engaging ways.

Whether you employ 50 or 15,000 employees, we have the LGPS experience needed to help you develop your pension strategy and make you fully aware of what LGPS membership entails.

Get in touch

Contact us to find out more about the pension services our sector specialists provide to local government.

“They were very professional and their advice was really clearly presented. Throughout the project, they managed themselves in an independent way in terms of the information they provided our employees, which was accurate and complete.”

John Livesey, CEO, Bolton Cares

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First Actuarial case studies

Bolton Cares

Taking responsibility for care services previously provided by a local authority, Bolton Cares turned to First Actuarial for help in setting up a competitive and affordable DC pension scheme for its staff.

“They’ve been really helpful and professional throughout the project, and we’ll use them again if we need specialist advice.”

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Bromford

First Actuarial partnered with Bromford to communicate extensive pension scheme changes and improve financial wellbeing, delivering more than 40 group presentations to 1,200 colleagues.

"Working with First Actuarial was a highly professional partnership that had a positive effect on our colleagues. We received great feedback on both the group and one-to-one sessions they ran."

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Watford Housing Trust

The risk of a significant cessation debt hung over Watford Community Housing as the number of its employees participating in the Local Government Pension Scheme (LGPS) diminished.

"First Actuarial are very approachable. They're very good at helping managers and Board members digest a very complex and difficult area, and they've also been proactive in helping us shape an innovative solution."

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