LGPS 2014
Essex Pension Fund
March 2014
Matt Mott
1

2014 Scheme Overview

50/50 section

APC

AVC

Flexible retirement

Protections

Pensionable Pay & Contributions

Employer Responsibilities & Discretions
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
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 www.gov.uk/calculate-state-pension
Voluntary retirement from age 55 (without employer
consent)
Flexible retirement From age 55 (with employer
consent)

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%
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%
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£60,001 to £85,000
9.9%
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£85,001 to £100,000
10.5%
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£100,001 to £150,000 11.4%
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£150,001 or more
12.5%
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
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
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Pay
Accrual
Pension
CPI
Total
Pension
Year 1
£20,000
1/49
£408.16
n/a
£408.16
Year 2
£22,000
1/49
£448.98
n/a
£408.16
£12.65
£489.80
n/a
£869.79
£45.23
Year 3
£24,000
1/49
£869.79
£1404.82

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”
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

During periods of nil pay sick leave 50/50 section
members must be re-enrolled into main section
Employers must maintain full contributions
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Spouses
benefits
Civil
partners
Children’s
benefits
Lump sum
death grant
Co-habiting
partners

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
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


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
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
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
◦ Contributions up to 100% of pay after LGPS contributions
and NI
◦ 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
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
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
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


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
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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
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1
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
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
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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!
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
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
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
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
22


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
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
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
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


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!
25

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
26





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
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50 50
switch
form
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Main
switch
form
29
Join the
scheme
form
30
Opt out
form
31
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
◦ Main Section
◦ 50/50 Section
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

The draft pay form contains up to 9 different
values
Required for all employees
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



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
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

www.lgps2014.org
www.lgpsregs.org
 Please read the HR & Payroll Guides
 Contains essential information!



www.essexpensionfund.co.uk
email: pensionenquiries@essex.gov.uk
telephone: 01245 431912
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Thank you for listening
Essex Pension Fund
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