Transcript COUNTY COUNCIL SEMINAR

LOCAL GOVERNMENT
PENSION SCHEME
Presented by
Charlotte Thompson
Deputy Pensions Manager
Agenda
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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
– 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
• 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!
• Option A = 41%
• Option B = 42%
• Option C = 7%
• Option D = 10%
What have we got?
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Option A
Option B
Option C
Option D
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X
X
X
X
Option A++
Scheme Comparison
Mrs 2006
Current Scheme
Salary = £15,000
Service = 20 years
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
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
Additional Contributions
Current Scheme
April 2008
• Added years
• Maximum £5000pa
maximum 6 2/3rds
• External provider AVC
• Mrs 2006 = £1170pa
contract
• External provider AVC
contract
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
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
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
Death Benefits
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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
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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
April 2008 preparation
• Tiered Contributions
• Calculation of final
pensionable salary
• Nomination forms
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
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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 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
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
• 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
• 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
• 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
Tapered Protection
DOB
85yr Rule
Tapered
Full
Reduction Reduction
31/03/2016
N/A
01/04/2016
Before
31/03/56
01/04/56 31/03/2008 01/04/2008 01/04/2020
31/03/60
After
31/03/2008
N/A
01/04/2008
01/04/60
New joiner
N/A
N/A
01/10/2006
01/10/2006
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
Any Questions?
Devon Pension Services
Estuary House
Peninsular Park
Rydon Lane
EXETER
www.devon.gov.uk/pensions
Email – [email protected]