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Essex Pension Fund March 2014 Matt Mott. LGPS 2014. LGPS 2014. 2014 Scheme Overview 50/50 section APC AVC Flexible retirement Protections Pensionable Pay & Contributions Employer Responsibilities & Discretions. 2014 Scheme Overview. CARE Scheme (Career Average Revalued Earnings)

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LGPS 2014


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    1. Essex Pension Fund March 2014 Matt Mott LGPS 2014

    2. LGPS 2014 • 2014 Scheme Overview • 50/50 section • APC • AVC • Flexible retirement • Protections • Pensionable Pay & Contributions • Employer Responsibilities & Discretions

    3. 2014 Scheme Overview • 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)

    4. 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%

    5. Contributions bands

    6. 2014 Scheme Overview • 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

    7. CARE Example

    8. 50/50 section • 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”

    9. 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

    10. Death benefits Civil partners Co-habiting partners

    11. APC • 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

    12. APC • 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

    13. AVC • 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

    14. Flexible Retirement • 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

    15. Protections - Pre 2014 membership • 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

    16. 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

    17. Protections - The Underpin • 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

    18. Protections – Rule of 85 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!

    19. 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

    20. 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

    21. Pay & Contributions • 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

    22. 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

    23. Employer Responsibilities • 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!

    24. 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

    25. 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

    26. 50 50 switch form

    27. Main switch form

    28. Join the scheme form

    29. Opt out form

    30. Employer Responsibilities 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

    31. Pay Form • The draft pay form contains up to 9 different values • Required for all employees

    32. Discretions & Policies • 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

    33. More Information • 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

    34. Thank you for listening Essex Pension Fund