Maintained school staff will be members of either the Teachers Pension Scheme (TPS) or the Local Government Pension Scheme (LGPS).
The Local Authority is the administrator in the case of the LGPS and collects and pays employer and employee contributions for both schemes. The Local Authority also submits an annual return of service for the TPS. These are ‘employer’ responsibilities.
For the Teachers Pension Scheme conversion to an academy is relatively straightforward. Decisions associated with management of the scheme are taken by Parliament and therefore are the same whether it is the Local Authority or the Academy employing the teacher. The difference is that an Academy will be required to undertake the employer responsibilities for making payments and data transfers as required by the scheme.
Support staff pensions
Schools becoming Academies will need to register with LGPS to be a scheduled body employer (not an admitted body) and take on the responsibilities for payments, year-end certification and data transfers for themselves.
Where maintained schools apply to convert to academies existing staff who are already members of the LGPS by virtue of the Administration Regulations would not be affected by the conversion.
Their membership of the LGPS would continue unaffected. After conversion, new non-teaching staff will be eligible to join the LGPS and will be automatically enrolled in the scheme when employed, as long as their contract of employment is for 3 months or more but will have the option to opt out of the scheme if he or she gives notice within three months. It is also open to an Academy to pay contributions into private pension schemes, but this normally happens only if an Academy was previously an independent school and some staff wish to remain in the private scheme. The Academy cannot do this as an alternative to the LGPS and all the non-teaching staff have the right of entry to the LGPS.
Risks to an academy
For the Teachers Pension Scheme, this is restricted to ensuring that payments and other administrative functions are made as required. The scheme can levy interest on late payments and an Academy is required to understand its responsibilities and meet them in a timely manner.
But for the Local Government Pension Scheme (for non teaching staff), the academy becomes a scheduled employing body of the LGPS whereupon the administering authority should be asked for a calculation of the employer contribution rate for the Academy. The actuarial assessment will be done by the LGPS administering authority’s fund actuary but the school may wish to have their own assessment performed by an independent actuary. The employer contribution rate will be calculated on the basis of the academy’s staff profile and relates only to the Academy, whereas nearly all maintained schools in Local Authority pay the same pooled rate. This means the rate can be higher than the rate which applied to the school when it was maintained by the Local Authority. There is likely to be a charge for the actuarial calculation.
Unlike the TPS, the LGPS is a funded scheme and can be in surplus or deficit according to investment performance. Most pension funds are currently managing a deficit, and the deficit in respect of pensionable service prior to conversion transfers from the Local Authority to the Academy through the transfer agreement signed prior to conversion. The actuarial calculation of the employer contribution rate will take into account the amount needed to pay off any past service deficit and meet future accruals over a specified period, which is normally taken to be 20 years for Academies, although it is for the actuary to take a view on this.
Whatever arrangements apply currently for remitting contributions as a maintained school, the Academy will itself be responsible for remitting employer and employee contributions to the administering authority,although a payroll provider may do this on its behalf. If there is a deficit in the relevant pension fund, the Charities Statement of Recommended Practice (SORP) requires that the Academy's statutory accounts show the deficit as a liability in the balance sheet. The total deficit can be substantial. However, the Charity Commission has advised that this liability, even if it exceeds the academy's assets, does not mean that the academy is trading while insolvent, because the deficit is being reduced by the contributions made, using the grant payable to the academy.
When a school is converting, it is therefore vital to obtain details of the administering authority contacts as quickly as possible (usually from the HR/pay department of the Local Authority), to ensure that staffing information required by the administering authority's actuary can be supplied by the school or the maintaining authority, and to ensure that the implications for the Academy have been fully discussed with the administering authority. The Department for Communities and Local Government (CLG) are currently preparing further advice and this will be provided as soon as it becomes available.
We would be delighted to discuss your particular pensions situation in more detail. Please call Wayne Thomas 01332 365855 or email firstname.lastname@example.org to arrange for an informal, no obligation discussion.
Neither Bates Weston LLP or Bates Weston Audit Ltd is authorised under the Financial Services and Markets Act 2000 but Bates Weston Financial Services (BW Financial Services Ltd, firm number 189042) is an appointed representative of David Booler & Company, which is authorised and regulated by the Financial Services Authority.