Managing unexpected events
Hertfordshire Pension Fund introduced a self-insurance approach which came into effect on 1 April 2026, implemented by the Fund’s actuary, Barnett Waddingham. This replaces the previous external cover provided by Legal & General (L&G) and is now fully in effect.
What is self-insurance?
Self-insurance is an internal funding approach where we set aside part of the employer contributions we already receive into a dedicated reserve. This reserve is used to meet the cost of specific pension-related events; ill-health and death in service strain costs.
Instead of paying premiums to an external insurer, we allocate part of the employer contributions already received into this reserve. Cover is then provided directly from within the Fund, without the need for separate insurance arrangements.
Why the Fund has introduced self-insurance
The Local Government Pension Scheme (LGPS) benefits usually grow over time, funded by regular monthly contributions. But sometimes, employers face unexpected costs for things like ill-health retirement and death in service benefits. This can result in additional, unexpected payments being required from employers.
The additional cost required by employers can vary significantly if they occur, which could lead to financial uncertainty for you, as employers. To tackle this, we have implemented a self-insurance approach that protects you from those unexpected costs.
How do employers benefit
More stable contribution rates
By pooling these specific risks, your contribution rates will be more consistent over time.
No extra costs
The self-insurance reserve is funded using a portion of the contributions you already pay.
Simple Process
You will not have to deal with a lengthy claims process; the administration is more straightforward.
Streamlined reviews
Any adjustments or reallocations of payments are handled during the triennial actuarial valuation, making everything more efficient.
While we cannot completely eliminate the risk of unexpected costs, the self-insurance approach gives us a way to actively manage them. The known cost of self-insurance is a lot better than the unknown cost of an unexpected event. It's a proactive step to create a more stable and secure environment for everyone involved.
Frequently Asked Questions (FAQs)
Does self-insurance increase my contribution rates?
There is no change to the rates you already pay.
The self-insurance reserve is funded by setting aside part of your existing employer contributions, so there are no additional costs and no separate premium.
Do I need to take any action?
No. All employers are covered unless they have a different arrangement in place, which they have agreed with the Fund.
Is this the same as an insurance policy?
No. this is not an insurance policy; it is a mechanism funded through employer contributions already due to the Fund.
Further information
If you have any questions regarding self-insurance, please do not hesitate to contact the Fund by emailing pensions.team@hertfordshire.gov.uk.