SAB Consultation: guidance on new employer flexibilities
11 Jan 2021
The Scheme Advisory Board has consulted on guidance for employers and funds on the application of the new regulations for managing employer rates and exits that came into force in September 2020. Our detailed response to this consultation is available to download below. In general, we are supportive of the ultimate objectives set out in the guidance, but have raised several concerns, including:
- The flexibilities have been heavily presented as options that are open to all employers, however, the use of these provisions is ultimately at the discretion of the Administering Authority of each fund. There is a danger that the document may give false impressions to some employers that these options will be open to them without increasing the balance of the guide.
- The document suggests that each fund’s approach and processes with regards to the new regulations are set out in the FSS. This will add considerable length to the FSS and there may be areas (such as data requirements and the process of requesting a contribution review) which may be better suited to the administration strategy, the agreements themselves or within standalone policies.
- There is a strong focus on covenant which we believe is important. However, from our experience, many LGPS funds do not have adequate time, expertise or budget to stretch to looking at covenant where employer risks are small (i.e. where the health of the Fund is heavily weighted to one or two very large employers). A more balanced approach may be desirable.
- We have a preference for a single process for employers to bring any grievances to the Fund and therefore suggest the same process used for disputing exit credit determinations is adopted as far as practicable.
If you have any questions or would like to discuss anything covered in our response, please get in touch.