Consultation on mandatory bond requirement for LGPS Admission Agreements

The Department for Communities and Local Government (DCLG) is consulting on the Draft Local Government Pension Scheme (Miscellaneous) Regulations 2012 (the 'Miscellaneous Regulations'). 

The consultation began in December 2011 and seems to be proceeding, relatively speaking, unnoticed. It could however have significant implications for both private sector contractors and not-for-profit organisations seeking admitted body status in the LGPS.

A number of amendments are proposed to the existing Benefits, Transitional and Administration Regulations. In relation to admission agreements, the most significant proposal is to make it a mandatory requirement to have an indemnity or bond for all transferee admission bodies and community admission bodies (save in the exceptional circumstances).
 
This replaces the existing requirement on the letting authority to carry out an assessment as to the level of risk. A new provision is also to be added to make it a requirement for a form of parent company guarantee to be provided should the body be unable to provide an indemnity or bond. 

The bond must meet the level of risk exposure arising on the insolvency, winding up or liquidation of the admission body and will be actuarially assessed to the satisfaction of the Administering Authority.

It will also be a requirement that the matters to be included in transferee admission body agreements and community admission body agreements are the same. Currently transferee admission body agreements have to comply with greater statutory requirements.

These new provisions will not have retrospective effect but will apply to all new admission agreements after the Miscellaneous Regulations come into force.

A mandatory requirement for a bond will have cost implications for contractors and charitable bodies and, although only currently a draft regulation, should be considered in relation to any upcoming bid submissions. It may also be difficult for the voluntary sector to obtain a bond.

The new provision for a parent company guarantee applies where "for any reason it is not possible for an admission body to enter into" a bond. The consultation letter explains that this is where a body is "unable to" provide a bond. A response to the consultation could be to consider the wider use of parent company guarantees as an alternative to a bond.  

The Consultation closes on 27 February 2012 and DCLG proposes that the Miscellaneous Regulations would take effect as soon as possible after the consultation. Representations should therefore be made as soon as possible.