1. LGPS 2014
Essex Pension Fund
March 2014
Matt Mott

2. LGPS 2014 2014 Scheme Overview 50/50 section APC AVC
Flexible retirement
Protections
Pensionable Pay & Contributions
Employer Responsibilities & Discretions

3. 2014 Scheme Overview CARE Scheme (Career Average Revalued Earnings)
Accrual rate of 1/49th - It’s better 
Annual revaluation by CPI
Normal retirement age (NRA) is State Pension Age (SPA)
Find your SPA at
Voluntary retirement from age 55 (without employer consent)
Flexible retirement From age 55 (with employer consent)

4. 2014 Scheme Overview 50/50 section
Benefits accrued prior to 1st April 2014 protected
Protection for those within 10 years of retirement in April 2012
Actuarial reductions for ER will differ for different periods of membership
Pensionable pay is actual pay
Vesting (refund) period increased to 2 years
Average member contributions of 6.5%
Cost envelope of 19.5%

5. Contributions bands Band pensionable pay range for an employment
Contribution rate for that employment 1
Up to £13,500
5.5% 2
£13,501 to £21,000
5.8% 3
£21,001 to £34,000
6.5% 4
£34,001 to £43,000
6.8% 5
£43,001 to £60,000
8.5% 6
£60,001 to £85,000
9.9% 7
£85,001 to £100,000
10.5% 8
£100,001 to £150,000
11.4% 9
£150,001 or more
12.5%

6. 2014 Scheme Overview All other ancillary benefits to remain the same
Additional Pension Contributions (APC)
Pension accounts
Automatic Aggregation
Link to Public Service schemes
AVC
Benefit Regulations Received September 2013

7. CARE Example Pay Accrual Pension CPI Total Pension Year 1 £20,000 1/49
£408.16
n/a
Year 2
£22,000
£448.98
£12.65
£869.79
Year 3
£24,000
£489.80
£45.23 £

8. 50/50 section Employee pays ½ contributions Benefits accrue at 1/98th
All other ancillary benefits to remain the same
Temporary arrangement
Employees put in main section on AE re-enrolment date
Cannot begin or continue APC
Unless for “lost pension”

9. 50/50 section
During periods of nil pay sick leave 50/50 section members must be re-enrolled into main section
Employers must maintain full contributions

10. Death benefits Children’s benefits Spouses benefits Civil partners
Lump sum death grant
Civil partners
Co-habiting partners
OK, so that was all about retiring from or leave the scheme, but as some of you may be aware there are other benefits of being in the scheme - one of them being death benefits.
Now death benefits can be paid from the scheme if you die in service, or die having left employment but with a set of deferred benefits, and also if you die after retirement.
The first of the benefits that would become payable is the lump sum death grant. Now this would be 3 times your final pay (remember final pay is normally your pensionable pay in the year up to the last day of pensionable employment). I must however stress that if you work part-time hours this is one time that the final pay is not calculated using whole-time pay levels.
Now, the lump sum is normally payable to your estate, however you can complete a nomination form, nominating a person, or persons, to receive this lump sum on your death. However, if we find out that your circumstances have changed but that you have not changed your nomination form, then we may decide just to pay the money to your estate.
In the majority of cases, however, we will honour the nomination form. There are a couple of benefits of completing a nomination form - first of all, if payment is made to a nominee, or nominees, it does not form part of your estate, and therefore it could result in less inheritance tax being paid, if any is paid at all. Furthermore it may save the people dealing with your estate from having to obtain a document known as the PROBATE or letters of administration if no will (dies intestate) - this is a document that we require sight of before we can make any payments to an estate. (NOT IF LESS THAN £5K)
The second type of death benefit is the widow or widower’s pension. This is payable if you are married at the time of your death.
This pension is normally calculated as a proportion of benefits accrued for each year to age 65 that would have been paid to you if you had retired on ill-health grounds (in new scheme tier 1) Long term = 50% of pre 08 and 37.5% of post 08!
However, there will be at least 3 months immediately following death, where the widow or widower’s pension will be equal to your final pay. (dependant on if retirement occurred pre or post 2008)
And finally if you have children AGED UNDER 18 or who are in full-time education and aged under 23 or unable to work due to illness (permanently incapacitated) , then small pensions could be paid in respect of them during the period whilst they are still in education or ill. To give you a rough idea, the children’s pensions could be approximately ¼ (1/3 if no survivor) of your prospective ill-health pension. If you have more than two children then a restriction to the overall value of the children’s pensions would apply.
PB – PROPORTION PENSION IN PAYMENT, 5X DEFERRED PENSION AS DG 10

11. APC Maximum £6,500 Monthly or lump sum contribution
A scheme member benefit only
Must cease if employee elects for 50/50 section
Also shared cost APC
Contribution split must be agreed
Buy extra pension

12. APC Used to buy “lost pension” Authorised unpaid leave
Child related unpaid leave
Strike*
If election is made within 30 days of return to work:
Employee pays 1/3
Employer 2/3 (except strike*)
Election after 30 days of return to work:
Full cost paid by employee

13. AVC Current 2014 regulations
Contributions up to 100% of pay after LGPS contributions and NI
Tax free cash 100% of AVC fund
Added to 25% LGPS lump sum = 55% tax charge
Intention (probable amendment) 2014 regulations
Tax free cash restricted to 25% of fund
Added to 25% LGPS lump sum = Nil tax charge
Pre 1 April AVC administered by 2008 regulations

14. Flexible Retirement From age 55 with employer consent
Actuarial reduction or strain may apply
Employees can choose to receive payment:
of all benefits
of all pre 2008 benefits
of all, part or none post 2008 benefits
of all, part or none post 2014 benefits
Plus “additional benefits” in accordance with actuarial guidance issued by the Secretary of State

15. Protections - Pre 2014 membership
All membership accrued pre 1 April 2014 protected
LGPS 2008 regulations apply including:
60th & 80th
If applicable lump sums
Normal retirement age 65
Link to final salary at eventual retirement
Members in receipt of a pension or a deferred benefits are unaffected by LGPS 2014

16. Protections - Pre 2014 membership
Protections can be lost if 2008 deferred benefits are aggregated with current 2014 membership if employee has had a break in public sector pension schemes of more than 5 years

19. Protections - The Underpin
Active members on 31 March 2008
Were within 10 years of NRA on 1 April 2012
Receive pension on or after NRA
Do not have more than 5 year break in membership of any public sector pensions
The underpin is only paid if the 2008 scheme (had it continued) provides a better pension than LGPS 2014

20. Protections – Rule of 85
Is so complicated I am not going to try and explain it!!
Example:
58 year old member
Rule of 85 satisfied
Can retire and immediately receive pension
Will there be an actuarial reduction?
Yes,11% of pension and 6% of lump sum!

21. Protections – Rule of 85 Why? Age plus membership in whole years = 85
Who has protection? = In before 1 October 2006
This protection continues from April 2014
*Does not apply to*
new option of drawing your pension from age 55-60

22. Protections – Rule of 85 Exercise discretion to waive the reduction
If so you will have a strain cost
Employers must publish a policy
Essential to read the HR and Payroll guides

23. Pay & Contributions Actual pensionable pay (PP) Including overtime
Does not include expenses
Assumed Pensionable Pay (APP)
What the employee would have earned
Replaces notional pay
See HR/Payroll guides
1/2 employee contribution rate if 50/50 elected
Employer contributions always paid in full

24. Pay & Contributions Final Pay (2008 definition)
Required for all pre 2014 membership
10 year Underpin
Also PT hours and average hours
Added years and CoP
Will you know who these apply to?
Therefore, we require them for all employees!!
Contribution bands will be revalued every 3 years only
Employers to review employee contributions
Annually in April
When material change occurs ie promotion

25. Employer Responsibilities
To provide starter details to the Fund within 1 month
By spreadsheet
To request within 3 months of employee start date employment and LGPS histories
Inform employee:
Contractual enrolment
Auto Enrolment
Contribution rate payable
They can opt out
Where to find scheme information ie website!

26. Employer Responsibilities
Upon 50/50 section election provide employee with impact of pension loss
Upon AE re-enrolment all 50/50 section members must be put into main section
For periods of nil pay sick leave 50/50 section members must be put into main section
Inform employees where to find the opt out form
But not to supply it!!
Opt out with less than 3 months membership, refund contributions and notify the Fund

27. Employer Responsibilities
Opt out with over 3 months membership, send the Fund normal leaver forms
APC for “lost pension” employers must:
Enable employee to make election within 30 days
Should ideally:
inform employee of the amount of lost pay
inform employee of the amount of lost pension
To provide data on spreadsheets (do not amend) each month
Same data fields for all employees
To provide end of year data (correct) by date specified by Fund, usually mid April

28. 50 50 switch form

29. Main switch form

30. Join the scheme form

31. Opt out form

32. Employer Responsibilities
All leaving details must be provided within 1 month of date of leaving:
All pay figures
Periods of membership
Main Section
50/50 Section
Contribution amounts

33. Pay Form The draft pay form contains up to 9 different values
Required for all employees

36. Discretions & Policies
Employers must formulate, publish and keep under review policy statements
The Fund should receive these by 30 June
Five main areas:
Voluntary funding of additional pensions (SCAPC)
Awarding additional pension via whole cost APC
Switching on 85 year rule for those 55-60
Flexible retirement
Waiving of actuarial reductions
A list of discretions will be provided by the Fund

37. More Information www.lgps2014.org www.lgpsregs.org
Please read the HR & Payroll Guides
Contains essential information!
telephone:

38. Thank you for listening
Essex Pension Fund