New look local government pension scheme for england wales
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New look Local Government Pension Scheme for England & Wales. New scheme to come into force at 1 April 2008. Amicus Pensions Team. Officers: - John Allott, National Officer Bryan Freake, Pensions Officer National Committee Member: - Dick Banks Amicus Local Government Pension Committee: -

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New look Local Government Pension Scheme for England & Wales

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New look local government pension scheme for england wales

New look Local Government Pension Scheme for England & Wales

New scheme to come into force at 1 April 2008


Amicus pensions team

Amicus Pensions Team

  • Officers: -

  • John Allott, National Officer

  • Bryan Freake, Pensions Officer

  • National Committee Member: -

  • Dick Banks

  • Amicus Local Government Pension Committee: -

  • Maintaining our lay democracy


Comparing the main elements in the current scheme with the regulations for the new scheme

Comparing the main elementsin the current scheme with the Regulations for the new scheme


New look local government pension scheme for england wales

Final Salary Scheme

The new scheme will remain a final salary scheme.


Accrual rate

Accrual Rate

Current scheme

  • 1/80th pension plus 3/80th lump sum x pensionable pay x pensionable service.

    New scheme

  • 1/60th pension x pensionable pay x pensionable service.

  • At retirement a member can exchange pension for cash up to a maximum cash lump sum of 25% of the overall value of their retirement benefit. The exchange rate is £12 cash for each £1 per annum pension given up.


Transfer to the new scheme

Transfer to the new scheme

  • Benefits earned on service up to 31 March 2008 will remain on current scheme accrual basis – 1/80th Pension + 3/80th lump sum.

  • All members will earn benefit under the new scheme from April 2008 including those with protection under the Rule of 85-1/60th pension.


Final pensionable pay

Final pensionable pay

  • Current scheme

    • Pension based on pensionable pay in last year of service or one of the two immediately preceding years.

  • New scheme

    • Pension based on pensionable pay in last year of service or one of the two immediately preceding years or best average of three consecutive years in the last ten.


Employee contribution

Employee contribution

  • Current scheme

    • 6% of pensionable pay.

    • 5% protected for those on manual grades at April 1998.

    • Those on 5% protection will have the protection phased out over three years from 2008


Employee contribution1

Employee Contribution

  • Proposed new scheme

  • Contributions linked to pay with higher paid paying more than lower paid as follows:-

  • Less than £12,000 = 5.5%

  • £12,001 - £14,000 = 5.8%

  • £14,001 - £18,000 = 5.9%

  • £18,001 - £30,000 = 6.5%

  • £30,001 - £40,000 = 6.8%

  • £40,001 - £75,000 = 7.2%

  • More than £75,000 = 7.5%

  • Contribution rate calculated on the basis of pensionable pay in the previous financial year The bands will rise in line with prices from 2009.


Retirement age

Retirement Age

  • Current scheme

    • Normal retirement age 65.

    • Can retire from age 60 without employer consent.

    • Minimum retirement age from age 50 increasing to 55 from April 2010.

    • Members can retire before age 65 without an early retirement reduction if age and service equal 85 (Rule of 85).

    • Phasing out of Rule of 85

      • Rule of 85 ends for service after April 2008

      • Protection for those age 60 before April 2016

      • Tapered protection for those age 60 between April 2016 and March 2020.


Retirement age1

Retirement Age

  • New scheme

    • Normal retirement age 65.

    • Can retire from age 60 without employer consent.

    • Minimum retirement age 50 increasing to 55 from April 2010 (55 from April 2008 for new starters).

    • Protections for Rule of 85 go forward into the new look scheme.


Ill health retirement

Ill Health Retirement

  • Current scheme

    • Unable to do current job until at least age 65, or comparable job offered by employer.

    • More than 5 years service at retirement to qualify.

    • Pension enhanced by formula based on service and age as follows:

      • Up to 10 years service doubled

      • Between 10 and 13 1/3 years service increased to 20 years

      • Service more than 13 1/3 years increased by 6 2/3 years.

        Enhancement cannot exceed potential service to age 65.


Ill health retirement1

Ill Health Retirement

  • New scheme

    If a members’ employment is terminated on the grounds that his ill health renders him permanently incapable of doing his current job and he has a reduced likelihood of obtaining gainful employment before his normal retirement age they may qualify for a benefit.

    “Gainful employment” is defined as paid employment for not less than 30 hours in each week for a period of not less than 12 months


New look local government pension scheme for england wales

  • Ill Health Retirement

  • There are three levels of provision:

  • Unable to undertake gainful employment before age 65, service is enhanced by 100% of potential service to age 65.

  • Unable to obtain gainful employment within a reasonable period but likely to be able to undertake gainful employment before age 65, service is enhanced by 25% of potential service to age 65.

  • Able to undertake gainful employment within a reasonable time of leaving, consultation continuing on a benefit to be provided by the Employer rather than the Scheme.


Retirements on grounds of redundancy and efficiency

Retirements on grounds of redundancy and efficiency

  • Current scheme

    • If forced to retire on redundancy/efficiency grounds after minimum retirement age - immediate pension earned to date of leaving without any early payment reduction paid.

  • New scheme

    • If forced to retire after minimum retirement age – entitled to immediate pension without reduction

      *Minimum retirement age for new staff is age 55. For existing staff, it is age 50 until April 2010 - when it goes up to 55 for everyone in line with the Finance Act.


Employers power to increase pensionable service and pension in payment

Employers’ power to increase pensionable service and pension in payment

  • Current scheme

    • Increase service by up to 6 2/3 years for those in service.*

  • New scheme

    • Increase service by up to 10 years for those in service.*

    • Increase pensions in payment.

      * Limited to potential service to age 65.


New look local government pension scheme for england wales

Death in service benefits

  • Current scheme

    • Lump sum 2 x pay.

  • New scheme

    • Lump sum 3 x pay.


Survivor s pension

Survivor’s pension

Current scheme

  • Widow/widower/civil partner’s pensions

  • ‘Short-term’ pay continues for up to 6 months, followed by ‘long-term’ pension based on 50% of ill health pension at date of death

  • Children’s pensions based on number of children and whether survivor’s pension payable.

  • New scheme

    • Pensions for co-habitees and unmarried partners backdated to 1 April 1988.

    • Pension same accrual rate as now.

    • Children’s pension same - but no up-rating where no survivors’ pension is payable.


  • Death in retirement

    Death in retirement

    • Current scheme

      • Death within 5 years of retirement – lump sum payable of 5 years’ pension, less pension already paid.

    • New scheme

      • Death within 10 years of retirement –lump sum payable of 10 years’ pension, less pension already paid.

    • Survivor’s pension

      • New scheme proposals similar to current scheme provision except no short-term pensions.


    Members options to increase benefits

    Members’ options to increase benefits

    • Current scheme

      • Buy additional years up to 6 and 2/3 years.

      • Pay additional voluntary contributions (AVC’s)

      • Up to the limits allowed by Finance Act –currently lifetime allowance £1.5million annual allowance £215,000.

        New scheme

      • Pay AVC’s to purchase up to £5000 per annum additional pension.


    Sharing the future risk of the scheme

    Sharing the future risk of the scheme

    • Review mechanism to be agreed by 1 April 2009.

    • All pension schemes have risks such as investment risk, or those associated with life expectancy. These will need to be discussed after 2009.


    New look local government pension scheme for england wales

    Summary


    New look local government pension scheme for england wales

    Summary and next steps


    Current scheme was changed from 6 april 2006 to allow greater flexibility for members

    Current scheme was changed from 6 April 2006 to allow greater flexibility for members

    Main changes are:

    • Members can take up to 25% of the value of their retirement benefits as a tax free lump sum by reducing their pension.

    • Members can remain in the scheme until age 75.

    • Members can reduce pay/hours and with employer consent draw their pension from age 50 and stay in work.

    • There is no maximum service. The old maximum of 40 years before age 60 and 45 before age 65 have been removed.

    • The maximum ceiling of 15% of pay that members can pay to increase benefits has been removed. Members can now pay up to 50% of their pay to the LGPS and additional voluntary contributions.

      Members can now earn benefits up to the maximum allowed by the Finance Act

      Currently lifetime allowance £1.5m Annual allowance £215,000.


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