Local Government Pension Scheme
LGPS2014 - Employer Presentation Andy Cunningham Employer Relationship & Fund Development Manager Wiltshire Pension Fund 28th & 29th January 2014
Local Government Pension Scheme Agenda 1). The main points and changes 2). New data requirements (including new forms/spreadsheets) 3). New Discretions Policy 4). Further guidance & information 5). Member Presentations and communications 6). Some actions to take away.
Local Government Pension Scheme 1. The main points and changes Benefits Changes – a brief overview • Career Average Scheme for benefits built up after April 2014 •
Final Salary Scheme for benefits before then – using the final salary when the person leaves (i.e. not at 31/03/2014)
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Accrual rate is now 1/49ths
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Normal Retirement Age is linked to state pension age (with a minimum of 65)
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But members can draw their pension from 55 without employer consent (but it will be reduced)
Local Government Pension Scheme 1. The main changes Benefits Changes – a brief overview (continued) • Underpin protecting people who were members at 01/04/2012 and who were over 55 at that time – means we must operate the Scheme as before for these people as well as under the new approach. •
Changes to employee contribution bands methodology
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Movement away from the idea of ‘service’ towards early pensionable pay (this affects the information we require)
Local Government Pension Scheme 1. The main points and changes 1.1. Two main sections to the Scheme • Main Section of the Scheme
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50/50 Section of the Scheme - Broadly speaking, paying half the contributions gets half the benefits (with some exceptions)
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All new member should be automatically put into the main section of the scheme although they can later switch between the main and 50/50 section.
Local Government Pension Scheme 1. The main changes 1.1. 50/50 and Main sections to the Scheme • Important: We strongly recommend that you set these up as sub-schemes or separate schemes on your payroll system as you will need to be able to identify the pensionable earnings relating to us for reporting purposes etc. •
Note that regardless of whether or not the member is in the main section of scheme or the 50/50 section, employer contributions based on their full pay are still required.
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(Similarly, reductions in pay due to sickness or injury should be disregarded when calculating employer contributions)
Local Government Pension Scheme 1. The main points and changes 1.2.a. Employee Contributions • Still split into bands •
Now based on expected actual pensionable for the year not full-time equivalent pay
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(Weighted) average rate is still around 6.5%
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Each job still assessed separately.
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Most part-time workers are likely to be paying less
Local Government Pension Scheme 1.2.b. The bands: Main Section of the Scheme Pay Bands (Actual Pay)
Employee Contribution Rates
Up to £13,500
5.5%
£13,501 - £21,000
5.8%
£21,001 - £34,000
6.5%
£34,001 - £43,000
6.8%
£43,001 - £60,000
8.5%
£60,001 - £85,000
9.9%
£85,001 - £100,000
10.5%
£100,001 - £150,000
11.4%
More than £150,000
12.5%
Local Government Pension Scheme 1.2.c. The bands: 50/50 Section of the Scheme Pay Bands (Actual Pay)
Employee Contribution Rates
Up to £13,500
2.75%
£13,501 - £21,000
2.9%
£21,001 - £34,000
3.25%
£34,001 - £43,000
3.4%
£43,001 - £60,000
4.25%
£60,001 - £85,000
4.95%
£85,001 - £100,000
5.25%
£100,001 - £150,000
5.7%
More than £150,000
6.25%
Local Government Pension Scheme 1. The main points and changes 1.2.d Implementation advice • Must review each employee’s band amount each April (as well as for new joiners at the time they join) •
Employer’s discretions as to whether to review these more frequently whenever a member’s pay changes (e.g. due to change of hours, pay increases etc) – your approach to this should be outlined in your discretions policy.
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Further information will be available in the new employer’s guide when this has been updated on the website.
Local Government Pension Scheme
1.3. New Definition of pensionable pay Main change is that all types of overtime will now be pensionable.
Local Government Pension Scheme
1.4. Refunds It is now possible for members to have refunds for service up to 2 years (depending on whether they started before or after April 2014). Only refunds through payroll = Opt outs within 3 months All other early leaver refunds will be dealt with by the pension fund.
Local Government Pension Scheme
1.5. Types of retirements Redundancy/Efficiency: From age 55, members are entitled to unreduced benefits (costs to employers will still apply in most cases) - unchanged Ill Health (any age): Process and tiers are similar although there is some changes to the wording.
Certificates will need to be updated
Local Government Pension Scheme
1.5. Types of retirements (Continued) Early Retirement (from age 55): Members no longer need employer permission to rely early but the pension will normally be reduced substantially No employer costs will apply Note: If members retire before age 60, they will lose any rule of 85 protection.
Flexible Retirement (from age 55): Will operate as before – employer permission still needed but no costs will apply in any case (again reductions will often be substantial)
Local Government Pension Scheme
1.5. Additional Contribution Options AVCs: Unchanged. Prudential is the current provider, but some members have stayed with previous providers. Added Years Arrangements (set up before April 08): Unchanged ARCs are now called APCs: As before but members can now may lump sum, one-off top ups to contributions Existing ARCs to continue as before.
Local Government Pension Scheme
1.6. Types of leave: Full pay, reduced pay and unpaid Full pay: Deduct employee and employer contributions as normal as if they were working. Reduced and unpaid leave: • Deduct employee contributions based on any pay received •
Employer contributions should be paid based on ‘assumed pay’ for relevant child related leave, sick leave & reserve forces leave
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Pension will be based on the member’s ‘assumed pay’ for child related leave and sick leave & reserve forces leave Assumed pay should not be used for strikes and other unpaid leave.
Local Government Pension Scheme
1.6. Types of leave: Full pay, reduced pay and unpaid Repaying contributions for missing service: Note there is no longer a specific option to do this* For relevant child related, sick and reserve forces leave – this is not necessary as the person’s pension is unaffected. For trade disputes and other types of unpaid (e.g. career breaks & unpaid additional maternity leave) –this option does not need to be offered (although note that members can still use APCs to top up pensions) (*Unless the member is covered by the Underpin)
Local Government Pension Scheme
1.7. Opting in and out and changing from Main to 50/50 Subject to the employee being eligible to join the scheme, members can: •
Opt in and out when they wish (but in line with payroll periods)
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Change between the main section of the scheme and 50/50 section when they wish.
Local Government Pension Scheme
1.7. Opting in and out and changing from Main to 50/50 (cont.) Notes: • Auto-enrolment and re-enrolment dates – When these events occur, members should be enrolled into the main section of scheme. •
If they are in the 50/50 section, still need to be enrolled into main section
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If the employee is in the 50/50 section and goes on to no pay due to sickness or injury, the employee must be (notionally) moved back into the main section from the beginning of the next pay period if they are still on nil pay at that time.
Local Government Pension Scheme
1.8. Casuals & Variable Workers For most members, it no longer matters if they are casual or variable workers as the pension is based on pensionable earnings. Hence we don’t need to know the hours for these workers in most cases. Exception: Members covered by underpin (member as at 01/04/2012, aged 55 or over at that time)
Local Government Pension Scheme
1.9 Starter Packs •
Some of the content in existing packs will soon be out of date
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Movement to on-line packs wherever possible (main reason is version control is easier)
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Some hard copies to be kept.
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New versions yet to be completed.
Local Government Pension Scheme
2. New data requirements 2.1. Starter Forms/ spreadsheets Generally speaking: the same information is needed Except we will no longer need to know part-time percentages for most workers* *Apart from a handful of members who could be covered by the underpin e.g.re-joiners who members as at 1 April 2012 and over 55 at this date with a gap of no more than 5 years)
Local Government Pension Scheme
2.2. Changes
Personal Changes: Required as before (addresses, name etc) Part-time Percentage Changes (either hours or weeks): We only need to know these for members covered by the underpin (born before April 1957)
Opting in and out: Forms needed as before 50/50 Main Section: We don’t need to know the date of change – just earnings when they leave or at the end of year.
Local Government Pension Scheme
2.3 Leavers (under 55)
More pay figures required: a). FTE Salary b) Pension Remuneration (for all pre-2014 members): Using the old definition of pensionable pay (i.e. excluding non contractual overtime) c). Actual or assumed pay since most recent first of April (split between 50/50 and Main Section) Assumed pay for those who were on reduced or no pay.
Local Government Pension Scheme
2.4 Retirements and leavers over 55 Also, more pay figures required: a). FTE Salary b) Pension Remuneration (for all pre-2014 members): Using the old definition of pensionable pay (i.e. excluding non contractual overtime)
c). Actual or assumed pay since most recent first of April (split between 50/50 and Main Section) Assumed pay for those who were on reduced or no pay.
Local Government Pension Scheme
2.5 Monthly/Annual Returns Main Changes: We need total pensionable earnings (annual report only): •
Split between 50/50 and Main Section of the scheme
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Adjusted for assumed pay.
Local Government Pension Scheme 3. Employers’ Discretions Policies •
New template will be on-line shortly
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Most of same discretions apply
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One additional (mandatory) discretion
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Old policies can continue to apply (where relevant) but we recommend that employers review their policy to update it where necessary.
Local Government Pension Scheme
4. Further Guidance •
Employers’ guide and new forms/spreadsheets on www.wiltshirepensionfund.org.uk
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Employers’ site – include HR/Payroll Guide: www.lgpsregs.org
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Members’ site (in addition to our website) www.lgps2014.org Contact Me E:
[email protected] T: 01225 713612
Local Government Pension Scheme 5. Members’ Presentations and Communications •
Active newsletters – sent out last week
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Presentations/Road-shows: A number already organised across Wiltshire.
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Presentations on site: Contact Zoe Stannard
[email protected] 01225 718054
Local Government Pension Scheme
6. Some actions to take away •
Ensure payroll system is set-up to cope with: - 50/50 and main scheme separation - Different methodology for calculating employee contributions
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Review employee contribution rates from April 2014
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Use new forms for events after April 2014 (although we may need to phase this transition after your data is not up to date on our system)
Local Government Pension Scheme
6. Some actions to take away •
Familiarise yourself with the new employer’s guide content (once on-line)
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Use new monthly contribution spreadsheet from April
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Check any references you make to pensions in contracts, employee documentation is still correct.
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Ensure relevant employer representatives are aware of the changes.
Local Government Pension Scheme
Any Questions?
