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Derbyshire Pension Fund exit credit policy

Status: Open

Opens: 22 July 2020 - Closes: 16 August 2020


What this consultation is about

The Local Government Pension Scheme (Amendment) Regulations 2020 which came into force on 20 March 2020 introduced a discretion for administering authorities to determine the amount of exit credit which should be payable to an employer leaving the Local Government Pension Scheme (LGPS).

Most employers are long-term participants, although, some enter the LGPS on a short-term basis as a result of undertaking a contract to provide a service on behalf of, and let from, a long-term scheme employer.

An exit credit is where an employer leaving the LGPS has, at the date of their exit,  assets in the pension fund which exceed their liabilities thus resulting in that employer’s share of the fund being in surplus.

Historically, any surplus of assets on exit was retained in the Fund and reallocated, usually to an employer from whom the exiting employer had taken on a contract as the reason for its entry to the LGPS.

Exit credits were first allowed by a 2018 amendment to The Local Government Pension Scheme Regulations 2013, but concerns were subsequently raised in relation to contractual pension risk sharing arrangements between letting employers and their outsourced service providers.

Letting employers may have shared the pensions risk with their service providers by picking up the risk of contributions increasing beyond a certain amount, or by picking up the risk of an exit deficit arising at the end of the contract. In these circumstances, it was widely considered to be unfair that service providers who had been protected from the pension risks during the contract should then benefit from an unanticipated windfall on exit that was not envisaged when the service contract was drawn up.

In response, the latest amending regulations were introduced which have created a discretion for administering authorities to determine the amount of an exit credit. The new regulations include confirmation that this amount may be zero.

Whilst the amending regulations are effective from 14 May 2018 (the date on which the exit credits were first introduced), there is a transitional provision which removes the possibility of revisiting any exit credit that has already been paid since then.

Derbyshire Pension Fund has prepared a draft policy to set out its approach to the determination of exit credits.

The draft policy has been agreed by Derbyshire County Council’s Pensions and Investments Committee, in its role as the administering authority of Derbyshire Pension Fund, subject to the outcome of a period of consultation with the Fund’s stakeholders.

A copy of a report considered by the Committee at its meeting on 21 July 2020 is attached to this page. The report includes the draft exit credit policy.

Responses to this consultation are welcome and will be considered by the Director of Finance and ICT and the Chair of the Pensions and Investments Committee. It is anticipated that the policy, including any revisions which are considered necessary following this consultation, will be formally adopted and applied to the determination of exit credit payments by Derbyshire Pension Fund, as soon as possible after the closure of the consultation.


How to take part

We are carrying out this consultation in the following ways:

  • By email
  • By post

Who is the consultation aimed at?

Which part of Derbyshire is this consultation aimed at?
  • All Derbyshire (including Derby City)
Generally, who is this consultation aimed at?
  • Derbyshire Pension Fund employers
  • Pension fund stakeholders
Specifically, who is this consultation aimed at?
  • Adults

How will we let you know the results?

Feedback about this consultation will be available by the following methods:

  • Our website

Contact details

Address:

  • Derbyshire Pension Fund
  • County Hall
  • Matlock
  • Derbyshire
  • DE4 3AG