Cap and collar arrangement

Similar to a pass-through arrangement, this is an arrangement between a contracting local authority and a service provider that is an admitted body to the LGPS. As the LGPS is a defined benefit scheme, the employer’s contribution rate will vary depending on the profile of the workforce and the value of the fund’s assets.

Under a cap-and-collar arrangement, the service provider agrees to meet any variation in the employer's contribution rate between a minimum and maximum figure with the contracting authority bearing the risk of any increase above the maximum figure, and benefiting from any decrease in the rate below the minimum level through an adjustment to the contract price.