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Draft Regulations for a new look Local Government Pension Scheme for England

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Draft Regulations for a new look Local Government Pension Scheme for England & Wales ... of 85 go forward into the new look scheme. LGPS briefing February 2007 ... – PowerPoint PPT presentation

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Title: Draft Regulations for a new look Local Government Pension Scheme for England


1
Draft Regulations for a new look Local Government
Pension Scheme for England Wales
  • Published 22 December 2006
  • Consultation ends 28 February 2007
  • Target for the final Regulations to be laid is
    April 2007
  • New scheme in force at 1 April 2008

2
Comparing the main proposals in the current
scheme with the draft Regulations for the new
scheme
3
Final Salary Scheme
The new scheme will remain a final salary scheme.
4
Accrual Rate
  • Current scheme
  • 1/80th pension plus 3/80th lump sum x pensionable
    pay x pensionable service.
  • Proposed 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.

5
Accrual Rate
  • Proposed new scheme
  • Because of the improved 1/60th accrual rate,
    members could have the same lump sum as now and
    see their pension improved by 8.3.

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 earned in last
    year of service or one of the two immediately
    preceding years.
  • Proposed new scheme
  • Pension based on pensionable pay earned in last
    year of service 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.
  • Proposed new scheme
  • 5.5 on first 12,000 of pensionable pay.
  • 7.5 on pensionable pay above 12000.
  • Based on average contribution of 6.3.
  • Those on whole time pay up to 16,000 will pay
    less than the current 6. Those on whole time pay
    up to 20,000 will pay less than the average of
    6.3.

9
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.

10
Retirement Age
  • Proposed 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.

11
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.

12
Ill Health Retirement
  • Proposed new scheme
  • Member leaves service on ill health grounds with
    a reduced likelihood of undertaking gainful
    employment, an ill health pension will be paid.
    Any service enhancement will be based on when
    member is expected to be able to undertake
    gainful employment.
  • Unable to undertake gainful employment before age
    65, service is enhanced by 50 of potential
    service to age 65.
  • 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, accrued benefits to
    date of leaving are payable with no enhancement.
  • Underlying guarantee that enhancements are to be
    no worse than under current scheme.

13
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.
  • Original Proposal for the new scheme
  • If forced to retire after minimum retirement age
    - employer decides whether to pay a pension and
    if so, whether it is reduced for early payment.
  • 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.

14
Retirements on grounds of redundancy and
efficiency
  • Negotiated Improvement
  • Through negotiation we have reversed the proposal
    to give employers discretion over whether to pay
    pension and how much.
  • The revised proposals are now the same as the
    current scheme.
  • LGPS members dismissed on redundancy or
    efficiency will be entitled to immediate payment
    of retirement pension without reduction.
    Existing members must be age 50 if they are
    dismissed before 31 March 2010, after that date
    it is age 55 for all members.

15
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.
  • Proposed scheme
  • Increase service by up to 10 years for those in
    service.
  • Increase pensions in payment.
  • Limited to potential service to age 65.

16
Death in service benefits
  • Current scheme
  • Lump sum 2 x pay.
  • Proposed new scheme
  • Lump sum 3 x pay.

17
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.
  • Proposed new scheme
  • Pensions for co-habitees and unmarried partners
    backdated to 1 April 1988.
  • Pension same accrual rate as now.
  • We need clarification that it will be based on
    ill health pension.
  • Childrens pension same - but no up-rating where
    no survivors pension is payable.

18
Survivors pension
  • Negotiated Improvement
  • The TU Side has won the argument and we expect up
    rated childrens pensions where no partners
    pension is payable (i.e lone parents) will be
    retained.

19
Death in retirement
  • Current scheme
  • Death within 5 years of retirement lump sum
    payable of 5 years pension, less pension already
    paid.
  • Proposed 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.
  • Proposed 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.
  • No details yet.

22
Summary and next steps
23
Summary and next steps
24
Give us your views!
  • Branches are consulting members.
  • Trade Union Side meets on 23 February.
  • SGLC meets on 27 February to assess progress.
  • SGLC will decide next steps.
  • Service Groups will then meet.

25
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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