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Essex Pension Fund March 2014 Matt Mott. LGPS 2014. LGPS 2014. 2014 Scheme Overview 50/50 section APC AVC Flexible retirement Protections Pensionable Pay & Contributions Employer Responsibilities & Discretions. 2014 Scheme Overview. CARE Scheme (Career Average Revalued Earnings)
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Essex Pension Fund March 2014 Matt Mott LGPS 2014
LGPS 2014 • 2014 Scheme Overview • 50/50 section • APC • AVC • Flexible retirement • Protections • Pensionable Pay & Contributions • Employer Responsibilities & Discretions
2014 Scheme Overview • CARE Scheme (Career Average Revalued Earnings) • Accrual rate of 1/49th - It’s better • Annual revaluation by CPI • Normal retirement age (NRA) is State Pension Age (SPA) • Find your SPA at www.gov.uk/calculate-state-pension • Voluntary retirement from age 55 (without employer consent) • Flexible retirement From age 55 (with employer consent)
2014 Scheme Overview • 50/50 section • Benefits accrued prior to 1st April 2014 protected • Protection for those within 10 years of retirement in April 2012 • Actuarial reductions for ER will differ for different periods of membership • Pensionable pay is actual pay • Vesting (refund) period increased to 2 years • Average member contributions of 6.5% • Cost envelope of 19.5%
2014 Scheme Overview • All other ancillary benefits to remain the same • Additional Pension Contributions (APC) • Pension accounts • Automatic Aggregation • Link to Public Service schemes • AVC • Benefit Regulations Received September 2013
50/50 section • Employee pays ½ contributions • Benefits accrue at 1/98th • All other ancillary benefits to remain the same • Temporary arrangement • Employees put in main section on AE re-enrolment date • Cannot begin or continue APC • Unless for “lost pension”
50/50 section • During periods of nil pay sick leave 50/50 section members must be re-enrolled into main section • Employers must maintain full contributions
Death benefits Civil partners Co-habiting partners
APC • Maximum £6,500 • Monthly or lump sum contribution • A scheme member benefit only • Must cease if employee elects for 50/50 section • Also shared cost APC • Contribution split must be agreed Buy extra pension
APC • Used to buy “lost pension” • Authorised unpaid leave • Child related unpaid leave • Strike* • If election is made within 30 days of return to work: • Employee pays 1/3 • Employer 2/3 (except strike*) • Election after 30 days of return to work: • Full cost paid by employee
AVC • Current 2014 regulations • Contributions up to 100% of pay after LGPS contributions and NI • Tax free cash 100% of AVC fund • Added to 25% LGPS lump sum = 55% tax charge • Intention (probable amendment) 2014 regulations • Contributions up to 100% of pay after LGPS contributions and NI • Tax free cash restricted to 25% of fund • Added to 25% LGPS lump sum = Nil tax charge • Pre 1 April AVC administered by 2008 regulations
Flexible Retirement • From age 55 with employer consent • Actuarial reduction or strain may apply • Employees can choose to receive payment: • of all benefits • of all pre 2008 benefits • of all, part or none post 2008 benefits • of all, part or none post 2014 benefits • Plus “additional benefits” in accordance with actuarial guidance issued by the Secretary of State
Protections - Pre 2014 membership • All membership accrued pre 1 April 2014 protected • LGPS 2008 regulations apply including: • 60th & 80th • If applicable lump sums • Normal retirement age 65 • Link to final salary at eventual retirement • Members in receipt of a pension or a deferred benefits are unaffected by LGPS 2014
Protections- Pre 2014 membership Protections can be lost if 2008 deferred benefits are aggregated with current 2014 membership if employee has had a break in public sector pension schemes of more than 5 years
Protections - The Underpin • Active members on 31 March 2008 • Were within 10 years of NRA on 1 April 2012 • Receive pension on or after NRA • Do not have more than 5 year break in membership of any public sector pensions • The underpin is only paid if the 2008 scheme (had it continued) provides a better pension than LGPS 2014
Protections – Rule of 85 Is so complicated I am not going to try and explain it!! Example: • 58 year old member • Rule of 85 satisfied • Can retire and immediately receive pension • Will there be an actuarial reduction? • Yes,11% of pension and 6% of lump sum!
Protections – Rule of 85 • Why? • Age plus membership in whole years = 85 • Who has protection? = In before 1 October 2006 • This protection continues from April 2014 *Does not apply to* new option of drawing your pension from age 55-60
Protections – Rule of 85 • Exercise discretion to waive the reduction • If so you will have a strain cost • Employers must publish a policy • Essential to read the HR and Payroll guides
Pay & Contributions • Actual pensionable pay (PP) • Including overtime • Does not include expenses • Assumed Pensionable Pay (APP) • What the employee would have earned • Replaces notional pay • See HR/Payroll guides • 1/2 employee contribution rate if 50/50 elected • Employer contributions always paid in full
Pay & Contributions • Final Pay (2008 definition) • Required for all pre 2014 membership • 10 year Underpin • Also PT hours and average hours • Added years and CoP • Will you know who these apply to? • Therefore, we require them for all employees!! • Contribution bands will be revalued every 3 years only • Employers to review employee contributions • Annually in April • When material change occurs ie promotion
Employer Responsibilities • To provide starter details to the Fund within 1 month • By spreadsheet • To request within 3 months of employee start date employment and LGPS histories • Inform employee: • Contractual enrolment • Auto Enrolment • Contribution rate payable • They can opt out • Where to find scheme information ie website!
Employer Responsibilities • Upon 50/50 section election provide employee with impact of pension loss • Upon AE re-enrolment all 50/50 section members must be put into main section • For periods of nil pay sick leave 50/50 section members must be put into main section • Inform employees where to find the opt out form • But not to supply it!! • Opt out with less than 3 months membership, refund contributions and notify the Fund
Employer Responsibilities • Opt out with over 3 months membership, send the Fund normal leaver forms • APC for “lost pension” employers must: • Enable employee to make election within 30 days • Should ideally: • inform employee of the amount of lost pay • inform employee of the amount of lost pension • To provide data on spreadsheets (do not amend) each month • Same data fields for all employees • To provide end of year data (correct) by date specified by Fund, usually mid April
Employer Responsibilities All leaving details must be provided within 1 month of date of leaving: • All pay figures • Periods of membership • Main Section • 50/50 Section • Contribution amounts • Main Section • 50/50 Section
Pay Form • The draft pay form contains up to 9 different values • Required for all employees
Discretions & Policies • Employers must formulate, publish and keep under review policy statements • The Fund should receive these by 30 June • Five main areas: • Voluntary funding of additional pensions (SCAPC) • Awarding additional pension via whole cost APC • Switching on 85 year rule for those 55-60 • Flexible retirement • Waiving of actuarial reductions • A list of discretions will be provided by the Fund
More Information • www.lgps2014.org • www.lgpsregs.org • Please read the HR & Payroll Guides • Contains essential information! • www.essexpensionfund.co.uk • email: pensionenquiries@essex.gov.uk • telephone: 01245 431912
Thank you for listening Essex Pension Fund