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New Scottish LGPS Heads of Agreement - PowerPoint PPT Presentation


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Scottish Local Government Pension Scheme. New Scottish LGPS Heads of Agreement . Outline. Consultation paper published and circulated Scottish Pensions Bulletin 7 summarises key issues Feedback Agreed UNISON Scotland response Discussions continued with CoSLA & SLOGPAG Pensions Bulletin 8

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Scottish Local Government Pension Scheme

New Scottish LGPS

Heads of Agreement

outline
Outline
  • Consultation paper published and circulated
  • Scottish Pensions Bulletin 7 summarises key issues
  • Feedback
  • Agreed UNISON Scotland response
  • Discussions continued with CoSLA & SLOGPAG
  • Pensions Bulletin 8
  • Heads of Agreement
type of scheme
Type of Scheme
  • Final salary scheme
  • Minimum Pension Age (MPA) 55 April 2010
    • Redundancy/efficiency protection MPA 50 pre April 2006
    • Rule of 85 transitional protection to 2020
  • Accrual rate – 60ths instead of 80ths plus 3/80ths lump sum
  • Existing commutation provisions
    • Lump sum £12 for each £1 pension commuted,
    • Max 25% of the capital value of annual pension
death in service
Death in Service
  • Increase in death in service benefit from two to three times final annual salary.
  • For deferred scheme members the lump sum will be increased to five times pension.
  • For pensioners (u/75) the lump sum increased to ten times pension less any pension paid.
  • Short term spouses pension removed to reflect higher benefits and streamlined admin arrangements for speedy payments.
ill health
Ill health
  • Current provision – permanent incapacity in job or comparable
  • New provisions retain ‘Permanently incapable’ (HMRC rule)
    • No reasonable prospect of employment by 65 - 100% enhance
    • Reasonable prospect of employment by 65– 25%
  • Transitional protection for existing members whose service enhancement less than current scheme
  • Pensions paid for life
  • 3rd tier outside the scheme. No permanent incapacity required. Discretionary payment of 1 week for every year of service.
  • Definitions reviewed 2011.
  • Certificate of Pension protection extended to ill health.
partner pensions
Partner pensions
  • Extend spouse and civil partner pensions to those who cohabit
  • Backdated to April 1988 + cost neutral purchase before that
  • Criteria
    • Able to marry or form civil partnership
    • Living together for 2 years
    • Neither partner living with a third person
    • Partner financially dependent or partners interdependent
flexible retirement
Flexible retirement
  • As current scheme. Pre 65 with reduced pension
  • New actuarial tables should make it cheaper
  • Take reduced pension before 65 and remain in employment
  • Continue to accrue service after 65
employee contributions
Employee Contributions
  • Average 6.3%
  • Tiered contribution rates like tax mechanism (E&W banded)
  • Fairer contributions to reflect benefits and tax relief

On earnings up to and including £18,000 5.5%

On earnings above £18,000 and up to £22,000 7.25%

On earnings above £22,000 and up to £30,000 8.5%

On earnings above £30,000 and up to £40,000 9.5%

On earnings above £40,000 12%

  • Bands increased in line with RPI
overall equivalent contribution rate
FTE Salary Avg. Rate

£6,753 5.50%

£15,194 5.50%

£18,008 5.50%

£20,822 5.74%

£23,636 6.00%

£26,449 6.27%

£29,263 6.48%

FTE Salary Avg. Rate

£32,077 6.73%

£34,891 6.95%

£37,705 7.14%

£40,518 7.34%

£43,332 7.64%

£46,146 7.90%

Overall Equivalent Contribution Rate

These contributions are paid before tax. Therefore actual contributions are less than this. E.g. 4.4% at the bottom and 4.8% at the top.

More than half of local government staff earn less than £18k p.a.

cost sharing
Cost Sharing
  • Employers contributions will be at least double employee contributions with an underlying rate of 13.3%.
    • (UNISON believes employer actuarial costing conservative)
  • Excludes investment risk and past deficits so actual contributions higher.
  • Agreed in principle to cost sharing in future if the cost of benefits change significantly. Review every 3 years.
  • SLOGPAG Sub-Group to develop solution by March 2010
governance
Governance
  • Cost sharing means members entitled to a greater say
  • Review governance arrangements at fund level.
  • Funds issue governance compliance statement by April 2009
  • Statutory guidance to be agreed by Oct 2008
  • SLOGPAG successor for national governance
  • EU Directive (IORP) & 2004 Pensions Act
transition arrangements
Transition arrangements
  • All staff transfer to new scheme.
  • Benefits better in new scheme so existing members:
    • Accrue pension under new scheme for future service
    • Two pension calculations for old (80ths + lump sum) and new scheme (60ths) when they retire.
  • Reviewed after 2011.
conclusion
Conclusion
  • Retained final salary scheme
  • Improved benefits
    • 60ths scheme, death benefits, partners pensions, pension protection.
  • Fairer contribution scale with most staff paying less
  • Further work on governance and cost sharing
  • Recommend vote ‘YES’ in ballot