Charging Policy
Background
In recent years there has been a significant increase in the amount of fees the Fund spends on legal and actuarial work, largely as a result of an increased number of employers joining, leaving and changing their status within the Fund and the subsequent effects of this.
Previously these costs have effectively been spread across all employers, proportionately to their size, although the activity tends to be the result of decisions made by a small number of employers. Considering this we have, with approval from the Wiltshire Pension Fund Committee, developed a charging policy to cover these specific costs, as well as to outline other costs that currently apply.
This charging policy will be applied to all new instructions from 1 April 2009.
Cost chargeable to the Fund
Standard Costs
Most costs of the Fund will continue to be charged by the Actuary proportioning them to all employers, based on size, as part of the Triennial Actuarial Valuation exercise. These are then picked up by employers through their employer contributions. We already consider these costs to be spread across by employers in a fair manner and therefore this method will remain unchanged.
Examples of costs included in this category:
- Governance costs
- Benefits administration
- Actuarial fees associated with completing the triennial valuation
- Investment management costs
- Most other administrative work and officer's time
However, some costs are more specific and are incurred as a result of the decision and actions of a particular employer. It seems only fair that these should be paid by the employer who generates them, rather than being shared across all employers.
Cost chargeable to the employers
Terminology
The following sections (4-8) illustrate the costs that are chargeable and who pays them. Before considering the types of charges to be made, it is worth just establishing some terminology.
Two descriptors crop up which warrant explanation:
- Transferor - This is the employer from with the staff originated before joining the new employer
- Transferee - This is the employer which the transferring staff are joining
Several different categories of employers are also mentioned in the policy:
- Scheduled Body - All 1st and 2nd tier Local Authorities, Academy Schools and Thamesdown Transport
- Resolution Body - All Town and Parish Councils
- Transferee Admission Body (TAB) - Typically a profit-making organization in the Fund as a result of an outsourcing from an existing employer, typically a scheduled body.
- Community Admission Body (CAB) - Typically a not-for-profit organization who has a "community of interest" with a scheduled body.
- Community Admission Body with guarantor (CAB-TAB) - A CAB that results from an outsourcing when the Fund requires a guarantee from the original employer
The 'employer type' shown in the left hand column of the tables below is the type of employer which is joining, leaving or changing status, not the type of employer who is causing the change, for example, by outsourcing staff.
Costs associated with new employers joining the Fund
Employer Type |
Standard Actuarial Costs (Contribution rate,bond value report and sub-fund set-up report as relevant) |
Standard Legal Fees (drafting and producing admission agreement) |
|---|---|---|
Scheduled and Resolution Body | The new employer is responsible for these costs, unless they are a new employer as a result of a TUPE from a current scheme employer, in which case, the transferor* pays. However, all new academies starting from September 2010 will pay their own fees | Not applicable in normal circumstances |
CAB - TAB and TAB | Transferor | Transferor |
CAB | New employer | New employer |
Costs associated with changes to continuing employers
Employer Type |
Bond Value re-assessments (Actuarial Costs) |
Bulk Transfers in and out of Wiltshire Pension Fund (Actuarial Costs) |
Bulk Transfers between two employers in Wiltshire Pension Fund (Actuarial Costs) |
Merger and Demergers within existing employers (Actuarial and Legal Costs) |
|---|---|---|---|---|
Scheduled Body and Resolution Body | Not Applicable | Transferor for transfers out of Wiltshire Pension Fund, Transferee for transfers in | Transferor | Very unlikely in normal circumstances, please refer to Wiltshire Pension Fund |
CAB - TAB and TAB | Transferor - if transferor deems a bond assessment is necessary | Very unlikely in normal circumstances, please refer to Wiltshire Pension Fund | Transferor | Very unlikely in normal circumstances, please refer to Wiltshire Pension Fund |
CAB | Not Applicable | The CAB | Transferor | The CAB |
Costs associated with ceasing employers leaving the Fund
Employer Type |
Cessation valuation (actuarial costs) |
|---|---|
Scheduled Body and Resolution Body | The scheduled body* or resolution body** |
CAB - TAB and TAB | Transferor |
CAB | The CAB |
* It is unlikely this will happen as new staff in scheduled bodies have an automatic right of entry
** At present, this is unlikely to occur
Additional tangible costs
Excessive costs in relation to new, ceasing or changing employers
Where administrative time by the Fund related to one of these situations exceeds what we deem "reasonable", these costs will also be recharged to the relevant employer in addition to the standard costs.
FRS17 Reports
The Fund has operated a charging policy prior to this more comprehensive one, at present this remains unchanged.
Full details can be obtained by contacting Catherine Dix
Telephone: 01225 713698
Poor performance recharges
Where we consider that we have incurred additional costs (including officer's time) as a result of an employer's poor level of performance, regulation 43 of the Local Government Pension Scheme Administration Regulations 2008 allows us to recover these costs. We have never used this power to date, although the details of where this regulation may be used can be found in our Administration Strategy. You can also view the full LGPS (Administration) Regulations.
Pension Strain Costs
Where an employer makes certain decisions which result in additional benefits being paid out to a member, this results on a strain on the Fund. The cost of providing these additional benefits are calculated and recharged in full to the employer who made the decision.
The main categories of these costs are:
- Redundancy (for members aged over 55)
- Early retirement (for members aged over 55)*
- Augmentation (granting additional service)*
- Waived actuarial reductions*
* These will arise from an employer exercising one of its discretions, which should be covered by their Employer Discretion Policy.
Please note that where the Fund pays out the lump sum payment or first pension payment late because we have not received the forms in sufficient time for them to be processed (i.e. one month and one year late respectively), we are required to pay an interest payment to the member.
The employer pays for this interest payment because it comes out of their sub-fund (in the same way as the lump sum and pension itself) and is evaluated in determining employer contribution rates following the triennial valuation.
Further Information
If you have any further questions or comments about this charging policy, please contact Andy Cunningham our Employer Relationship Manager:
Telephone: 01225 713612
Wiltshire Pension Fund, Wiltshire Council - Bythesea Road,Trowbridge, Wiltshire, BA14 8JN.
© 2009 Wiltshire Pension Fund.