Transcript Master PowerPoint style

New LGPS 2014 and
Automatic Enrolment
workshop
Agenda
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LGPS2014-basic details
LGPS2014 –employer roles
LGPS2014 – employer discretions
LGPS2014- communications plan
Question and answer session
Auto Enrolment- basic details
Auto Enrolment- employer responsibilities
Auto Enrolment- the pension regulators role
Question and answer session
Disclaimer
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Everything I discuss is subject to change out of my control
Benefit regulations all received
Transitional regulations in draft/released ???
The transitional regulations will instruct us how to hand previous
pension rights particular concerns on:
• The underpin
• Treatment of transfers
• Pay drops
LGPS 2014 - Summary of changes
Current scheme
New scheme
Scheme basis
Final Salary
CARE
Accrual rate
1/60th
1/49th
Indexation
CPI for DB’s and
pensioner’s
CPI on all
Normal Pension age
65
SPA
Earliest retirement age
60
55
Employee contributions
5.5% to 7.5%
5.5% to 12.5%
Contributions flexibility
None
50/50 option
Pay used
Pensionable pay
Actual pay
Vesting period
3 months
(entitlement to a refund)
2 years
Protection
Pre 2014, plus 10 year
of retirement
85 year rule, pre 2008
service
Retirement age
Linked to SPA
SPA:
currently 65
66 by October 2020
67 by 2028*
68 by 2030*
*still waiting for pension act to be ratified
Retirement from 55
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Member driven retirement now from age 55
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Employers will have the option to agree to ‘honour’ reductions
under 85 year rule but no obligation
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Either way likely to be too expensive for most members to
consider
Early retirement costs
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Just for comparison purposes
55 year old on £35k with 20 years service
Contributions
Actual Pensionable pay
New
rate
After
tax
relief
Current rate
(if full time)
After tax relief
Up to £13,500
5.5%
4.4%
5.5%
4.4%
£13,501 to £21,000
5.8%
4.64%
5.8, 5.9 or
6.5%
4.64% to 5.2%
£21,001 to £34,000
6.5%
5.2%
6.5%
5.2%
£34,001 to £43,000
6.8%
5.44%
6.8%
5.44%
£43,001 to £60,000
8.5%
5.1%
6.8 or 7.2%
5.44% to 5.14%
£60,001 to £85,000
9.9%
5.94%
7.2%
5.14%
£85,001 to £100,000
10.5%
6.3%
7.2 or 7.5%
5.14% to 4.23%
£100,001 to £150,000
11.4%
6.84%
7.5%
4.23%
Greater than £150,000
12.5%
6.88%
7.5%
4.23%
Subject to amendment by treasury
50/50 scheme
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50% contributions
50% service accrual
100% death cover
Enrolled into full scheme after 3 years
Brought back into full scheme if assumed pay needed
Employer pays full contribution
Actual pay
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For benefits accrued after 1/4/2014
And to calculate contribution rate to be paid
Overtime
Bonus
Allowances
Major benefits to part time employee’s
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For many years to come we will require 2 pay figures on a member
leaving employment.
Query on how assumed pensionable pay will be applied.
Employer Contributions
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Paid on Actual pay
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Assumed pensionable pay while on ‘relevant’ child related leave
(i.e. Ordinary maternity, paternity or adoption leave or paid
additional maternity, paternity or adoption leave)
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Assumed pensionable pay whilst on sick leave reduced or zero pay
Protection for pre 2014
service
Pre 2008 service
2008 to 2014 service
Post 2014 service
Age 65 before 1 April 2022
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All retirees within 10 years of age 65 at 31 March 2012
covered by the ‘underpin
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2 calculations to pay the better of
• Old benefits (60th pension, final pay with retirement age 65)
• New benefits (49th pension ON CARE basis linked to SPA)
Winners and Losers
Winners
• Not expecting much (any) further salary growth
• Part time employees
• Happy to work to SPA
• Anyone covered by the underpin
• Overtime workers?
Losers
• Expecting pay increases greater than CPI
• Those on greater than £43,000
• Keen to retire as early as possible
Employer responsibilities
LGA have produced 2 guides (HR and Payroll)
Key points are
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Monitor changes between full scheme and 50:50
Record pay in both pre and post 2014 formats
Register when a member in the 50:50 section received assumed
pensionable pay
Monthly return
Why?
LGPS2014 more complex with 2 pay figures
50:50 section with movements between
25 year guarantee to scheme design (flying pig alert)
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Benefits for employers
Ensures that all requirements of the LGPS2014 scheme are complied
with.
Will minimise end of year queries
Will ensure that data is up to date as TPR starts to take on
monitoring role
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Monthly return 2
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Queries to be reported to your fund site
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Member in 50:50 section now on assumed pensionable pay- you
will need to confirm if due to long term sickness and if so bring
them back in to the full sections
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Will need a unique identification for each post
E forms
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The monthly return is the ideal method of informing us of changes
however we have updated the e forms:
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Joiner
Change of Hours
Auto enrolment form (for members)
Change of section (full scheme/ 50:50)
Leavers form- this will still be required even if you submit the
monthly return to confirm/verify reason for leaving
Handouts
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State pension age calculator
Low flyer/medium/high flyer
Early retirement costs
4 member driven leaflets
FAQ document
Fact sheet- with disclaimer
Payroll guide
HR Guide
Monthly return guidance note and FAQ
Monthly return template
Future scheme cost control
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Scheme based on a 1/3rd cost paid by member and 2/3rds paid by
the employer.
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6.5% member average contribution
13% employer contributions
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For future service only- no allowance taken for past service deficit or
previous early retirement costs
Figures taken on a national basis and if the employer figure exceeds
the 13% by 2%:commitment to hold discussions on how to bring the
employer rate back within this threshold would begin.
Governance
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Discussions are still ongoing on the final details of the governance
of the scheme.
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4 level
Responsible Authority- DCLG
Scheme manager
Pension board
Scheme advisory board
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There is also consultation on the best way to deliver LGPS
currently 89 funds- likely to be substantially reduced
Discretions
New discretions needed
List to follow but I expect least 5 new discretions will be needed
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Switching on 85 year rule for voluntary retirements between 5560
Funding of additional pension (will be referred to as SCAPC shared
cost additional Pension contributions)
Flexible retirement
Waiving of actuarial reductions
Award of additional pension
Unchanged
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Ill health
Redundancy (employer driven) early retirement
Death
ARCs/AVCs
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New factors will be required for
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Transfers
Divorce
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Planned communications
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Letter to member
Modeller
Leaflets
Videos
Website
Posters
Visits/ talks (Could be a charge)
Website
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www.yourpension.org.uk/lpfa/pension reform
www.lgps2014.org
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Update as soon as new information is made available
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Summary for new scheme
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CARE
1/49th
NRD=State pension age
Actual pay for benefits and contributions
New contribution rates
50/50 scheme
Protection for all service to 31/3/2014
Best of both for those within 10 years of retirement
Questions on LGPS2014
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A chance to ask any questions
What is AE
What is Automatic Enrolment
Government requirement that all employees must be enrolled
into a pension scheme (pension saving)
• The Government has appointed The Pension Regulator to act a
the enforcer or policeman
• Minimum amounts payable by employee and employer
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Categories of employee
Under age 22
22 to SPA
Over SPA
Less than £5668
Entitled worker
Entitled worker
Entitled worker
Between £5668 and
£9440
Non eligible job
holder
Non eligible job
holder
Non eligible job
holder
Over £9440
Non eligible job
holder
Eligible Job
Holder
Non eligible job
holder
Staging dates
120,000 or more
1 October 2012
50,000-119,999
1 November 2012
30,000-49,999
1 January 2013
20,000-29,999
1 February 2013
10,000-19,999
1 March 2013
6,000-9,999
1 April 2013
4,100- 5,999
1 May 2013
4,000-4,099
1 June 2013
3,000-3,999
1 July 2013
2,000-2,999
1 August 2013
1,250-1,999
1 September 2013
800-1,249
1 October 2013
500-799
1 November 2013
350-499
1 January 2014
250-349
1 February 2014
160-249
1 April 2014
Transitional Arrangements
Good news
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DB (or Hybrid scheme);
Always open to all employees; and
Transitional arrangement allow to defer automatically enrol
current optants.
Employer duties 1
Pre staging date
• Decide if using transitional delay
• Decide if using postponement
• Inform all employees of staging date
• Write to all employees who are not in the scheme (either using
transitional delay or enrolling them from staging date)
• Amend joiner pack to remove mention of opt out
• Informing LPFA of those employees being auto enrolled
Employer duties 2
From staging date forward
• Bring all new employees into pension scheme
• Bring in any employee who reaches age 22
• Bring in any employee who breaks £786 (£833) on given month
Employer duties 3
After your staging date
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Register with the pension regulator (within 4 months of your
staging date)
Three years anniversary bring all members who opt out back into
the scheme
LPFA’s role
We must
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Enrol any members notified to us for enrolment;
Provide details of possible opt out; and
Keep records.
But we can do more
We will provide the following to employers
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Guidance notes;
Draft letter’s from Employer;
Electronic opt out route; and
Website page purely on Auto enrolment.
Electronic opt out route linked into yourfund contacts
Timetable communications ‘suggestions’ around your staging date
Optants
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Someone who has opted out previously; and
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Assuming they are over 22 (and less than SPA) and are on a
salary of greater than £9440 they will need to be brought back
into the scheme.
Every 3 Years
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The whole exercise for optants will need to be repeated every
three years!
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2014, 2017, 2020
Questions
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A chance to ask any questions on Auto enrolment
Any other business
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End of contracted out NI from 2016?
Thank you
Contact details
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Neil Lewins
Technical Officer
0207 369 6066
[email protected]