3 Steven Tagg Treasury & Investments Senior Accountant –Pension FundBusiness Strategy and Support
4 Local Government Pension Scheme (LGPS) - preserving pension provision when transferring employees from a LGPS employer to the private sector.
5 Two main messagesThis must be considered at the absolute outset and included in any procurement process.Employees must not be transferred until either of the following two options have been fully completed –
6 1) Use a broadly comparable pension scheme Need a Certificate of Broad Comparability from an Actuary.Employees leave the LGPS and join the pension scheme of the private company.Our actuary and the actuary of the private company agree ‘bulk transfer’ termsThis option may be withdrawn from 1 April Waiting announcement from DCLG.
7 1) Use a broadly comparable pension scheme LGPS Regulations 2013 (SI 2013/2356) laid before Parliament on the 19 September 2013.Further LGPS transitional regulations are to be introduced and are yet to be laid before Parliament.Government Actuary’s Department announcement 27 November 2013.
8 2) Admission of the private company to the LGPS Allows time to scrutinise the application and minimise risk to the Pension Fund.Delegation of Authority
9 2) Admission of the private company to the LGPS Data Capture – our actuary then calculates the employer contribution rate and Bond, for the private company to pay and provide.
10 2) Admission of the private company to the LGPS Based on fully funded at the start but the new company is responsible for any future deficit.New questionnaire – electronic and hard copy
11 2) Admission of the private company to the LGPS Pension regulations re Question 4Answer any queries from the Questionnaire by , not by completing a new Questionnaire.Supporting documents no longer necessary to submit.Precedent admission agreement and Bond.
12 2) Admission of the private company to the LGPS Financial Health check.Bond reviewed annually.Employer contribution rate revised every three years – next valuation as at 31 March with any new rates from 1 April 2014
13 2) Admission of the private company to the LGPS Reviewing underlying contractName ChangesSecond generation transfersRecovery of Pension Fund costs from Letting Authority
14 2) Admission of the private company to the LGPS Admission not necessary for:- Schools converting to Academies- New Parish Councils- New Scheduled Bodies
15 Two main messagesThis must be considered at the absolute outset and included in any procurement process.Employees must not be transferred until either of the above two options have been fully completed
17 Changes To Local Government Pension Scheme from April 2014 Barbara CheatleDeputy Pensions Manager
18 LGPS 2014 – Overview Annual Pension Account 1/49th accrual CPI revaluationPension age linked to State Pen Age (min 65)Voluntary retirement from 55Rule of 85 retained (60+)Protection for pre 2014 service and underpin for those within 10 years of NRA at April 2012
19 LGPS 2014 – OverviewP/T worker contribution rates assessed on actual pensionable pay (not FTE) – so many will pay less50/50 optionCan purchase additional pension via APC or AVCNote:Existing pensioner and deferred members - no change
20 Employers – 2014 key requirements Look at:Separate records per job2 sections to the scheme (main & 50/50)Pensionable PayAssumed Pensionable PayEmployee contributionsBuying extra pension
21 Employers – 2014 key requirements Separate records per jobSame as for auto enrolment2 jobs = employee rates separately assessedExcept for single employment relationshipsSeparate cumulative pensionable pay (incl. APP) and employee contributions per job - accuracy of pension build up dependant on correct cumulative pensionable pay
22 Employers – 2014 key requirements 2 sections to the scheme (main & 50/50)Automatically back in main section from next available pay period:if goes to nil pay due to sickness and still on nil pay for that reason at beginning of next pay period (watch out for nil pay s/t sickness)after re-enrolment dateunless member elects otherwise
23 Employers – 2014 key requirements Pensionable PaySame definition as now except that non-contractual overtime and additional hours are now pensionableBenefit accrues each Scheme year based on pensionable pay received* in that year (not pensionable pay due for the Scheme year)* See next slide re APP
24 Employers – 2014 key requirements Assumed Pensionable PayAccrues during sickness on reduced or no pay (incl. s/t periods), child related leave (ordinary and paid add’l), reserve forces service leave – (rationale)Based on last complete 3 months or 12 weeks pensionable pay (excluding all lump sums)Regular pensionable lump sum payments may be added to APP by employersAPP increased by CPI if goes over 2 scheme yearsWatch out for – KIT and Stringer days
25 Employers – 2014 key requirements Employee contribution ratesNew bands with some increases in ratesTable may change before AprilWhich band? – up to employers but...Part time staff in band based on actual payReview on material change in pay
26 Current rates and Bands Full Time Equivalent Pensionable PayHeadline/Gross ContributionContribution after tax relief*Up to £137005.5%4.40%£ £161005.8%4.64%£16101-£208005.9%4.72%£ £347006.5%5.20%£ £465006.8%5.44%£ £871007.2%4.32%More than £871007.5%4.50% or 4.13%* The net contribution rates are approximate and depend on individual circumstances
27 New bands and rates Pensionable Pay Headline /Gross Contribution Contribution after tax reliefUp to £135005.5%4.40%£ £210005.8%4.64%£ £340006.5%5.20%£ £430006.8%5.44%£ £600008.5%5.10%£ £850009.9%5.94%£ £10000010.5%6.30%£ £15000011.4%6.84%£ or more12.5%6.88%* The net contribution rates are approximate and depend on individual circumstances
28 Employers – 2014 key requirements Employee / Employer contributionsEmployee pays contributions on pensionable pay received (not on APP – except reserve forces service leave)Employer pays contributions on pensionable pay received butEmployer pays contributions on APP during child related leave and sick leave whilst on reduced or no pay
29 Employers – 2014 key requirements Buying extra pensionFull and shared cost APC replaces ...- ARCs- AugmentationAnd used to buy pension ‘lost’ due to:- Strike – at full cost to member- Child related leave (unpaid add’l) – shared cost- Unpaid leave – shared cost (no compulsory first 30 days)AVCs
30 Employers – 2014 key requirements Payments due for period pre April 2014 paid after March 2014 – contribution rates as at ?old or new rate and old definition? BUT don’t drop pensionable pay into post 2014 cumulativesRequirement for hour changes going forward for underpin cases & those purchasing old style added yrsRequirement for breaks in servicePre 2014 definition of Final Pay at date of leaving for pre 2014 membership and underpin cases – calculate as now (but looking to simplify)
31 Employers – other consideration Pre 2014 definition of Final Pay at each Scheme year end for pre 2014 membership and underpin cases – employer to supply FTE? (but looking to simplify)Existing added years, ARC and ASBC contracts?Councillors’ pensions?TUPE transfers - retain membership of the LGPS – scope and mechanism still to be worked out
32 LGPS 2014New option from April members can choose to voluntarily draw their benefits on or after age 55 without employer’s consentRule of 85 protections will not apply if they choose to take their pension on of after age 55 but before 60 but some employer discretion may be provided
33 Example of Basic Calculation Pensionable PayPensionYear 1£10,000£204.08Year 2Year 3Year 4Year 5Total£ per yearHowever, pay does normally rise over time and there is inflation to consider, so we will see how revaluation is needed to ensure the pension does not lose its value
34 Example of Revaluation Pensionable PayPensionRevalued PensionYear 1£10,000£204.08£229.70Year 2£223.01Year 3£216.51Year 4£210.20Year 5Total£ per yearCompared with the basic calculation the first 4 years of pension built up have been increased to take account of inflation (assumed 3% each year)
35 Example of pay rises before Revaluation Pensionable PayPensionRevalued PensionYear 1£10,000£204.08£229.70Year 2£10,500£214.29£234.16Year 3£11,000£224.49£238.16Year 4£11,500£234.69£241.73Year 5£12,000£244.90Total£ per yearIn this example both increases in pensionable pay and inflation have been built into the calculation of the member's pension.
36 Employer points to note Consider budget implication of additional hours being pensionableConsider budget implications for those on reduced or no pay for whom you will need to pay full employer contributionsEmployer policies for post 1/4/2014Nominated co-habiting partners change to co-habiting partnersConsider those on ‘casual’ or zero hour contracts
37 Thank you for listening Any Questions?Thank you for listening
38 Local Government Pension Scheme 2014 - Roadshows Additional forums have been arranged to provide information on the new scheme, new procedures, new forms and what records you need to keep. These have been arranged for:Ashford Borough Council - 14 January 2014Sessions House, Maidstone – 16 January 2014The Coniston Hotel, Sittingbourne – 21 January 2014Dartford Borough Council – 23 January 2014Charlton Place, Canterbury – 4 February 2014Tunbridge Wells Borough Council – 6 February 2014Tea and Coffee will be provided from 9:30 with the forum starting at to be finished by 13:00 at the very latest.You can book these via the website and I attach a link to our website which includes the booking form for these training sessions -
39 Steven Tagg Treasury & Investments Senior Accountant –Pension FundBusiness Strategy and Support
40 Treasury & Investments Team Alison MingsTreasury & Investments ManagerBusiness Strategy and SupportGeoff HallPrincipal Accountant (Treasury)Business Strategy and SupportSangeeta SuranaSenior Accountant- Treasury and InvestmentsBusiness Strategy and SupportAnn SelbyFinance AssistantBusiness Strategy and SupportJoseph McKayKent Accountancy TraineeBusiness Strategy and SupportAnya GelmanKent Accountancy TraineeBusiness Strategy and Support
41 Number of Employers in the Kent Pension Fund 31 March 1989 = 76
42 Number of Employers in the Kent Pension Fund 31 March 2013= 496
44 Different types of Employers Local AuthoritiesScheduled BodiesAcademiesSchoolsAdmitted BodiesCollegesParish CouncilsHousing Associations
45 The Devil is in the detail! Please help us to help you Ensure any change to your employer contribution rate is made from 1 April 2014.
46 Quote your Oracle employer number in The subject line of any to usQuote your Oracle employer number in subject line of any
47 Quote your Oracle employer number on the Pen 4/1 form Quote your Oracle employer number here
48 Quote your Oracle employer number In the narrative of your electronic paymentsWhen sending any cheques (only acceptable with our prior agreement)
49 Quote your Employer number, our invoice number and the amount of the invoice in the subject line of any to us.£10.00Quote our invoice number and the amount of the invoice in the subject line
50 Interest may be applicable in the late payment of contributions Ensure your pension contributions reach us by the 19th of the following month to which they relateInterest may be applicable in the late payment of contributions19th of the month!
51 Update us when your contact details alter ByBy telephone
57 Early payment of Deferred Benefits When a member leaves the pension scheme and is not entitled to a refund or immediate payment of benefits they are awarded a Deferred BenefitThe Pensions Section send a Deferred Benefit Statement each year to the member until either the benefit is transferred to another scheme or the benefit is in payment.Both the award letter and the statement explain when the member is entitled to take the benefit but there are two circumstances when the pension can be brought into payment early. These are:- Early Payment - Employers Consent (aged 55+)- Early Payment - Ill Health
58 Early payment of Deferred Benefits The process has changed to bring it in line with that for other benefitsFormer members continue to request early payment in writing to the Pensions SectionThe request continues to be forwarded to the Employer for a decisionIn the letter to the Employer there is less information regarding the decision making but there is a link to more information on our websiteThe actual decision making process for the Employer has not changedThe next stage of the process is the biggest change…
59 Early payment of Deferred Benefits If the member is successful in their request the employer will now follow a process similar to that of any other retirement.- They will a send a letter to the former member, an estimate of benefits and forms to be completed and returned to them- A complete package of information will then be forwarded by the employer to the Pensions SectionIf the member is unsuccessful in their request- The employer will now send a ‘Decline’ letter to the former member explaining the situation and including a paragraph regarding the IDRP process- A copy of the decline letter along with a DB Early Payment notification form must then be forwarded to the Pensions Section.We hope this new process will standardise the procedure for all employers
61 Pension Website Employers Employees To access this you needuser name – your 5 digit employer numberpassword – as notified by the pension section.If you are unsure what this is then please contact your liaison officer.In order to comply with the requirements of the Data Protection Act 1998, it is now our policy to password protect any documents that are sent electronically and may contain personal information. The password that we will be using for each employer will be the same as your 8 digit PIN/Website password.Ensure that all persons who need to know, are aware how to log onto the website.Employees
64 Going Forward Looking to complete forms via a webpage Website will be kept up to date with changes in procedures/forms.Looking to complete forms via a webpageThis is under developmentAny suggestions for information that you would like to see on the website then let me know.