The background 

The association was an Admission Body within the LGPS and only had a handful of active members remaining. In usual circumstances, when the last active member leaves service a cessation debt would be triggered, calculated on a least risk basis. This would have meant that a multimillion pound exit payment became due.

Our solution

It was important to help the association weigh up the pros and cons of the different approaches. Once a decision on a preferred approach had been taken, the next step was to help the association formulate a proposal to the LGPS for an alternative approach, whereby the debt would not be crystallised when the last active member left. We were able to use our experience of the LGPS to negotiate a proposal that was acceptable to the LGPS.

The outcome

The association was able to agree with the LGPS that, when the last active member left, they would remain participating in the LGPS fund as a ‘closed fund’ with only deferred and pensioner members. They would effectively remain ‘on risk’ but they would not need to make a significant one-off payment. Importantly, the association was also able to agree that there would not be the need for any additional security such as a contingent asset or insolvency bond.