Purpose

The purpose of this report is to access the Salary Sacrifice Additional Voluntary Contributions framework to award a contract to AVC Wise Limited for the provision of a shared cost additional voluntary contributions (AVC) Scheme for the set up and on-going management of the scheme.

Decision

To approve the award of a contract to AVC Wise for 50 months from 1/04/26 to 31/05/30 called off the Portsmouth City Council Salary Sacrifice Additional Voluntary Contributions framework to the value of £233,269, for access by members of the LGPS pensions scheme.

Reasons for the decision

This report seeks approval to implement a salary sacrifice Shared Cost Additional Voluntary Contribution (Shared Cost AVC) pension arrangement for our Local Government Pension Scheme (LGPS) members. Shared Cost AVC schemes have been adopted across the UK with over 300 LGPS employers already delivering this staff benefit. 

The key reasons for implementing a Shared Cost AVC scheme at the Council are:

                            i.         The council will make budget savings

                          ii.         Staff will have access to a new financial well-being benefit that provides significantly improved retirement benefit outcomes.

                         iii.         Staff who contribute to a Shared Cost AVC scheme will pay lower National Insurance contributions (NICs) and this saving will automatically be passed into the AVC. For most staff this will result in additional savings of 8%.

                         iv.         Staff will continue to receive income tax relief on their Shared Cost AVC contributions

                          v.         The combined tax and NIC saving equates to a growth/yield rate of over 38% for basic rate taxpayers and over 72% for higher rate taxpayers. 

                         vi.         The introduction of a Shared Cost AVC will have no effect on the main LGPS benefits

                       vii.         Staff will have access to a wide range of pension webinars, individual pension meetings and other financial well-being support that will help deliver the council’s wellbeing agenda.

It has been ascertained that given the specialist nature of Local Government / LGPS and associated salary sacrifice AVC administration there is only a single provider in the marketplace – AVC Wise

Earnings related payments, such as overtime, pay increases, contractual allowances, occupational maternity pay, occupational sickness pay and redundancy are calculated on the notional salary before applying the salary sacrifice reduction. Section 5.5 below for further details.

Alternative options considered

Delivery Options Appraisal

The council previously considered awarding to the provider in this report but did not implement the decision due to changes in personnel in the HR service and loss of continuity.

OPTION 1 DO NOTHING

Description of the Option

Do nothing and so lose the opportunity to save both scheme contributors and the Council financial savings from secondary National Insurance contributions

Feasibility

·       Is this option deliverable within time, resource and legal constraints?

The option could be chosen

·       Are suppliers or partners available (if relevant)?

The only supplier is the supplier proposed for the contract.

·       Would the Council have the capacity or capability to deliver the option?

The council could not deliver this service without the supplier contract.

Benefits and Drawbacks

No advantages

The benefits as set out will be lost or not achieved impacting on employees and overall, on council financial position

Overall Assessment

Not Recommended

OPTION 2 FORMAL TENDER

Description of the Option

Undertake a formal tendering process.

Feasibility

·       Is this option deliverable within time, resource and legal constraints?

A tender could be undertaken with the current resources but not to the same timescales.

·       Are suppliers or partners available (if relevant)?

There is only one supplier on the market

·       Would the Council have the capacity or capability to deliver the option?

Yes

Benefits and Drawbacks

There are no other providers, and this would require time and cost over the framework call off option.

Will take longer and require additional project resources for same outcome.

Benefits realisation will be delayed but will still be realised.

Overall Assessment

Not Recommended

OPTION 3 Direct award not using framework

Description of the Option

Undertake a direct award to enter into a contractual relationship with AVC Wise.

Feasibility

·       Is this option deliverable within time, resource and legal constraints?

As the value is over PA23 thresholds this will not be compliant with procurement legislation or CSOs.

·       Are suppliers or partners available (if relevant)?

Supplier is available

·       Would the Council have the capacity or capability to deliver the option?

Yes

Benefits and Drawbacks

This was the earlier proposal that was adopted however it would require the council to negotiate a contract with the provider and not benefit from the framework now in place that provides clarity in contractual arrangements and additional employee benefits that would not be part of the offer directly with AVC Wise.

Benefits to staff and council budgets are realised

Not compliant with PA23, not compliant with CSOs

Risk of challenge might be perceived to be low as lack of other suppliers in market

Overall Assessment

Not Recommended

OPTION 4 Framework call off

Description of the Option

Undertake a direct award via a framework call off from single supplier framework.

Feasibility

·       Is this option deliverable within time, resource and legal constraints?

Yes Compliant with CSOs and procurement legislation

·       Are suppliers or partners available (if relevant)?

Supplier is available

·       Would the Council have the capacity or capability to deliver the option?

Yes

·       Note any non?financial risks or constraints

Project resource to deliver

Governance approvals

Benefits and Drawbacks

Benefits to staff and council finances are realised in shortest timescale

Alignment with council strategies

Compliant

Overall Assessment

Recommended

OPTION 5 In House Service

Description of the Option

Perform the salary sacrifice service in-house

Feasibility

·       Is this option deliverable within time, resource and legal constraints?

Yes Compliant with CSOs and procurement legislation

·       Are internal resources available (if relevant)?

Would require additional resources to administer

Would require knowledge and expertise which the council does not currently have in house.

·       Would the Council have the capacity or capability to deliver the option?

Not in the immediate term.

·       Note any non?financial risks or constraints

Project resource to deliver

Budget availability in the short term

Benefits and Drawbacks

Benefits to staff and council finances are delayed before they can be realised eventually. Will take significant time to secure budget, recruit and train additional staff and make changes to Oracle.

Alignment with council strategies

Compliant

Council would not have the benefit of the wider employee benefits platform and advice that the provider has. These would need to be procured separately.

Over the duration of the contract via the recommended route the council should consider this option prior to renewal of any existing arrangement.

Overall Assessment

Not Recommended

Recommended Delivery Option

Option 3 is recommended for the reasons set out above.