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New look Local Government Pension Scheme for England

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in the current scheme with the Regulations for the new scheme. LGPS BRIEFING 4 ... that his ill health renders him permanently incapable of doing his current job ... – PowerPoint PPT presentation

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Title: New look Local Government Pension Scheme for England


1
New look Local Government Pension Scheme for
England Wales
  • New scheme to come into force at 1 April 2008

2
Amicus Pensions Team
  • Officers -
  • John Allott, National Officer
  • Bryan Freake, Pensions Officer
  • National Committee Member -
  • Dick Banks
  • Amicus Local Government Pension Committee -
  • Maintaining our lay democracy

3
Comparing the main elementsin the current scheme
with the Regulations for the new scheme
4
Final Salary Scheme
The new scheme will remain a final salary scheme.
5
Accrual Rate
  • Current scheme
  • 1/80th pension plus 3/80th lump sum x pensionable
    pay x pensionable service.
  • New scheme
  • 1/60th pension x pensionable pay x pensionable
    service.
  • At retirement a member can exchange pension for
    cash up to a maximum cash lump sum of 25 of the
    overall value of their retirement benefit. The
    exchange rate is 12 cash for each 1 per annum
    pension given up.

6
Transfer to the new scheme
  • Benefits earned on service up to 31 March 2008
    will remain on current scheme accrual basis
    1/80th Pension 3/80th lump sum.
  • All members will earn benefit under the new
    scheme from April 2008 including those with
    protection under the Rule of 85 -1/60th pension.

7
Final pensionable pay
  • Current scheme
  • Pension based on pensionable pay in last year of
    service or one of the two immediately preceding
    years.
  • New scheme
  • Pension based on pensionable pay in last year of
    service or one of the two immediately preceding
    years or best average of three consecutive years
    in the last ten.

8
Employee contribution
  • Current scheme
  • 6 of pensionable pay.
  • 5 protected for those on manual grades at April
    1998.
  • Those on 5 protection will have the protection
    phased out over three years from 2008

9
Employee Contribution
  • Proposed new scheme
  • Contributions linked to pay with higher paid
    paying more than lower paid as follows-
  • Less than 12,000 5.5
  • 12,001 - 14,000 5.8
  • 14,001 - 18,000 5.9
  • 18,001 - 30,000 6.5
  • 30,001 - 40,000 6.8
  • 40,001 - 75,000 7.2
  • More than 75,000 7.5
  • Contribution rate calculated on the basis of
    pensionable pay in the previous financial year
    The bands will rise in line with prices from
    2009.

10
Retirement Age
  • Current scheme
  • Normal retirement age 65.
  • Can retire from age 60 without employer consent.
  • Minimum retirement age from age 50 increasing to
    55 from April 2010.
  • Members can retire before age 65 without an early
    retirement reduction if age and service equal 85
    (Rule of 85).
  • Phasing out of Rule of 85
  • Rule of 85 ends for service after April 2008
  • Protection for those age 60 before April 2016
  • Tapered protection for those age 60 between
    April 2016 and March 2020.

11
Retirement Age
  • New scheme
  • Normal retirement age 65.
  • Can retire from age 60 without employer consent.
  • Minimum retirement age 50 increasing to 55 from
    April 2010 (55 from April 2008 for new
    starters).
  • Protections for Rule of 85 go forward into the
    new look scheme.

12
Ill Health Retirement
  • Current scheme
  • Unable to do current job until at least age 65,
    or comparable job offered by employer.
  • More than 5 years service at retirement to
    qualify.
  • Pension enhanced by formula based on service and
    age as follows
  • Up to 10 years service doubled
  • Between 10 and 13 1/3 years service increased to
    20 years
  • Service more than 13 1/3 years increased by 6
    2/3 years.
  • Enhancement cannot exceed potential service to
    age 65.

13
Ill Health Retirement
  • New scheme
  • If a members employment is terminated on the
    grounds that his ill health renders him
    permanently incapable of doing his current job
    and he has a reduced likelihood of obtaining
    gainful employment before his normal retirement
    age they may qualify for a benefit.
  • Gainful employment is defined as paid
    employment for not less than 30 hours in each
    week for a period of not less than 12 months

14
  • Ill Health Retirement
  • There are three levels of provision
  • Unable to undertake gainful employment before age
    65, service is enhanced by 100 of potential
    service to age 65.
  • Unable to obtain gainful employment within a
    reasonable period but likely to be able to
    undertake gainful employment before age 65,
    service is enhanced by 25 of potential service
    to age 65.
  • Able to undertake gainful employment within a
    reasonable time of leaving, consultation
    continuing on a benefit to be provided by the
    Employer rather than the Scheme.


15
Retirements on grounds of redundancy and
efficiency
  • Current scheme
  • If forced to retire on redundancy/efficiency
    grounds after minimum retirement age - immediate
    pension earned to date of leaving without any
    early payment reduction paid.
  • New scheme
  • If forced to retire after minimum retirement age
    entitled to immediate pension without reduction
  • Minimum retirement age for new staff is age 55.
    For existing staff, it is age 50 until April
    2010 - when it goes up to 55 for everyone in line
    with the Finance Act.

16
Employers power to increase pensionable service
and pension in payment
  • Current scheme
  • Increase service by up to 6 2/3 years for those
    in service.
  • New scheme
  • Increase service by up to 10 years for those in
    service.
  • Increase pensions in payment.
  • Limited to potential service to age 65.

17
Death in service benefits
  • Current scheme
  • Lump sum 2 x pay.
  • New scheme
  • Lump sum 3 x pay.

18
Survivors pension
  • Current scheme
  • Widow/widower/civil partners pensions
  • Short-term pay continues for up to 6 months,
    followed by long-term pension based on 50 of
    ill health pension at date of death
  • Childrens pensions based on number of children
    and whether survivors pension payable.
  • New scheme
  • Pensions for co-habitees and unmarried partners
    backdated to 1 April 1988.
  • Pension same accrual rate as now.
  • Childrens pension same - but no up-rating where
    no survivors pension is payable.

19
Death in retirement
  • Current scheme
  • Death within 5 years of retirement lump sum
    payable of 5 years pension, less pension already
    paid.
  • New scheme
  • Death within 10 years of retirement lump sum
    payable of 10 years pension, less pension
    already paid.
  • Survivors pension
  • New scheme proposals similar to current scheme
    provision except no short-term pensions.

20
Members options to increase benefits
  • Current scheme
  • Buy additional years up to 6 and 2/3 years.
  • Pay additional voluntary contributions (AVCs)
  • Up to the limits allowed by Finance Act
    currently lifetime allowance 1.5million
    annual allowance 215,000.
  • New scheme
  • Pay AVCs to purchase up to 5000 per annum
    additional pension.

21
Sharing the future risk of the scheme
  • Review mechanism to be agreed by 1 April 2009.
  • All pension schemes have risks such as investment
    risk, or those associated with life expectancy.
    These will need to be discussed after 2009.

22
Summary
23
Summary and next steps
24
Current scheme was changed from 6 April 2006 to
allow greater flexibility for members
  • Main changes are
  • Members can take up to 25 of the value of their
    retirement benefits as a tax free lump sum by
    reducing their pension.
  • Members can remain in the scheme until age 75.
  • Members can reduce pay/hours and with employer
    consent draw their pension from age 50 and stay
    in work.
  • There is no maximum service. The old maximum of
    40 years before age 60 and 45 before age 65 have
    been removed.
  • The maximum ceiling of 15 of pay that members
    can pay to increase benefits has been removed.
    Members can now pay up to 50 of their pay to the
    LGPS and additional voluntary contributions.
  • Members can now earn benefits up to the maximum
    allowed by the Finance Act
  • Currently lifetime allowance 1.5m Annual
    allowance 215,000.
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