1. Copyright © Derbyshire County Council 2006 Derbyshire Pension Fund Annual General Meeting 12 November 2013 Ian Howe Pensions Manager

2. Copyright © Derbyshire County Council 2006 2014 Where are we at? Regulations are at various stages. The third consultation closed 2 August on the revised main scheme regulations that were laid before parliament 19 September 2013 and come into force on 1 April 2014 Consultation closed on 24 May on the transitional and miscellaneous regulations. Amendments have since been included. Revised regulations are now expected “before Christmas” Councillors consultation closed 5 July 2013 Informal consultation results between June and August 2012 resulted in support ; 93% of employers, 90% Unison, 95% GMB and 84% Unite.

3. Copyright © Derbyshire County Council 2006 What are main points? Start date 1 April 2014 Career Average Revalued Earnings (CARE) scheme and actual pensionable pay. Referred to as a “Pension Account” 1/49 th accrual (currently 1/60 th – previously 1/80 th ) No automatic right to a retirement lump sum but may still give up pension to achieve a lump sum Revaluation of active members’ benefits in line with consumer price index (CPI) Normal pension age linked to state pension age – i.e. if a member’s state pension age rises, then their normal pension age will do so to (but only for post 2014 CARE service element).

4. Copyright © Derbyshire County Council 2006 What are the main points? A low cost 50/50 option – allows active members to pay 50% contributions for 50% of main benefits. Once in the 50/50 scheme the person stays in this scheme until the person opts back into the main scheme or hits a triggers under auto enrolment. Once “re-auto enrolled” the person is brought into the main LGPS scheme, but of course they can opt out and opt back into the 50/50 scheme. Not simple for the person/payroll/HR and pensions admin! Death in service and ill health still on main scheme benefits Pensions in payment to increase in line with CPI

5. Copyright © Derbyshire County Council 2006 What are the main points? Average member contributions yield 6.5% with tiered contributions (assuming everyone stays in the main scheme and there is not a “drift” to the 50/50 scheme) Contribution bandings are calculated on actual pensionable pay for part timers. Scheme members may pay a lower rate. Example –Now. Person works 18.50 hours per week earning £15,000 per year. Banding is calculated 37.00/18.50 x £15,000 = £30,000 whole time salary, therefore = 6.5% contributions –1/4/2014. Person works 18.50 hours per week. Banding is based on £15,000, therefore = 5.8% contributions

6. Copyright © Derbyshire County Council 2006 What are the main points? Contributions are taken on non-contractual overtime and additional hours for part time scheme members and used in the calculation of CARE benefits from 1 April 2014. However, the calculation of benefits accrued to 31 March 2014 are still based on final pay as defined within the regulations (excluding non-contractual overtime and additional hours for part time scheme members).

7. Copyright © Derbyshire County Council 2006 What are the main points? 2014 LGPS employee contributions FromToGross rate Up to £13,5005.5% £13,501£21,0005.8% £21,001£34,0006.5% £34,001£43,0006.8% £43,001£60,0008.5% £60,001£85,0009.9% £85,001£100,00010.5% £100,001£150,00011.4% More than £150,000 12.5%

8. Copyright © Derbyshire County Council 2006 What are the main points? Optional lump sum commutation at a rate of £12 of lump sum for every £1 of pension (as now) A member may leave employment voluntarily at age 55 or over and elect to receive immediate payment of pension (with an actuarial reduction on all service) Early/late retirement factors from age 55 on an actuarially neutral basis. A vesting period of 2 years (no longer 3 months). Minimum age of 55 still applies for early payment of unreduced benefits on redundancy or efficiency.

9. Copyright © Derbyshire County Council 2006 What are the main points? Ill health retirement pensions to be based on the current 3 tier ill health provisions. Spouse and partner pensions to continue on a 1/160th accrual Death in service lump sum is 3 x pensionable pay Benefits accrued to 31 March 2014 are still based on protected final pay at leaving.*(Note - Transitional Regulations later)

10. Copyright © Derbyshire County Council 2006 What are the main points? Additional voluntary contributions (AVCs) may not be taken as 100% tax free cash from 1 April 2014. Instead, 25% may be taken as tax free cash bringing the LGPS into line with all other public sector schemes. This is currently being challenged by Fund AVC providers. Members who leave the LGPS on or after 1 April 2014 and re-join the LGPS within 5 years (either in the same Fund or different Fund) would have their membership automatically aggregated (combined/transferred). Members who have a break of more than 5 years do not have an automatic aggregation but may elect to do so.

11. Copyright © Derbyshire County Council 2006 What about Protection? The Transitional Regulations provide the “protection link” between the current scheme and the 2014 CARE scheme. As these are not yet written these are our “current understanding” but may change. All accrued rights to 31 March 2014 would be calculated using protected final pay at date of leaving, or best of the last three years, or previous higher pay periods if additional protection already applies (if leaves within 10 years of reduction) Scheme members who suffer a permanent reduction to pensionable pay (on or after 1 April 2014) may still apply for pay protection for the calculation of their pre 2014 benefits. This is a positive change to our previous understanding.

12. Copyright © Derbyshire County Council 2006 What about Protection? A protection underpin applies to scheme members age 55 or over at 1 April 2012 who retire at or after 65. The underpin allows the higher of either, Current scheme benefits accrued to 31 March 2014 plus benefits from 1 April 2014 based on the CARE calculation, or Current scheme benefits accrued to 31 March 2014 plus benefits from 1 April 2014 based on protected final pay and 60 th accrual Rule of 85 remains as in the current scheme but not for the new voluntary retirement at age 55

13. Copyright © Derbyshire County Council 2006 How are benefits calculated? A Simple Example The following example is a retirement where the person is retiring voluntarily and is; Full time throughout (no part time service or breaks in service) Has no 50/50 service Has no extra contracts “AVCs or ARCs” Has no conversion of annual pension to lump sum Has no pay protection Has no transfers in Has no annual allowance or life time allowance HMRC tax implications

14. Copyright © Derbyshire County Council 2006 How are benefits calculated? A Simple Example Born 1/7/57, Joined LGPS 1/4/93, Retires 31/3/19 Age 61 at retirement, Total service 26 years FromToPen PayAccrualMembershipPensionLump SumRevalued Pension 1/4/9331/3/0816,7501/80 +3/80 153,140*9,421n/a 1/4/0831/3/1416,7501/6061,675*n/a 1/4/1431/3/1515,0001/491306n/a344 1/4/1531/3/1615,5001/491316n/a345 1/4/1631/3/1716,0001/491326n/a346 1/4/1731/3/1816,5001/491336n/a346 1/4/1831/3/1917,0001/491346n/a346 = 1,727* Assumes CPI @ 3% pa 9,4216,542*

15. Copyright © Derbyshire County Council 2006 How are benefits calculated? A Simple Example …..or is it? Born 1/7/57, Joined LGPS 1/4/93, Retires 31/3/19 Age 61 at retirement, Total service 26 years FromToPensionLump Sum Normal Retirement Age % Reduction Lump Sum Final Pension 1/4/9331/3/083,1409,42160n/a9,4213,140* 1/4/0831/3/141,675n/a65 (ish)8.103%n/a1,539* 1/4/1431/3/191,727n/aState Pension Age 21.013%n/a1,364* Total9,4216,043*

16. Copyright © Derbyshire County Council 2006 Any questions?