If you're a current Local Government Pension Scheme (LGPS) employer considering outsourcing a function or service to an external contractor, or you’re considering bidding for a contract, there’s some important points you need to be aware of:

Employers outsourcing a contract

The following points summarise some of the main issues and responsibilities for an outsourcing employer to consider:

  • Ensure that potential bidders are made fully aware of their responsibilities in respect of protecting LGPS membership for their prospective employees. 
  • Liaise with your legal adviser to ensure that pensions information (including costs) is included in the tender and contract.
  • The successful bidder will either need to apply for Admission Body status to ensure they are protecting LGPS membership for the transferring employees or where applicable, source a broadly comparable pension scheme for eligible transferred staff. The option to provide a broadly comparable scheme only relates to contracts outsourced from a “Best Value Authority”.
  • Provide adequate information to the eligible staff transferring to the new contractor about the impact of the transfer on their pensions.
  • Understand that the ultimate responsibility for pension matters relating to the transferring staff, and unpaid liabilities to the pension fund, remains with the original scheme employer.
  • Consider all risk sharing options including whether the contractor will be required to arrange a bond, and level of bond, to cover any liabilities to the fund. Alternatively you may decide to act as a full guarantor.
  • Have an awareness of the successful contractor’s opening funding position and whether any liabilities are to be transferred to them.
  • Liaise with a legal adviser in preparation for checking the admission agreement and any bond or guarantee agreement.
  • Provide payroll data to the pension fund for transferring LGPS members.
  • Monitor the contractor's performance as a scheme employer.
  • Determine the pension position for LGPS eligible staff at the end of the contract.

New contractors becoming an LGPS employer

New contractors must normally provide continued access to the LGPS when an outsourced contract involves the transfers of LGPS eligible staff. For transfers from “Best Value Authorities” only, the contractor can determine if to continue to provide LGPS membership, or a broadly comparable scheme. More information is available on our protecting LGPS membership page. 

The following points summarise some of the main issues and responsibilities for a contractor taking on an outsourced function or service and maintaining LGPS membership for transferring staff eligible for the scheme: