LGPS 2014 - Southend Learning Network

Report
LGPS 2014
Essex Pension Fund
March 2014
Matt Mott
1

2014 Scheme Overview

50/50 section

APC

AVC

Flexible retirement

Protections

Pensionable Pay & Contributions

Employer Responsibilities & Discretions
2

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)

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%
Band
pensionable pay range
for an employment
Contribution 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%
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
Pay
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
£489.80
n/a
£869.79
£45.23
Year 3
£24,000
1/49
£869.79
£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


During periods of nil pay sick leave 50/50 section
members must be re-enrolled into main section
Employers must maintain full contributions
9
Spouses
benefits
Civil
partners
Children’s
benefits
Lump sum
death grant
Co-habiting
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
Buy extra
pension
11



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

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

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



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 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
1
7
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
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

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

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


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

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



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

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





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
50 50
switch
form
28
Main
switch
form
29
Join the
scheme
form
30
Opt out
form
31
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


The draft pay form contains up to 9 different
values
Required for all employees
33
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


www.lgps2014.org
www.lgpsregs.org
 Please read the HR & Payroll Guides
 Contains essential information!



www.essexpensionfund.co.uk
email: [email protected]
telephone: 01245 431912
37
Thank you for listening
Essex Pension Fund
38

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