Local Government Pension Scheme pension debt: New Scottish Regulations in force

The Local Government Pension Scheme (Scotland) Regulations 2018 came into force on 1 June 2018, introducing a mechanism called a ‘suspension notice’ which allows an administering authority to suspend a participating employer’s liability to pay a full ‘cessation debt’, which would otherwise have become due. If an authority serves such a notice, the employer must continue to contribute towards the liabilities in respect of its current and former employees until a new and satisfactory valuation is carried out and the suspension notice is withdrawn.

This has potential to avoid the ‘cliff face’ scenario faced by many charities and third sector organisations on either losing a contract or having their last active member leave their employment.
The power to decide whether to issue a suspension notice lies with the administering authority, and requires that an employer enters into a formal agreement with the authority.

This doesn’t solve all the LGPS issues facing charities and third sector organisations, but should be seen as helpful steps. As such, employers participating in the LGPS – including charities and other third sector organisations – should continue to have dialogue with their administering authority prior to the triggering of any event under which an ‘employer debt’ may become due (for example, if the last active member leaves their employment).

The regulations are available here.

James Keith has been advising various charity and third sector clients on the risks and threats associated with their membership of LGPS.

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