Did you know that it is the employer’s responsibility (yes, that’s you) to ensure that accurate LGPS annual returns are submitted on or before the Fund’s deadline date – even if you outsource your payroll to a third party like Dataplan Education?
Did you know that it is the employer’s responsibility (yes, that’s you) to ensure that accurate LGPS annual returns are submitted on or before the Fund’s deadline date – even if you outsource your payroll to a third party like Dataplan Education?
Did you also know that most LGPS administering authorities (Funds) now have the powers to impose fines on employers for late submission of the annual return? We have seen more than one Fund notifying employers of their proposal to charge up to £37,500 if the return is up to one month late and up to £75,000 (yes this is the right number of zeros – tens of thousands) if the return is over one month late!
So why all the fuss?
2016 is the LGPS actuarial valuation year. This is where specialist “pension accountants” (sorry if this is an insult to accountants and/or actuaries) assess all employer’s pension assets and liabilities and use these, together with various assumptions to set the employer pension contribution rates for the next three years – from 2017 to 2020.
According to Essex Pension Fund, if employers fail to provide complete and accurate data, “The actuary will have to estimate employer contribution rate. It will be cautious (higher) maybe 2% higher?!”
In addition to this, all LGPS Funds have a legal responsibility to issue annual benefit statements to all active members by 31 August each year. If this cannot be achieved due to late and/or very poor quality data from employers, they are legally required to report the employer to the independent Pension Regulator. If Funds receive the accurate data they need from employers but then fail to issue the benefit statements by the deadline date due to some other reason (e.g. employers do not respond to Fund data queries in a timely manner), then they have to self-report their breach to The Pension Regulator. The Regulator then has the power to impose further fines on employers or Funds or both.
From 2016/2017, there is a further legal requirement to provide additional earnings information every year covering the period from 1st to 5th April. This is required to calculate any income tax liability due to exceeding the lifetime and/or annual pension allowances.
As a reminder, the Lifetime Allowance is a limit on the amount of pension benefit that can be drawn from pension schemes – whether lump sums or retirement income – and can be paid without triggering an extra tax charge.
The Annual Allowance which from 6 April 2014 was reduced to £40,000 is the amount of additional pension earning in any fiscal year from both employee and employer contributions.
What employers (you) need to do …
During the year, you need to provide your LGPS Fund with details of starters, leavers, certain contract changes and even some changes to employee personal details (e.g. name change, address, etc.). This is usually done on a template form or via an Excel spreadsheet in an agreed format.
At the end of each year in March, the Fund will provide employers with an annual return (Excel spreadsheet), with set columns of the data that they require for each pension scheme member for each job they hold / have held during the course of the year. Employers must then populate this return. Data is required for the full 12 month period or for part of the year for new starters and leavers.
In addition to the annual return, most Funds also require a contribution summary. This is a full record and reconciliation of the employee and employers contributions due each month and/or for the year. The totals in the annual return due must also agree with the total amount due / paid.
The completed annual return and contribution summary must then be submitted to the Fund on or before the deadline date
Upon receipt of the annual return, the pension Fund administrators will perform detailed checks and data validation. Any incorrect data and/or member queries will then be passed back to the employer (you) to investigate and resolve. The Fund will usually set a deadline by which all data corrections and queries must be resolved.
The final stage of the annual process is the Fund calculating and issuing annual benefit statements to each member. Legally, this must be done by 31 August each year. Non-compliance can result in financial penalties for the employer (you) and / or the Fund.
How Dataplan Education can help
Dataplan Education undertakes a comprehensive Pension Management service for the majority of its education clients. Following a recent review and changes to our systems and processes, we now use as many automated systems and processes as possible to deliver this pension service which includes:
- Notification of starters, changes and leavers or the completion and submission of monthly pension returns
- Completion and submission of annual contributions summary and reconciliation
- Completion and submission of the annual return
- Investigating and resolving data /member queries resulting from the annual return submission
To find out more about how Dataplan Education can help you, please contact us on 03331 128000