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Human Resources New Look Local Government Pension Scheme 2008 An overview of the changes.

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Presentation on theme: "Human Resources New Look Local Government Pension Scheme 2008 An overview of the changes."— Presentation transcript:

1 Human Resources New Look Local Government Pension Scheme 2008 An overview of the changes

2 Directorate of Human Resources What are the key features of the new scheme? Retirement age Transitional regulations How benefits are calculated The % that employees pay Additional contributions to boost your pension Pensions for co-habiting partners Flexible retirement arrangements Ill-health retirement provisions

3 Directorate of Human Resources Retirement age Normal pension age is 65 Pension paid after 65 will be enhanced Pension must be paid by age 75 85 year rule still applies for those who will be 60 by 31 st March 2016 Pension is payable from 60 but will be actuarially reduced Pension may be payable from age 55 (by 2010 for current members) with employer permission but will be reduced

4 Directorate of Human Resources Transitional regulations For members before 2008, two pension calculations carried out The same final salary figure is used for both calculations Best of: Final 365 days salary Either of the 2 years before that Best average of 3 consecutive years in last 10 years of service Service up to 31 st March 2008 calculated under old scheme Service from 1 st April 2008 calculated under new scheme

5 Directorate of Human Resources How benefits are calculated Pension based on 1/60 th of final salary for every year of service No automatic lump sum Up to 25% of pension pot can be converted to tax free lump sum Every £1 of pension converted results in £12 of lump sum

6 Directorate of Human Resources For example … Individual retires at 65 with 10 years of membership up to March 2008 and 10 years from April 2008 and final salary of £20,000 Pension from old scheme: Annual pension – £20,000 x 10/80 = £2,500 Lump sum - £2,500 x 3 = £7,500 Pension from new scheme: Annual pension - £20,000 x 10/60 = £3,333 No automatic lump sum Maximum lump sum = 25% of pension pot Pension pot = approximately 20 x annual pension I.e. (£2,500 + £3,333) x 20 = £116,660 25% = £29,165 maximum total lump sum (including £7,500 from old scheme) Remaining total annual pension - £4,028

7 Directorate of Human Resources Employee contribution rates The % that is deducted from pay each month will depend on salary Part-time staff pay contributions on the full-time equivalent salary Semester-time only staff rate based on full-time equivalent for the number of weeks that they work Manual staff who were paying 5% will be phased into line with other rates BandPayRate 1Up to £12,0005.5% 2£12,001 to £14,0005.8% 3£14,001 to £18,0005.9% 4£18,001 to £30,0006.5% 5£30,001 to £40,0006.8% 6£40,001 to £75,0007.2% 7Above £75,0007.5%

8 Directorate of Human Resources Additional contributions to boost your pension The provision to buy additional years has been removed Existing contracts will be honoured Replaced with a provision to buy additional pension Purchased via additional monthly contribution Increases the annual pension after retirement by minimum of £250 and maximum of £5,000 per year The facility to pay AVCs (Additional Voluntary Contributions) is retained

9 Directorate of Human Resources Pensions for co-habiting partners Receive the same long-term pension as a spouse or civil partner in the event of the members death Must be living together as man and wife or civil partners Must be free to marry or form a civil partnership Must not be living with a third party as man and wife or civil partners! Must be financially interdependent or nominee is dependent on scheme member These conditions must have been satisfied for 2 years Must make a nomination

10 Directorate of Human Resources Flexible retirement The existing flexible retirement provision has been extended Scheme members who are 50 or over (55 by 2010) can apply to reduce either hours or grade and take some or all of their pension benefits Pension benefits will be reduced unless the 85 year rule is fulfilled Previously scheme members have had to take all of their benefits, now they will have the option to take only part Needs employer permission That will depend on operational needs and cost You will need to reduce your hours by at least 20% of your normal working hours

11 Directorate of Human Resources Ill-health retirement Current ill-health retirement scheme is being extended Those who are permanently unable to work due to ill-health will still be entitled to immediate, unreduced benefits Pension will be enhanced so it is based on the total service that would have been accrued to age 65 Those who are permanently unable to work in current role but may be able to do some work, but not within a reasonable period will also be entitled to immediate, unreduced benefits Pension will be enhanced by 25% of the total prospective service to age 65

12 Directorate of Human Resources Other changes Death in service grant – 3 times annual salary Death grant after retirement: Pension will be guaranteed for 10 years A partners pension of 1/160 th for each year of service will also be payable

13 Directorate of Human Resources Further information See our web pages: Contact your link Human Resources team or Laura Naunko, HR Adviser E-mail See the scheme website

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