I was interested to see the results of a recent LGPS Scheme Advisory Board survey which showed that:
- less than 5% of those LGPS funds who responded were aware of employers who are exiting the LGPS (or are at risk of exiting) where the exit is linked to the current situation with COVID-19;
- but over 25% of employers had contacted those LGPS funds to let them know they may not be able to pay contributions.
The responses to those two questions indicate that LGPS employers and funds envisage short term cash flow concerns, rather than covenant concerns necessarily leading to exit (although a large number of employers clearly have concerns which could develop).
I would not expect the COVID-19 situation to necessarily lead employers, who have the choice, to determine that LGPS exit is appropriate for the long term. However, it seems to me that it is disappointing that the Government's proposed reforms to the LGPS, which would have provided LGPS funds and employers with more tools to manage employer exit, were put on pause last year (caught up in something called Brexit).
At present, for many employers, they are between a rock and a hard place. They may struggle to afford contributions, but be unable to afford the cost of an exit payment, unless the LGPS fund allows it to be paid off over the longer term - rather than a single cheque.
If COVID-19 pushes employers harder over the medium term, those proposed tools/flexibility would prove invaluable to assist employers withdrawing from the LGPS where of course that was the right thing to do.
Those tools, including the concept of a deferred employer, should I believe be dusted off - and really as soon as possible.
the results show a high level of confidence in the ability to continue to pay more than 1.5 million LGPS pensioners, a minority of employers in current difficulties