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New Scottish LGPS Heads of Agreement

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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New Scottish LGPS Heads of Agreement

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  1. Scottish Local Government Pension Scheme New Scottish LGPS Heads of Agreement

  2. 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

  3. 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

  4. 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.

  5. 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.

  6. 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

  7. 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

  8. 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

  9. 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.

  10. 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

  11. 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

  12. 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.

  13. Next Steps

  14. 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

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