1. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS The Local Government Pension Scheme The Northumberland Pension Fund Employee Meetings November 2012

2. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Recent Developments From 1 st October 2012. Persons employed for less than 3 months can now opt to join the LGPS. We won’t bring them in automatically. This also applies to casuals.

3. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Auto Enrolment. NCC’s staging date 1 st March 2013. NCC to apply deferment – we won’t auto enrol current opt outs until 2017. From 1 st March new employees will be subject to Auto Enrolment, as will people whose circumstance change and they now come within AE e.g. they attain age 22 or start to earn above the auto enrolment threshold.

4. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS The 2014 Scheme

5. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS The proposal is that we will have a new LGPS with effect from 1 st April 2014

6. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Both the unions and the employers support what has so far been proposed

7. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS We’re all going to be worse off under the new scheme, aren’t we?????

8. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Actually no!!! Whilst its true the proposed Career Average Scheme will, over time, leave the “high flyers” worse off people on low or static pay could be better off under the new proposals. And some low paid people, particularly those working part-time will pay less in!

9. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS So what is proposed?

10. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS From the 1st April 2014 the LGPS will become a career average pension scheme. It will be based upon an accrual rate of 1/49 th with past earnings revalued in line with CPI inflation. Pension earned to 31 st March 2014 will be protected and still linked to final salary. There will be some additional protections for those who were over 55 as at 1 st April 2012

11. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS A 1/49 th is a higher (better) accrual rate than a 1/60 th under the current scheme. A person who completes 30 years under the current scheme gets 30/60 of the final years pay - 50%. A person who completes 30 years under the new scheme would get 30/49ths of their revalued career average pay – revalued in line with CPI - 61%.

12. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme Pay excluding non- contractual overtime. New Scheme Pay including non- contractual overtime. Pensionable pay

13. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme Up to £13,500 5.5% £13,501 to £15,800 5.8% £15,801 to £20,400 5.9% £20,401 to £34,000 6.5% £34,001 to £45,500 6.8% £45,501 to £85,300 7.2% More than £85,300 7.5% New Scheme Up to £13,500 5.5% £13,501 to £21,000 5.8% £21,001 to £34,000 6.5% £34,001 to £43,000 6.8% £43,001 to £60,000 8.5% £60,001 to £85,000 9.9% £85,000 to £100,000 10.5% £100,001 to £150,000 11.4% More than £150,000 12.5% Employee Contributions

14. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme The contribution rate is based what the person would have earned if they had been full-time. New Scheme Based upon the persons actual rate of pay. Pay Used To Calculate Contribution rate Part-time Employees

15. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme Rate based on notional full- time pay therefore 6.5% £12,000 x 6.5% = £780 New Scheme Rate based on actual part- time pay therefore 5.5% £12,000 x 5.5% = £660 Contribution Calculations A part-time worker earning £12,000 a year. If they had been full-time their pay would have been £24,000

16. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme None New Scheme Yes. A member can opt to pay 50% contributions for 50% of the pension. Contribution Flexibility

17. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme Age 65 New Scheme Linked to State Retirement Age – Minimum of 65. Normal Retirement Age

18. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme £1 of pension given up gives £12 lump sum New Scheme £1 of pension given up gives £12 lump sum Lump Sum Options

19. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme 3 x Pensionable Pay New Scheme 3 x Pensionable Pay Death In Service Lump Sum

20. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme 1/160 th accrual based upon Tier 1 ill-health pension enhancement. With added years up to age 65. New Scheme 1/160 th accrual based upon Tier 1 ill-health pension enhancement. With added years up to up to State Retirement Age. Spouses Pension – Death In Service

21. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme 3 Tiers of ill-health with the pension reflecting the impact the illness has on the person’s ability to work. New Scheme 3 Tiers of ill-health with the pension reflecting the impact the illness has on the person’s ability to work. Ill-Health Pension

22. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme CPI New Scheme CPI Indexation of Pensions in Payment

23. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Old Scheme 3 Months New Scheme 2 Years Qualifying or vesting period

24. www.northumberland.gov.uk Copyright 2009 Northumberland County Council Early Retirement Options – New Scheme Redundancy - a person who is made redundant on or after age 55 will still qualify for the immediate payment of their pension. From age 55 - a person can opt to retire early. They will not need employer consent. We are not clear how this option fits with “rule of 85 protections” but our understanding is these protections would not apply if the pension is paid early and all of the pension may be reduced to reflect the early payment i.e. you’d get a smaller pension but paid longer. Con’t

25. www.northumberland.gov.uk Copyright 2009 Northumberland County Council Early Retirement Options – New Scheme Going At 60 Retirement from age 60 will still be an option. Reductions may apply to the benefits, however we understand that rule of 85 protections will carry over in to the new scheme. We will however need further clarification to understand how this will work.

26. www.northumberland.gov.uk Copyright 2009 Northumberland County Council Rule of 85 No longer part of the scheme - however people who were scheme members before 1 st October 2006 have protection. It’s a test to see if reductions apply to the pension and lump sum. Age + Service (in completed years) = 85 you pass the test. Only applies to rights accrued before 1 st April 2008 – unless you were born before 1 st April 1960 where additional protections may apply.

27. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS How does a Career Average Scheme work?

28. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS In a career average scheme your pension is calculated on the average of your revalued earnings over the whole period of your scheme membership and not your final years pay.

29. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS What does a career average scheme look like? For the purposes of the next example we have used the proposed 1/49 th accrual. The inflation factors are assumed for illustration only.

30. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Career Average Example YearPayAccrual Rate Inflation Factor Pension Earned 117,000X 1/49thX 1.15= £398.98 218,000X 1/49thX 1.11= £407.76 319,500X 1/49thX1.06= £421.84 419,900X 1/49thX 1.03= £418.31 523,000X 1/49thX 1.00= £469.39 Total DuePension= £2,116.28

31. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS What would the old scheme have provided? Final years pay £23,000. £23,000 ÷ 60 x 5 years = £1916.66 pension So new scheme better in this example, but the outcome of which scheme is better very much depends upon how CPI inflation compares with increases in pay.

32. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Reminders

33. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Nominations! All scheme members can nominate who they would wish to receive any lump sum payable in the event of their death. Unmarried scheme members may also be able to nominate a partner to receive a pension on their death. Married scheme members or civil registered same sex partners are automatically covered for a spouses pension on their death.

34. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Tax Charges – Annual Allowance If the value of your pension savings increases by more than £50,000 in one year you may suffer an additional tax charge. The increase is measured as the difference in the amount of your pension at the start of the year as compared to the end multiplied by 16.

35. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Annual Allowance – Example Accrued pension at the start of the year £12,000 Accrued pension at the end of the year £15,000 i.e. the person has had a large pay increase. £15,000 - £12,000 = £3,000 x 16 = £48,000 so no tax charge.

36. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Smart AVC

37. www.northumberland.gov.uk Copyright 2009 Northumberland County Council LGPS Northumberland County Council has established “salary sacrifice” benefits for its staff. One of these is in relation to AVC i.e. rather than paying into AVC’s you give up salary and the Council then make a contributions to the AVC scheme equal to the salary given up. This gives the same tax benefits as normal AVC’s but has the additional advantage that the person pays less in National Insurance. These are shared cost AVC’s – so you also need to pay £1 a month in normal AVC contributions e.g. additional to the “sacrificed” amount. You also need to consider what impact paying less National Insurance can have on any entitlement to State benefits,