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LOCAL GOVERNMENT PENSION SCHEME. Presented by Charlotte Thompson Deputy Pensions Manager. Agenda. Proposals for April 2008 scheme Ill Health and the 3 tier proposal Compensation Regulations Removal of 85 year rule What’s new. New Look scheme - April 2008. Costed options consultation

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Presentation Transcript
slide1

LOCALGOVERNMENT

PENSION SCHEME

Presented by

Charlotte Thompson

Deputy Pensions Manager

agenda
Agenda
  • Proposals for April 2008 scheme
  • Ill Health and the 3 tier proposal
  • Compensation Regulations
  • Removal of 85 year rule
  • What’s new
new look scheme april 2008
New Look scheme - April 2008
  • Costed options consultation
    • 30 June – 29 September 2006
  • Statutory consultation exercise on proposals
    • November 2006 – February 2007
  • Make and lay regulations
    • April 2007
  • New Look Scheme in force
    • April 2008
the four options
The four options
  • Option A: an updated current scheme with the 1/80th: 3/80th structure
  • Option B: a new final salary scheme,with an improved accrual rate of 1/60th, but with no automatic lump sum
  • Option C1 (C2): a new career-average scheme, with an accrual rate of 1.85% (1.65%) and RPI (and RPI plus 1.5% estimation of wage inflation) revaluation
  • Option D: a new hybrid scheme, based on C1 or C2, but with a one off choice to make extra contributions in order to receive final salary linked benefits
the results are in
The results are in!
  • Option A = 41%
  • Option B = 42%
  • Option C = 7%
  • Option D = 10%
what have we got
Option A

Option B

Option C

Option D

X

X

X

X

Option A++

What have we got?
scheme comparison
Mrs 2006

Current Scheme

Salary = £15,000

Service = 20 years

Scheme Comparison

Mr 2008

April 2008

Salary = £15,000

Service = 20 years

joining the scheme
Current scheme

Unreduced retirement benefits available from 60 with 25 years service (85year rule)

Minimum retirement age 50 (will increase to 55 in 2010)

April 2008

Unreduced retirement benefits from age 65

Minimum retirement age 55

Joining the scheme
employee contributions
Current Scheme

5% - pre 1998 protected manual workers

6%

Mrs 2006 pays £900

April 2008

5.5% on first £12,000

7.5% on excess over £12,000

Mr 2008 pays £885

Employee contributions
additional contributions
Current Scheme

Added years maximum 6 2/3rds

Mrs 2006 = £1170pa

External provider AVC contract

April 2008

Maximum £5000pa

External provider AVC contract

Additional Contributions
final salary definition
Current Scheme

Highest of

pay in the final year

One of the previous 2 years pay

April 2008

Highest of

Pay in the final year

Revalued (RPI) average of the best 3 consecutive years’ salary in the last 10 years service

Final Salary definition
normal retirement benefits
Current Scheme

Service/80 X FPS = P

Service X 3/80ths = Cash

Pension £3,750

Cash £11,250

April 2008

Service/60ths X FPS = P

Pension £5,000

Cash £ nil

Normal Retirement Benefits
hmrc maximum cash
Current Scheme

Value of standard benefits = £86,250

Commutation = 12:1

Pension = £3,013.40

Cash = £20,089.20

Value = £80,357.20

April 2008

Value of standard benefits = £100,000

Commutation = 12:1

Pension = £3,214.29

Cash = £21,428.52

Value = £85,714.32

HMRC Maximum Cash
death benefits
Current Scheme

Death grant 2 X Salary

Post Retirement lump sum – balance of 5 years

Widow(ers), Civil Partners pension – 160ths

Mrs 2006

£30,000 death grant

£1875 survivor pension

April 2008

Death grant 3 X salary

Post Retirement lump sum – scope for balance of 10 yrs

Widow(ers), Civil Partners, nominated dependent partners – 160ths

Mr 2008

£45,000

£1875 survivor pension

Death Benefits
april 2008 preparation
April 2008 preparation
  • Tiered Contributions
  • Calculation of final pensionable salary
  • Nomination forms
ill health benefits
Ill Health Benefits
  • Current LGPS
    • Active member must be permanently incapable of discharging their duties in current job and also a comparable job.
    • Deferred member must be incapable of performing duties of former Local Government job
  • Additional years service for active members
    • Between 5-10 years – double service
    • 10 – 13 1/3 – service increased to 20 years
    • 13 1/3 – 33 1/3 – service increased by 6 2/3 years
    • Between 33 1/3 – 40 – service increased to 40 years
ill health benefits17
Ill Health Benefits
  • Proposed 3 Tier, no review system
    • Unable to perform local government employment duties but immediately able to undertake gainful employment = Accrued Rights only
    • Unable to undertake gainful employment on leaving but likely to be able to before normal retirement age = Accrued Rights plus 25% of prospective service
    • Unable to undertake gainful employment before normal retirement age = Accrued Rights plus 50% of prospective service
slide18

Compensation Regulations

  • Came into force 29/11/06 but back dated to 01/10/06
  • One off lump sum payment of up to 104 weeks pay
  • Continue to use actual week’s pay
  • Remove CAY
transitional period
Transitional period
  • Three periods to consider
  • 01/10/06 – 29/11/06
    • Employees should not be worse off, new regulations cannot be used to reduce compensation (i.e. use 2000 compensation policy)
  • 30/11/06 – 31/03/07
    • Can use either regulations (if policy already in place for 2000 regulations
  • 01/04/07 –
    • New regulations only. Policies under the 2000 regulations will expire on 31/03/07.
2006 compensation policy
2006 Compensation Policy
  • No period of grace
  • One month ‘change’ rule does not apply
  • Inaugural policy under 2006 Compensation Regulations – can be implemented from the date the policy is agreed
removal of the rule of 85
Removal of the rule of 85
  • Removed with effect from 1 October 2006
  • All members joining after 1 October 2006, earliest age for unreduced benefits is 65.
  • All existing members as 30 September 2006 will keep rule until at least 31 March 2008.
  • Full protection to 31/03/16 for members attaining 60 and the 85 year rule by this date
  • Taper protection to 31/03/2020 for members reaching 60 and the 85 year rule by this date
what s new
What’s new
  • Additional Voluntary Contributions
    • Introduction of 50% contribution limit
  • Trivial Commutations
    • Bring LGPS regulations in line with Finance Act 2004
  • Administration Regulations – due soon
devon pension services
Devon Pension Services

Estuary House

Peninsular Park

Rydon Lane

EXETER

www.devon.gov.uk/pensions

Email – pensions@devon.gov.uk