Transcript Local Government Pension Scheme

Pension Liaison Officer Group
nd
2 July 2013
Presented by
Emma Shand – Employer Liaison Officer
Shirley Cuthbert – Deputy Pensions Manager
Viv Ray – Deputy Pensions Manager
Agenda
• Auto-enrolment – Update
• LGPS 2014
• What the new scheme means for
employers
• Looking to the Future
Auto-Enrolment
Speaker: Viv Ray
(Deputy Pensions Manager)
Auto-Enrolment – Agenda
 Experience
 Reminder
Auto-Enrolment
Experience
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Do not underestimate the time needed to set up new processes to comply with AE.
You need to talk to your payroll provider at least 12 months before your staging
date to establish what service they will be providing.
Do not accept any opt out forms if:
– Member has completed old opt form. New form available since January 2013
on Devon Pension Services website or by contacting pension section
– Dated before employee has joined LGPS. Can only opt out once joined pension
scheme.
– Member has only completed one form for multiple post. Each post the member
wishes to opt out of must have separate opt out form.
Employer must send starters data and opt out data on spread sheets within one
month of employee joining LGPS and/or opting out.
Employer must include ALL starters even if they have opted out before deduction of
pension contributions. DPS are required to hold this information.
Ensure you fully understand what you are required to do to comply with Auto
Enrolment rules.
Auto-Enrolment
REMINDERS
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Do you know when your Staging Date is?
Have you made a decision whether to use the Transitional Period and/or
Postponement?
Is everything in place for sending out letters to ALL your employees at your Staging
Date?
Do you have in place, processes for assess your employees each month to check
their auto enrolment eligibility?
Have you got monthly procedures in place for notifying Devon Pension Services of
new starters and those that have opted out?
AE NEWS
GOOD NEWS!
Will Auto Enrolment rules be abandoned for Defined
Benefit schemes such as the LGPS?
Maybe!
(see DWP consultation ended 7th May 2013)
Auto-Enrolment
Any Questions?
Auto-Enrolment
Useful website addresses
Pensions Regulator:
www.thepensionsregulator.gov.uk
Department of Work and Pensions:
www.dwp.gov.uk/policy/pensions-reform/workplace-pension-reforms/
Devon Pension Services
www.devon.gov.uk/pensions
LGPS 2014
Speaker Shirley Cuthbert
(Deputy Pensions Manager)
LGPS 2014 Video
http://lgps2014.org/content/video-overviewlgps-2014
LGPS 2014 Proposals
Feature
LGPS 2008
LGPS 2014
Basis of Pension
Final Salary
Career Average
Revalued Earnings
(CARE)
Accrual rate
1/60th
1/49th
Normal Pension Age
Age 65
State Pension Age
(Minimum age 65)
Earliest voluntary
retirement age
Age 60
Age 55
Contribution flexibility
None
50/50/Option
Revaluation
CPI
Active rate?/ CPI
LGPS 2014 Proposals
Feature
LGPS 2008
LGPS 2014
Definition of pensionable
pay
Pay excluding noncontractual overtime and
non-pensionable
additional hours
Pay including noncontractual overtime and
additional hours for parttime staff
Lump sum option
Trade £1 of pension for
£12 lump sum
Trade £1 of pension for
£12 lump sum
Death in Service lump
sum
3 x pensionable pay
3 x pensionable pay
Death in Service survivor 1/160th (based on Tier 1
benefits
ill health enhancement)
1/160th (based on Tier 1
ill health enhancement)
Feature
LGPSLGPS
2014
Proposals
2008
LGPS 2014
Ill- health retirement
Tier 1 – service
enhanced to Normal
Pension Age (65)
Tier 2 - 25% service
enhancement to NPA
(65)
Tier 3 – temporary
payment of pension up
to 3 years
Tier 1 – service
enhanced to Normal
Pension Age (State
Pension Age)
Tier 2 - 25% service
enhancement to SPA
(min 65)
Tier 3 – temporary
payment of pension up
to 3 years
Redundancy/efficiency
retirement
Age 55+
Age 55+
Qualifying period for
benefits
3 months
2 years
Contributions
Possibly From
LGPS 2014
Possibly To
Gross Rate
Up to £13,500
5.5%
Cont After Tax
Relief
4.40%
£13,501
£21,000
5.8%
4.64%
£21,001
£34,000
6.5%
5.20%
£34,001
£43,000
6.8%
5.44%
£43,001
£60,000
8.5%
5.10%
£60,001
£85,000
9.9%
5.94%
£85,001
£100,000
10.5%
6.30%
£100,001
£150,000
11.4%
6.84%
12.5%
6.88%
More than £150,000
CARE
Date
Transaction
Year 1
Deposit
£15,000 X 1/49
£306.12
£306.12
Year 2
Interest
£306.12 X 0.03
£9.18
£315.30
Deposit
£15,600 X 1/49
£318.37
£633.67
Interest
£633.67 X 0.03
£19.01
£652.68
Deposit
£16,000 X 1/49
£326.53
£979.21
Interest
£979.21 X 0.03
£29.38
£1,008.59
Deposit
£16,000 X 1/49
£326.53
£1,335.12
Year 3
Year 4
Total
50/50 option
• Pay 50% contribution for 50% of pension
• Only affects the amount of pension you
build up – other benefits remain
• Encourage members to join/stay in
• Could be useful for high earners to avoid
annual allowance/lifetime allowance
charges
• Will be automatically enrolled back into
100% scheme for Auto Enrolment
50/50 Example
Main Scheme (5.8%)
Net contribution
1 years Pension
DIS lump sum
50/50 Option (2.9%)
£58 per month
1/49th x £15,000=
£306pa
£29 per month
1/98th x £15,000 =
£153 pa
3 x £15,000 = £45,000
3 x £15,000 = £45,000
Linking NPA to SPA
• LGPS 2014 Normal Pension Age (NPA) linked to
State Pension Age (SPA) - minimum of 65
• If retire before NPA pension will be reduced. If
retire after NPA pension will be increased
• SPA is increasing to 66 with future increases to
67 and beyond
• Office for Budget Responsibility to set future link
between SPA and life expectancy
19
www.local.gov.uk
Protections
• Benefits before April 2014 will be
unaffected for all members
– Keep normal retirement age 65
– Keep 85 year rule protections
– Continue to be linked to final salary on leaving
• Members aged 55+ at 06/04/2012 will get
the greater of 2008/2014 scheme
• Will 50/50 option affect protections?
• Continue in LGPS if outsourced
Examples
• Please visit www.LGPS2014.org
What the new scheme means
for employers
Presented by
Emma Shand
Employer Liaison Officer
Introduction
The reform of LGPS in 2014 will have implications for
Payroll systems
Changes as a result of changes to pensionable pay and
move to Career Average Revalued Earnings Scheme
(CARE)
Legislation yet to be laid but payroll requirements are
expected to remain same
Further developments may impact on information provided
Key Requirements
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Payroll records for each job
Separate sections of the scheme
Employee Contribution Rates
Employer Contribution Rates
Additional Contributions
New Definition of Pensionable Pay
Assumed Pensionable Pay
Pay received spanning 31/3/2014 and 1/4/2014
Payroll Records
• Multiple employments - Each job must be held
separately
• Ability to deduct appropriate contribution rate for each
job
• Potentially change employee contribution rates each pay
period due to variations of pensionable pay
• Ensure employee contribution rates determined by
pensionable pay received not full-time equivalent pay
• Ability to hold separate cumulative pensionable pay and
employee contributions for each job
Payroll Records continued…
• Report changes in contractual hours
• Report periods of absence
• Ability to hold pensionable pay accumulations to date of
any protections member has
• Ability to hold pensionable pay accumulations at age 65
for members aged 55 and over at 1/4/2012
• Deduct employee and employer contributions on any
pensionable emoluments and include in cumulative
pensionable pay
Separate Sections of the Scheme
2 Sections: Full section (100/100) and 50/50 section
Payroll systems must:
• Be able to operate the 50/50 Section on any or all of the jobs
• Have ability to deal with movement between full section and
50/50 section and back (and vice versa) within one financial
year
• Hold cumulative contributions paid and pensionable pay for
each section AND each job per Scheme year.
• Ensure cumulative figures for any periods in each section are
totalled
• Report start and end dates for each period in full and 50/50
sections
Employee Contribution Rates
• Contribution rates determined by and calculated on actual
pensionable pay received
• Deducted on pensionable pay received
• If Assumed Pensionable Pay (APP) used contributions
deducted from pensionable pay received not APP
• Rates remain same unless employer changes rate due to
change in employment or pensionable pay
• Payroll must hold cumulative contribution amounts for each
job per section of scheme
Employer Contribution Rates
Payable on pensionable pay received except during:
• Ordinary or paid maternity leave
• Ordinary or paid paternity leave
• Ordinary or paid adoption leave
Employer contributions payable on Assumed
Pensionable Pay (APP) for above
Employer contributions are not halved for 50/50
section
Additional Contributions
No change here
Still need facility to deduct additional
pension contributions as percentage of
pensionable pay or a flat rate
Still need facility to deduct Additional
Voluntary Contributions (AVCs)
Pensionable Pay New Definition
From 1/4/2014:
• Non-contractual overtime will be pensionable
• Excess hours for part-time staff will be pensionable
• Exclusions will be listed in scheme regulations – if
not listed its included for pensionable pay
Pensionable Pay New Definition
Payroll systems must:
• Operate 2014 scheme definition of pensionable
pay
• Hold seperately, per job, pensionable pay
cumulative each year in line with 2007 pay
definition
Final Pensionable Pay
Final pay for pre 2014 benefits (2007 regs) =
based on FTE pensionable pay due for last 365
days
Post 1/4/2014 CARE scheme benefits accrue year
by year = based on actual pay or APP received in
scheme year (ending 31st March)
Though basis of scheme changes from 1/4/2014,
final pay will still be at date of leaving
Final Pensionable Pay
Anyone with pre 1/4/2014 service two
remuneration calculations needed:
Final pensionable remuneration for last 365 days
to date of leaving and previous years if applicable
(without non-contractual overtime)
PLUS
Actual pensionable pay 1st April to date of leaving
(including non-contractual overtime)
Assumed Pensionable Pay (APP)
APP only applies to the relevant employment when
a member goes onto reduced contractual pay or
no pay:
• Sickness or injury
• Ordinary or paid additional maternity, paternity
or adoption leave
• Relevant child-related leave
• Absent on reserve forces leave
APP continued
Payroll system must:
• Calculate APP for each job
• Calculate APP for period of ordinary and additional maternity,
paternity or adoption leave for each job
• Ensure cumulative figures for pensionable pay include APP
for relevant periods for each job
• Ensure the actual pensionable pay for periods of reduced pay
is not included in the cumulative pensionable pay figure for
each job
• Ability to deduct appropriate contributions on actual
pensionable pay received during reduced pay period and hold
APP in the accumulations for each job
Pay relating to pre 31/3/2014
Pay or back-pay received after 31/3/2014
relating to period before 1/4/2014 is
excluded from cumulative pay figure for the
year
NOT included in calculation of CARE
pension (post 2014)
Next Steps
Provisions for pre 2014 membership and final pay are
being agreed and will be shared shortly
Local Government Association (LGA) website links to
Briefing Note for Employers
Payroll specification document is to be developed aiming to
provide more details – expected August/September 2013
LGA will provide training for employers August/September
2013
Looking to the future
Speaker Shirley Cuthbert
(Deputy Pensions Manager)
Looking to the future
We are moving
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New location - Great Moor House, Exeter
New phone number 01392 383000
With effect from 16th September 2013
Letters to employers August 2013
Letters to all members August 2013
Shared service
Improved database
• Web based platform - Altair
• Employer Self Service (ESS) currently
being trialled
• Member Self Service to follow (MSS)
allow members to update certain
fields eg change of address
calculate own estimates
Password Protected
Communication
• Employers – Pensions Line main source of
providing information
• Employees – Pensions Post, keeping
employees up to date with developments
• Electronic communication – sending
updates straight to email addresses
• Annual Benefit Statement
The Personal Touch
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Employer meetings and training
Member presentations
Drop in sessions
Prudential & us
State Pension Reform 2017
• Contracting out to cease
scheme members & employers
will pay more National Insurance
no affect on Scheme benefits
no affect to income received into
Fund
Any questions
Further Information
• LGA website:
http://www.local.gov.uk/web/lgaworkforcepensions/home.
LGA latest news containing information on scheme reform
• LGPS website:
http://www.lgps.org.uk/lge/core/page.do?pageId=97977.
Information on the agreement reached between employers, trade
unions and government on the benefit structure of the scheme – see
‘Reform of the LGPS – The New LGPS 2014 Project’.
• LGPS 2014 member website: www.lgps2014.org.
A dedicated website for information for scheme members about the
reforms to the LGPS from 1 April 2014
• DCLG: https://www.gov.uk/government/consultations/localgovernment-pension-scheme-2014-and-2008-scheme-amendingregulations.
Most recent DCLG consultation
Contact Info
• Email addresses:
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[email protected]
[email protected]
[email protected]
[email protected]
[email protected]