1

LGPS 2014

Essex Pension FundMarch 2014Matt Mott

2014 Scheme Overview

50/50 section

APC

AVC

Flexible retirement

Protections

Pensionable Pay & Contributions

Employer Responsibilities & Discretions

2

LGPS 2014

CARE Scheme (Career Average Revalued Earnings)

Accrual rate of 1/49th - It’s better

Annual revaluation by CPI

Normal retirement age (NRA) is State Pension Age (SPA)◦ Find your SPA at www.gov.uk/calculate-state-pension

Voluntary retirement from age 55 (without employer consent)

Flexible retirement From age 55 (with employer consent)

2014 Scheme Overview

50/50 section

Benefits accrued prior to 1st April 2014 protected

Protection for those within 10 years of retirement in April 2012

Actuarial reductions for ER will differ for different periods of membership

Pensionable pay is actual pay

Vesting (refund) period increased to 2 years

Average member contributions of 6.5%

Cost envelope of 19.5%

2014 Scheme Overview

5

Contributions bands Band pensionable pay range

for an employmentContribution rate for that employment

1 Up to £13,500 5.5%

2 £13,501 to £21,000 5.8%

3 £21,001 to £34,000 6.5%

4 £34,001 to £43,000 6.8%

5 £43,001 to £60,000 8.5%

6 £60,001 to £85,000 9.9%

7 £85,001 to £100,000 10.5%

8 £100,001 to £150,000 11.4%

9 £150,001 or more 12.5%

All other ancillary benefits to remain the same

Additional Pension Contributions (APC)

Pension accounts

Automatic Aggregation

Link to Public Service schemes

AVC

Benefit Regulations Received September 2013

6

2014 Scheme Overview

CARE ExamplePay Accrual Pension CPI Total

Pension

Year 1 £20,000 1/49 £408.16 n/a £408.16

Year 2 £22,000 1/49 £448.98 n/a

£408.16 £12.65 £869.79

Year 3 £24,000 1/49 £489.80 n/a

£869.79 £45.23 £1404.82

Employee pays ½ contributions

Benefits accrue at 1/98th

All other ancillary benefits to remain the same

Temporary arrangement◦ Employees put in main section on AE re-

enrolment date

Cannot begin or continue APC◦ Unless for “lost pension”

8

50/50 section

During periods of nil pay sick leave 50/50 section members must be re-enrolled into main section

Employers must maintain full contributions

9

50/50 section

Spouses benefits

Lump sum death grant

Death benefits

Co-habiting partners

Civil partners

Maximum £6,500

Monthly or lump sum contribution

A scheme member benefit only

Must cease if employee elects for 50/50 section

Also shared cost APC◦ Contribution split must be agreed

11

APC

Buy extra pension

Used to buy “lost pension”◦ Authorised unpaid leave◦ Child related unpaid leave◦ Strike*

If election is made within 30 days of return to work:◦ Employee pays 1/3◦ Employer 2/3 (except strike*)

Election after 30 days of return to work:◦ Full cost paid by employee

12

APC

Current 2014 regulations◦ Contributions up to 100% of pay after LGPS contributions

and NI◦ Tax free cash 100% of AVC fund◦ Added to 25% LGPS lump sum = 55% tax charge

Intention (probable amendment) 2014 regulations◦ Contributions up to 100% of pay after LGPS contributions

and NI◦ Tax free cash restricted to 25% of fund◦ Added to 25% LGPS lump sum = Nil tax charge

Pre 1 April AVC administered by 2008 regulations

13

AVC

From age 55 with employer consent

Actuarial reduction or strain may apply

Employees can choose to receive payment:◦ of all benefits◦ of all pre 2008 benefits◦ of all, part or none post 2008 benefits◦ of all, part or none post 2014 benefits

Plus “additional benefits” in accordance with actuarial guidance issued by the Secretary of State

14

Flexible Retirement

All membership accrued pre 1 April 2014 protected

LGPS 2008 regulations apply including:◦ 60th & 80th

◦ If applicable lump sums◦ Normal retirement age 65◦ Link to final salary at eventual retirement

Members in receipt of a pension or a deferred benefits are unaffected by LGPS 2014

15

Protections - Pre 2014 membership

Protections can be lost if 2008 deferred benefits are aggregated with current 2014 membership if employee has had a break in public sector pension schemes of more than 5 years

16

Protections - Pre 2014 membership

17

18

Active members on 31 March 2008

Were within 10 years of NRA on 1 April 2012

Receive pension on or after NRA

Do not have more than 5 year break in membership of any public sector pensions

The underpin is only paid if the 2008 scheme (had it continued) provides a better pension than LGPS 2014

19

Protections - The Underpin

Is so complicated I am not going to try and explain it!!

Example: 58 year old member Rule of 85 satisfied Can retire and immediately receive pension

Will there be an actuarial reduction? Yes,11% of pension and 6% of lump sum!

20

Protections – Rule of 85

Why?

Age plus membership in whole years = 85

Who has protection? = In before 1 October 2006

This protection continues from April 2014

*Does not apply to* new option of drawing your pension from age 55-60

21

Protections – Rule of 85

Exercise discretion to waive the reduction ◦ If so you will have a strain cost

Employers must publish a policy

Essential to read the HR and Payroll guides

22

Protections – Rule of 85

Actual pensionable pay (PP)◦ Including overtime◦ Does not include expenses

Assumed Pensionable Pay (APP)◦ What the employee would have earned◦ Replaces notional pay◦ See HR/Payroll guides

1/2 employee contribution rate if 50/50 elected

Employer contributions always paid in full

23

Pay & Contributions

Final Pay (2008 definition)◦ Required for all pre 2014 membership◦ 10 year Underpin◦ Also PT hours and average hours◦ Added years and CoP

Will you know who these apply to?

Therefore, we require them for all employees!!

Contribution bands will be revalued every 3 years only

Employers to review employee contributions ◦ Annually in April◦ When material change occurs ie promotion

24

Pay & Contributions

To provide starter details to the Fund within 1 month◦ By spreadsheet

To request within 3 months of employee start date employment and LGPS histories

Inform employee:◦ Contractual enrolment◦ Auto Enrolment◦ Contribution rate payable◦ They can opt out ◦ Where to find scheme information ie website!

25

Employer Responsibilities

Upon 50/50 section election provide employee with impact of pension loss

Upon AE re-enrolment all 50/50 section members must be put into main section

For periods of nil pay sick leave 50/50 section members must be put into main section

Inform employees where to find the opt out form◦ But not to supply it!!

Opt out with less than 3 months membership, refund contributions and notify the Fund

26

Employer Responsibilities

Opt out with over 3 months membership, send the Fund normal leaver forms

APC for “lost pension” employers must:◦ Enable employee to make election within 30 days

Should ideally:◦ inform employee of the amount of lost pay ◦ inform employee of the amount of lost pension

To provide data on spreadsheets (do not amend) each month◦ Same data fields for all employees

To provide end of year data (correct) by date specified by Fund, usually mid April

27

Employer Responsibilities

28

50 50 switch form

29

Main switch form

30

Join the scheme form

31

Opt out form

All leaving details must be provided within 1 month of date of leaving:

All pay figures

Periods of membership◦ Main Section◦ 50/50 Section

Contribution amounts◦ Main Section◦ 50/50 Section

32

Employer Responsibilities

The draft pay form contains up to 9 different values

Required for all employees

33

Pay Form

34

35

Employers must formulate, publish and keep under review policy statements

The Fund should receive these by 30 June

Five main areas:◦ Voluntary funding of additional pensions (SCAPC)◦ Awarding additional pension via whole cost APC◦ Switching on 85 year rule for those 55-60◦ Flexible retirement◦ Waiving of actuarial reductions

A list of discretions will be provided by the Fund

36

Discretions & Policies

www.lgps2014.org www.lgpsregs.org

Please read the HR & Payroll Guides Contains essential information!

www.essexpensionfund.co.uk

email: pensionenquiries@essex.gov.uk telephone: 01245 431912

37

More Information

Thank you for listening

Essex Pension Fund 38