1. Craig Martin Pension Manager Changes to the LGPS from 1 April 2014

2. 2014 Changes : At a glance A career average (CARE) defined benefit scheme Increased accrual rate of 1/49 th. Normal Pension Age (NPA) aligned with State Pension Age (SPA) at point of payment Additional short term flexibility / option to pay ½ contributions for ½ benefits New pensionable pay definition & employee contribution bands Retirement from age 55 without employer approval – pension reductions apply Final Salary protection for accrued benefits 2

3. Normal Retirement Age (NRA) aligned to State Pension Age (SPA) at the point of payment Removal of Scheme NRA (currently age 65, some protections may apply) Normal Pension Age = Your own SPA (minimum age 65) for benefits built up from 1 April 2014 Pre-2014 benefits protected SPA assessed at the point of payment of your benefits Under current legislation, SPA is planned to increase to: - Age 66 between November 2018 and October 2020 Age 67 between 2034 and 2036 Age 68 between 2044 and 2046 Queens speech confirmed that: age 67 change will be brought forward to between 2026 and 2028 Regular reviews will take place in line with rising longevity 3

4. Pensionable pay and assessment of contribution bands Change to definition of pensionable pay to include: Basic pay, plus Non-contractual over-time Additional hours for part-time staff Impact on part-time members Band assessed with reference to actual pensionable pay 4

5. Contribution band changes LGPS 2008 RegulationsLGPS 2014 CARE scheme Band Whole-time equivalent Pensionable Pay Gross Contributions Contribution after tax Actual Pensionable Pay Gross Contributions Contribution after tax 1Up to £13,5005.5%4.40%Up to £13,5005.5%4.4% 2£13,501£15,8005.8%4.64%£13,501£21,0005.8%4.64% 3£15,801£20,4005.9%4.72%£21,001£34,0006.5%5.20% 4£20,401£34,0006.5%5.20%£34,001£43,0006.8%5.44% 5£34,001£45,5006.8%5.44%£43,001£60,0008.5%5.10% 6£45,501£85,3007.2%4.32%£60,001£85,0009.9%5.94% 7More than £85,3007.5% 4.50% or 4.13% £85,001£100,00010.5%6.30% 8£100,001£150,00011.4%6.84% 9More than £150,00012.5%6.88%

6. Additional flexibility – 50/50 option Short term option to pay ½ contributions in return for ½ the benefits 1/49 th to 1/98 th Intended as a short term solution to financial hardship Re-enrolled in ‘main scheme’ under automatic enrolment Lump sum death benefit and ill health benefits remain at full rate 6

7. Example of a Career Average Revalued Earnings (CARE) calculation 2014 LGPS CARE 2014 Defined Benefit Pensionable Pay paid during scheme year (pay rises 1% pa) Earned Pension at end of scheme year Value following revaluation (2.5%) at start of year: 2015/16 (Year 2) 2016/17 (Year 3) 2017/18 (Year 4) 2018/19 (Year 5) 2019/20 (Year 6) Pension for 2014/15 (Year 1) 1/49 th £60,000£1,224£1,254£1,284£1,317£1,350£1,383 Pension for 2015/16 (Year 2) 1/49 th £60,600£1,236 £1,266£1,299£1,332£1,365 Pension for 2016/17 (Year 3) 1/49 th £61,206£1,251 £1,281£1,314£1,347 Pension for 2017/18 (Year 4) 1/49 th £61,818£1,263 £1,296£1,329 Pension for 2018/19 (Year 5) 1/49 th £62,436£1,275 £1,308 Value in Account £1,254£2,550£3,897£5,292£6,732 7

8. Additional contributions Additional Voluntary Contributions (AVCs) Contributions will continue for current members Prudential or Standard Life Additional Pension Contributions (APCs) to increase ‘earned pension’ in scheme year pay over any number of years up to leaving/retirement We expect existing Additional Regular Contributions (ARCs)/Added Years contracts will continue post 31 March 2014 (in draft of LGPS Transitional Regs) 8

9. Retirement NO CHANGE Rules unchanged governing the payment of pension benefits on the grounds of: Redundancy Efficiency Flexible Ill health CHANGE Normal retirement = SPA NEW Retirement from age 55 without employer approval Early retirement reductions will apply regardless of existing provisions 9

10. Benefits built up prior to 1 April 2014 Normal Pension Age protected = 65 (some protections may apply) 85-year rule protections continue “Underpin” protection for members within10 years of normal pension age on 1 April 2012 Final Salary Defined Benefit continues, for membership as follows: - To 31 March 2008, 1/80 th annual pension + 3/80 th lump sum 1 April 2008 – 31 March 2014, 1/60 th annual pension Final pay at leaving used to calculate benefits 10

11. Final pay and Regulation 10 Protection Final salary link continues for pre 2014 service Continued application of Benefit Regulation 8: Last 365 days or one of the previous two years if higher (“best of the last 3 years”) Add pensions increases (CPI) to pension benefits if previous year used Applied automatically at point of leaving/ retirement Anticipate continued application of BR10 protection (to be confirmed) Pensionable pay average of 3 consecutive years in last 13 years All at 31 st March each year Can pick any period – doesn’t have to be the highest but must be consecutive Election to be made at least one month before date of leaving / retirement Add pensions increases (CPI) to pension benefits 11

12. Example of member leaving with pre and post 2014 service Factors Date of leaving = 31 March 2034 Male - age at leaving = 60 (SPA = 67) Total membership = 30 years Salary on 1 April 2014 = £60k Salary increases pa = 2% Final Pay = £87,408 Revaluation increases = 2.5% Doesn’t meet criteria for 2014 CARE underpin 12

13. 01/04/2008 – 31/03/2014 (60 th ) Payable at age 65 Pension £8,740 01/04/2008 – 31/03/2014 (60 th ) Payable at age 65 Pension £8,740 01/04/2004 – 31/03/2008 (80 th ) Rule of 85 applies (age 60) Pension Lump Sum (3 x pension) £4,370 £13,110 01/04/2004 – 31/03/2008 (80 th ) Rule of 85 applies (age 60) Pension Lump Sum (3 x pension) £4,370 £13,110 Payable @ SPA of 67 Total PensionTotal L/Sum £51,434 £13,110 Payable @ SPA of 67 Total PensionTotal L/Sum £51,434 £13,110 01/4/2014 – 31/03/2034 Payable at age 67 CARE Pension £38,324 01/4/2014 – 31/03/2034 Payable at age 67 CARE Pension £38,324 less 32% for early payment Less 25% for early payment No reduction – 85 year rule protection Payable @ age 60 Total Pension Total L/Sum £36,985£13,110 Payable @ age 60 Total Pension Total L/Sum £36,985£13,110 01/4/2014 – 31/03/2034 Age 60 CARE Pension £26,060 01/4/2014 – 31/03/2034 Age 60 CARE Pension £26,060 01/04/2008 – 31/03/2014 (60 th ) Age 60 Pension £6,555 01/04/2008 – 31/03/2014 (60 th ) Age 60 Pension £6,555 01/04/2004 – 31/03/2008 (80 th ) Age 60 PensionLump Sum (3 x pension) £4,370 £13,110 01/04/2004 – 31/03/2008 (80 th ) Age 60 PensionLump Sum (3 x pension) £4,370 £13,110 13

14. Next steps You can download slides directly from this Live meeting facility Will keep you updated on Transitional Regulations Communications to staff during February and March Up to date information and guides available through www.eapf.org.ukwww.eapf.org.uk Contact us if you have any queries 14

15. Any questions?

16. Changes to the Annual Allowance & Lifetime Allowance Craig Martin Pension Manager

17. Annual allowance: Definition Annual Allowance is the amount your pensions savings can increase in any one year before you become liable to a tax charge If you exceed in one year, can offset against unused allowances from previous three years Any excess is charged at normal rate of tax £50,000 limit, reducing to £40,000 from 1 April 2014 DateAnnual Allowance 2006/07215k 2007/08225k 2008/09235k 2009/10245k 2010/11255k 2011/1250k 2012/1350k 2013/1450k 2014/1540k 17

18. Pension/lump sum at 31 March 2013 Based on Final Pensionable Salary and Pensionable Service at that date Inflation (CPI) increase Pension/lump sum at 31 March 2014 Based on new Final Pensionable Salary and Pensionable Service at that date StartEnd Pension ‘growth’ x 16 + lump sum ‘growth’ + AVCs = Annual “growth” “Pension Input Period” (PIP) Annual Allowance How does it work? 18

19. Example calculation of Annual Allowance… Assumption: Pensionable pay is £60k for 2012/13 and £63k in 2013/14 15 years scheme membership and CPI is 3.1% Opening balance 2012/13£ Pre 08 pension p.a. Post 08 pension p.a. 10/80 x £60k 5/60 x £60k 7,500 5,000 Pre 08 pension p.a. Post 08 pension p.a. 10/80 x £63k 6/60 x £63k 7,875 6,300 Closing balance 2013/14£ Add lump sum10 x 3/80 x £60k 22,500 Total annual pension12,500 Multiply annual pension by 16200,000 222,500 Increase by inflationX 1.031 Opening value229,397.50 The increase in the member’s benefits for 2013/14 is £251,425 - £229,397.50 = £22,027.50 As this is less than £50k annual allowance, no tax charge due Total annual pension14,175 Add lump sum10 x 3/80 x £63k 23,625 Multiply annual pension by 16226,800 Add AVCs paid in year1,000 Closing value251,425 19

20. Example calculation of carry forward Assumes increase in pension of £60k for 2013/14, exceeding the £50k limit by £10k YearIncrease in pension value Annual Allowance Unused reliefCarry forward 2010/11£50,000 £0 2011/12£40,000£50,000£10,000 2012/13£22,027.50£50,000£27,972.50£37,972.50 2013/14£60,000.00£50,000£0£27,972.50 Member exceeded Annual Allowance in 2013/14 by £10k The member can now use the £37,972.50 unused relief to offset the £10,000 Leaves excess amount of £27,972.50 for 2014/15 onwards 20

21. What happens if I exceed the annual allowance? If annual allowance charge is <£2,000 you will have to pay charge directly to HMRC Taxed at normal rate of tax, e.g. 40% If the annual allowance charge is >£2,000 can elect for the amount to paid by the Pension Fund (if the whole charge relates to EAPF) Pension Fund will actuarially reduce the value of your LGPS benefits accordingly 21

22. Considerations for you Pension Fund will inform you if you exceed the annual allowance in a year Changes to LGPS and Annual Allowance threshold: Accrual rate of the LGPS increasing to 1/49 th Annual allowance threshold reducing to £40k Impact depends on individual circumstances including: pay growth and length of service and AVCs Potential options? 22

23. Lifetime Allowance: Definition Lifetime Allowance is the total value of all your LGPS and any other pension benefits that you may have accrued, and any excess over and above the threshold is taxed DateLifetime Allowance 2006/071.5m 2007/081.6m 2008/091.65m 2009/101.75m 2010/111.8m 2011/121.8m 2012/131.5m 2013/141.5m 2014/151.25m 23

24. Lifetime allowance: How does it work? Assessed when pension benefits come into payment 20 x Annual Pension; plus Any Lump Sum payable; plus Value of AVC Fund (if applicable) Compare with current Lifetime Allowance Anything above the LTA limits will be taxed at special rates 24

25. Example calculation of LTA Assumes pension of £50,000 and a lump sum of £112,500 at retirement (Factor of 20 x pension) + lump sum (20 x £50,000) + £112,500 = £1,112,500 £1,112,500 / £1,250,000 x 100 = 90% of LTA Pension benefits are less than both current and new LTA threshold No lifetime allowance tax due upon retirement 25

26. New LTA protections: Fixed protection and Individual protection Background and existing LTA protections Fixed protection 2014 Have to apply before 5 April 2014 Protected LTA of £1.5 million regardless of current level of benefits Not permitted if you have primary protection No further benefits can accrue from April 2014 (only CPI increase) Individual protection 2014 You can apply if the value of your benefits are over £1.25 million on 5 April 2014 You do not have primary protection You can continue to accrue benefits and protect benefits up to £1.5 million Legislation will not be in place until August 2014 but backdated to April 2014 Individuals will have until 5 April 2017 to apply 26

27. What should I do? ProtectionDeadline for registration Notes Fixed Protection5 April 2014Protects benefits up to £1.5m but no further accrual allowed Individual Protection5 April 2017Only apply if benefits are over £1.25m on 5 April 2014 and you do not have Primary Protection You can register for both forms of protections if you qualify What should I do? Pension Fund will contact you if you qualify for FP14 or IP14 to discuss your options The Pension Fund can provide further information relating to your EAPF benefits but will not be able to give you individual advice HMRC has published a Q&A entitled Pension Restriction on tax relief and you can access this from www.hmrc.gov.uk/pensionschemes www.hmrc.gov.uk/pensionschemes 27

28. Any questions? www.eapf.org.uk