2014 LGPS Proposals

Fire Brigades Union

2014 LGPS proposals

2014 LGPS Proposals

Background recap

• Government endorses Hutton

• Proposes £900million savings

• Increase contributions

• Link with state pension age

• Career Average Revalued Earnings

• Change from RPI to CPI

• ‘Work Longer Pay More Get Less’

2014 LGPS Proposals

LGPS Negotiations

• Government recognise ‘funded schemes’ different

• Separate negotiations – Unite, GMB, Unison

• Early versions of HOA – agreed Dec ‘11

• FBU position: HOA unacceptable

• No protection for lowest paid

• NPA unworkable

2014 LGPS Proposals

Talks continued

• From January 2012 – 31 May no details released as talks continued

• LGPS trade union side meetings cancelled

• 31 May – first details released

• Joint statement – LGA – 3 Unions

• 2014 LGPS proposals

• Consult with members report back to future TU side meeting

2014 LGPS Proposals

2014 proposal in brief

• England and Wales only

• Introduced one year earlier - 2014

• CARE scheme

• No increases in contributions until 2014

• No NPA – individually linked to SPA

• Protection

• Options

2014 LGPS Proposals

Summary of changes

Element LGPS 2008 LGPS 2014

Structure Defined Benefit Defined Benefit

Basis of pension Final Salary CARE

Accrual Rate 60ths 49ths

Revaluation rate N/A CPI

NPA 65 Increased by linking to individuals SPA (Min 65)

Contribution flexibility No Option to pay 50% contributions for 50% benefits

2014 LGPS Proposals

Summary of changes (cont.d)Element LGPS 2008 LGPS 2014

Commutation option 12:1 12:1

Death in service 3x pay 3x pay

Survivor benefits 160th accrual based on tier1 ill health enhancement

160th accrual based on tier1 ill health enhancement

Indexation CPI CPI

Vesting period (Timeframe for members to get their contributions refunded rather than waiting for pension at retirement age)

3 months 2 years

2014 LGPS Proposals

Summary of changes (cont.d)

Element LGPS 2008 LGPS 2014

Ill health provision Tier 1 – immediate payment enhanced to 65Tier 2 – immediate payment 25% enhanced to 65Tier 3 – temporary payment for up to 3 years

Tier 1 – immediate payment enhanced to 65Tier 2 – immediate payment 25% enhanced to 65Tier 3 – temporary payment for up to 3 years

2014 LGPS Proposals

2008 v 2014 Contributions

LGPS 2008 Gross 2014 LGPS Gross ( Net )

Up to £13,500 5.5% Less than £13,501 5.5% (4.4%)

£13,501- £15,800 5.8% £13,501- £21,000 5.8% (4.64%)

£15,801- £20,400 5.9% £21,001- £34,000 6.5% (5.2%)

£20,401- £34,000 6.5% £34,001- £43,000 6.8% (5.44%)

£34,001- £45,500 6.8% £43,001- £60,000 8.5% (5.1%)

£45,501 - £85,300 7.2% £60,001- £85,000 9.9% (5.94%)

Over £85,300 7.5% £85,001 - £100,000 10.5% (6.3%)

£100,001- £150,000 11.4% (6.84%)

Over £150,000 12.5% (6.88%)

2014 LGPS Proposals

What this means to meRole ( Salary 2008 2014

FF Dev £20,935 6.5% 5.8% ( - 0.7%)

FF Comp £26,790 6.5% 6.5%

CM Dev £28,472 6.5% 6.5%

CM Comp £29,700 6.5% 6.5%

WM Dev £30,345 6.5% 6.5%

WM Comp A (B) £31,187 (£33,211) 6.5% 6.5%

Stn M Dev £34,547 6.8% 6.8%

Stn M Comp A (B) £35,583 (£38,104) 6.8% 6.8%

GM Dev £39,788 6.8% 6.8%

GM Comp A (B) £40,980 (£44,108) 6.8% 6.8% ( 8.5%) (+1.7%)

2014 LGPS Proposals

Changes to way contributions are calculated

• LGPS contributions based on actual pensionable pay – inc. non contractual overtime and any additional hours (p/t)

• Part – time workers will have contributions based upon actual pay not full time equivalent

• e.g. previous proposal part time earning £13,395 pays 6.5%

• Now £13,395 pays 5.5%

2014 LGPS Proposals

2014 Normal Pension Age

• LGPS will have NPA based on individuals’ own SPA

• SPA increasing to;

• 66 between 2018 and 2020

• 67 between 2026 and 2028 (34-36)

• 68 and beyond in line with future rises in life expectancy (44-46)

2014 LGPS Proposals

Impact on LGPS 2014 members

• Can still retire before from SPA ( from age 55) but with actuarial reductions applied

No. of years before SPA

Reductions for Men

Reductions for Women

1 6% 5%

2 11% 11%

3 16% 15%

4 20% 20%

5 25% 24%

10 42% 40%

2014 LGPS Proposals

Protection

• Accrued rights protected

• All pre 2014 pension will be

1. Final salary link

2. Accessible at current NPA

3. Rule of 85 protection remains

2014 LGPS Proposals

CARE – revaluation and Accrual rate

• Career Average Revaluated Earnings

• Pension value for earnings each year

• Revalued until retirement

• Starting point AWE ~ CPI +2.25% and 60ths

• Balancing act

• 2014 LGPS CPI and 49ths

• Professional advice

2014 LGPS Proposals

CARE Vs Final Salary

• CARE depends on revaluation rate being better than any rise in earnings and flat career

• Rise in earnings better than RR or promoted Final Salary more rewarding

• Assess whether pay will grow more than CPI over career

• (FBU using 1st Actuarial for advice)

2014 LGPS Proposals

Flexible options

• 50/ 50 option available

• Try to avoid opt outs on low paid

• 50% contributions – 50% pension

• Ancillary benefits same

• Short term option

2014 LGPS Proposals

Example of 50/50

Individual earning £15,000

Full member 50/50 option

Net monthly contribution £58 £29

Accrual rate 1/49th 1/98th

Pension value per year before revaluation

£306 £153

Death in service 3x salary (£45,000) 3x salary (£45,000)

2014 LGPS Proposals

Transitional protection

• Applies to members within 10 years of age 65 in 2012.

• Individuals may see their NPA move due to changes in SPA

• Protection – calculation done on retirement at age 65 so pension is at least equal to what they would have received under 2008 scheme

2014 LGPS Proposals

Consultation

TU’s involved consulting members before reporting back

Unison, Unite & GMB joint statement with LGA

Unison, Unite and GMB consultative ballot July – August

FBU Consultation method meetings and consultative ballot

2014 LGPS Proposals

Recap • LGPS 2014 changes instead of 2015• CARE – revalued using CPI – 49th accrual• Same contributions for majority & based on

actual earnings• NPA linked to SPA• Indexed using CPI • Option of 50/50 with same ancillary benefits• Protection – accrued and transitional• Outsourced individuals protected

2014 LGPS Proposals

Executive Council 17 July1. Noted the outcome of the LGPS negotiations.

2. Recognised some positive progress has been made. E.g contribution rates

3. Concerned at the proposed accrual rates and revaluation rates - seeking further professional advice

4. Opposed to any increase in NPA. Believe an NPA of 68 is unrealistic and unworkable for firefighters (control) .

5. Seek the support of colleagues in other unions to establish with the employers a working group to examine the specific occupational needs of FRS control staff and any other identified occupational groups with particular needs.

6. Continue to attempt to gain access for firefighters control into a fire service pension scheme

2014 LGPS Proposals

Recommendations

• Consultative ballot • 2 straight forward questions

1. Is the proposed 2014 LGPS acceptable ? Yes or No? EC recommend – No

2. Do you wish the FBU to continue trying to achieve access for firefighters control into a specific fire service pension scheme ? Yes or No

• Attend meeting before responding