£6.5m pension dispute involving two councils on hold ‘for some months’

Last June, the Local Democracy Reporting Service revealed that Enterprise Managed Services Ltd (EMS) was suing a pension fund belonging to Daventry District Council and Northampton Borough Council.

EMS – which is now part of the Amey group – held a £7million-a-year contract to collect bins and clean streets between 2011 and 2018 for the two councils. But since losing its contract, it has claimed that it is entitled to around £6.5 million as an ‘exit credit’ from the Northamptonshire Local Government Pension Fund (LGPS). The fund itself is overseen by the county council, but EMS is suing the assets of Daventry and Northampton.

Government legislation changes in 2018 introduced the concept of the ‘exit credit’, where an assessed surplus in the fund when an admission body ceased to be one was to be paid out to that admission body, in this case EMS.

But a report by Daventry District Council last summer stated that the £6.5million sum would be a ‘wholly unjustified windfall’ for EMS, adding: “Prior to the 2018 regulations it would have had no expectation of such a payment and would not have priced the environment services contract in anticipation of it.”

It added: “When this council and NBC entered into the contract with EMS, a significant number of staff transferred from the councils to EMS. In accordance with the regulations, the staff who transferred retained membership of the pension fund and EMS became an ‘admission body’. As is required, EMS had an ‘account’ created, which was initially funded to match 100 per cent of the assessed liabilities, with assets taken from the DDC and NBC accounts.

“During most of the life of the contract the EMS account was assessed as being in deficit. This resulted in higher employer pension contributions which the councils met. However, towards the end of the contract this position was reversed, as asset values increased and different assumptions about pensioner lifetimes were made, and the requirement for contributions reflected this. When the contract came to an end the county council assessed the EMS account and found that a surplus of assessed assets over liabilities of around £6.5 million existed.”

However, the legal action appears to have been put on hold as the Government has now made new rules regarding ‘exit credits’, and has amended the 2018 regulations so that authorities can determine ‘at their own discretion’ the amount of any exit credit payment

due. It adds that administering authorities should ‘adopt a fair and reasonable’ exit credits policy, and that any disputes

The councils say the current legal dispute that was launched last year is now on hold because EMS is seeking a judicial review of the Government’s decision.

A spokesman for both authorities said: “DDC and NBC are engaged in litigation with Enterprise Managed Services Limited (EMS) about EMS’ claim to entitlement to an exit credit of £6.5 million from the Local Government Pension Scheme.

“However, that action is on hold – in legal language ‘stayed’ – because the Government made new regulations which would have changed the situation.

“EMS and its parent company, Amey Plc, are seeking a judicial review of the Government’s decision to make those regulations. Due to the effect this could have on DDC and NBC, they are what is called ‘interested parties’ and able to take part in the legal action. It is likely to be some months at least before the actions are concluded.”