An employer in the Dorset County Pension Fund is “ceased” in the Local Government Pension Scheme (LGPS) if:
- They have no active members left and the Fund determines that they will no longer be able to admit any new members to the Fund or
- As the result of the termination of the employer’s Admission Agreement. The conditions for this are set out in the employer’s Admission Agreement (Admitted Bodies only), but relate to either the contract to which the Admission Agreement relates coming to an end, or the employer ceasing to exist.
Note: Before ceasing the employer, we will discuss with them the likelihood that they will have active members again in the future.
The cessation policy details the approach we will take with regard to the cessation of admitted bodies.
The LGPS regulations state that the Fund must instruct our actuary to:
- produce a funding valuation of the assets and
- liabilities for the employer ceasing membership.
An Actuary uses their skills to help measure the probability and risk of future events.
The employer ceasing membership of the Fund is usually liable for all cessation costs. Where, the employer is unable to pay these costs, the fund will look to a guarantor to cover these costs.
The number of people employed and the complexities involved will impact on the cost of the actuarial fees. The fees could be several thousands of pounds.
The cessation report from the Fund actuary determines whether there is a surplus or deficit in the funding position. This is based on the date of termination of membership.
Each valuation will vary on many factors from employer to employer. The cessation policy sets out the guidelines for the valuation. It is difficult to give any estimates or figures in this respect, although the cessation valuation will typically be significantly higher than the total monetary deficit currently due by most employers unless the admitted body concerned has a guarantor in place.
Where the report shows a funding deficit, the Fund will require payment of the amount under the terms of the cessation policy.
In the event that a surplus exists, the LGPS regulations state that the Administering Authority requires the Fund to pay the specified amount to the exiting employer.