Pension Liaison Officer’s Group
Presented by:
Annette Wass
Viv Ray
Shirley Cuthbert
Mike Germon
• ADDITIONAL VOLUNTARY
CONTRIBUTIONS
(AVCs)
• ADDITIONAL REGULAR
CONTRIBUTIONS
(ARCs)
‘TOPPING UP’ BENEFITS
Methods are:• PERSONAL PENSION / STAKEHOLDER / FREE STANDING AVC
Provided by an outside source – arranged entirely by the member and paid
for by direct debit from their Bank Account
• PURCHASING ADDITIONAL SERVICE
If election made prior to 1st April 2008 members can continue with buying
service although this is no longer available to new applicants
Methods are:• ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVCs)
In house AVCs through Prudential – Devon County Council’s Provider since 2000
Also have some members with Equitable Life – the original sole provider
when in house AVCs were introduced in 1987
• ADDITIONAL REGULAR CONTRIBUTIONS (ARCs)
Regular monthly payments to purchase additional Local Government Pension
- pension can be boosted by a minimum of £250 p.a. to a maximum of
£5000 p.a. extra (in multiples of £250 p.a.)
TAX RELIEF
If the member is a tax payer relief is available on all pension
contributions up to 100% of pay:• PERSONAL PENSION / STAKEHOLDER / FREE STANDING AVC
Plan holder pays the net amount but the provider invests the full amount e.g. £100
premium due but £80 actually paid by individual
• AVCs / ARCs / Added Years
Full amount payable deducted from salary before PAYE tax calculated so taxed on
lesser amount – relief given at highest rate first!
WHO PAYS?
• AVCs – Member only (no employers contribution)
• ARCs – Member only (no employers contribution)
N.B. There is a provision in the LGPS for Shared Cost AVCs (SCAVCs) but no employer in Devon
has exercised this discretion
ADDITIONAL VOLUNTARY
CONTRIBUTIONS (AVCs)
‘MONEY PURCHASE’ TYPE BENEFITS
Contributions deducted from pay
Sent to Prudential for Investment – several options available from safe to ‘risky’!
Maximum 50% of Salary (can backdate to April of current tax year)
Tax Relief
OPTIONS ON
RETIREMENT?
• TO BUY AN ANNUITY
From the In House AVC provider (Prudential / Equitable Life) or
From an outside provider (Open Market Option)
• TO PURCHASE ADDITIONAL LOCAL GOVERNMENT PENSION
All or part of the fund can be transferred to buy LGPS pension subject to certain
conditions
• TO TAKE TAX FREE CASH
Since ‘A’ day in April 2006 it’s been possible to take tax free cash from AVC funds
(sometimes the full fund) as long as combined AVCs and LGPS Lump Sums remain
within the HMRC limit of 25% of the value of member’s benefits
• TO TRANSFER TO THE LGPS FOR SERVICE CREDIT
If In House AVC fund started prior to 13th November 2001, active member is over 50
and has ceased AVCs can buy LGPS with AVC fund under former Regulation 66
Also possible on retirement where member retires on Ill Health grounds at any age
• CAN OPT FOR A MIXTURE OF
THE OPTIONS
• FOR EXAMPLE :25% TAX FREE CASH
BALANCE TRANSFERRED TO BUY LOCAL GOVERNMENT
PENSION ON RETIREMENT
ADDITIONAL REGULAR
CONTRIBUTIONS (ARCs)
• MEMBERS CAN ELECT TO BUY ADDITIONAL LOCAL
GOVERNMENT PENSION FOR JUST THEMSELVES
OR
• THEMSELVES AND THEIR DEPENDANTS
How much does the
additional pension cost?
• TABLES FOR COST PROVIDED BY THE GOVERNEMENT
ACTUARY’S DEPARTMENT (GAD)
Based on: Age, Gender, Dependant’s cover required, Length of time payments to be
made, Cost per £250 extra to be purchased
Tables can be amended from time to time and adjustments to payment would be
effective from the following April
EXAMPLE OF COST
MALE aged 46 wants to buy £2000 p.a. extra pension for Himself
only and spread the payments over 14 years:1 x £250 extra = £22.16 per month (from GAD Table C)
Therefore:8 x £250 for £2000 p.a. extra = 8 x £22.16 = £177.28 p.m. for 14
years
• TO BUY THE SAME PENSION WITH DEPENDANT’S COVER
WOULD COST SLIGHTLY MORE – SEE GAD TABLES
• CAN MAKE MORE THAN ONE ELECTION AS LONG AS TOTAL
PENSION PURCHASED IS NO GREATER THAN £5000
Can a member cease
ARCs before the end of
the payment period?
YES:• LEAVER WOULD AUTOMATICALLY STOP
• ACTIVE MEMBER CAN CHOOSE TO STOP
Additional Pension bought to date of cessation would be pro rated in both cases
BUT…….
• IF MEMBER RETIRING ON TIER 1 OR 2 ILL HEALTH GROUNDS
ANY ADDITIONAL PENSION BEING PURCHASED IS AWARDED IN
FULL AS IF PAYMENTS WERE COMPLETE
Will the additional
pension be paid in full on
Retirement?
• YES IF:
Retiring or benefits being brought into payment at or after age 65
• YES IF:
Retiring on Tier 1 or 2 Ill Health Grounds
• NO IF:
Retiring before age 65 for reasons other than Ill Health as above – actuarial reduction
will be applied even if main benefits are protected under the old ’85 year rule’
Can additional Pension be
converted to Lump Sum
Retiring Allowance?
YES!!!
Additional Pension is just added to the member’s accrued Local
Government Pension and can be converted to Tax Free Cash
within the HMRC limits (25% of the value of the members benefits
in total)
What happens to the
Additional Pension on
Death?
DEATH IN SERVICE
• OWN PENSION ONLY
No benefits payable
• OWN AND DEPENDANT’S BENEFITS
Dependant’s benefits payable to Spouse/Civil Partnership/Nominated Partner/Eligible
Children – calculated using the full amount of additional pension the member set out to
buy even if payments are incomplete at the date of death
DEATH AFTER RETIREMENT
• FOR BOTH OWN PENSION ONLY AND FOR OWN AND
DEPENDANT’S COVER
Normal 10 x Pension in payment less pension already paid Death Grant applies to the
additional pension as well
• IF DEPENDANT’S COVER
Dependant’s benefits payable to surviving Spouse/Civil Partner/Nominated
Partner/Eligible Children
DEATH ON DEFERRED PENSION
• FOR BOTH OWN PENSION ONLY AND FOR OWN AND
DEPENDANT’S COVER
Normal 5 x Pension Death Grant applies to the additional pension element as well
• IF DEPENDANT’S COVER
Dependant’s benefits payable to surviving Spouse/Civil Partner/Nominated
Partner/Eligible Children
Does the Additional
Pension Increase?
• INCREASED IN LINE WITH THE CONSUMER PRICE INDEX (CPI)
Any Additional Pension being bought is inflation proofed with effect from the date
that the first contribution for it’s purchase is paid and continues to be increased once
the pension becomes payable (i.e. where Pensions Increase is due)
• DEPENDANT’S BENEFITS ARE ALSO INCREASED IN LINE WITH
CPI
Are there any conditions
that apply in order to
make an election?
• MEDICAL REQUIRED
• PAY MUST BE SUFFICIENT TO COVER THE MONTHLY
DEDUCTIONS
• MEMBERS MUST HAVE THE POTENTIAL TO PAY FOR ANY
EXTRA PENSION OVER A PERIOD OF AT LEAST 1 YEAR
How can AVCs and ARCs
get started?
• PRUDENTIAL AVCs
By written Application Form – Available from Devon Pension Services
Online @ www.prudential.co.uk/content/scheme/localgovavc/home
By telephone 0845 607 0077
• ADDITIONAL REGULAR CONTRIBUTIONS
Election form and Medical Certificate available from Devon Pension Services
Forms can be downloaded Online @ www.devon.gov.uk/pensions
COMPARISONS
Maximum Conts
AVCs
50%
Charges
Age Limit?
Medical Required
Flexible Payments
Approx 1% p.a.
None
No
Yes
ARCS
No limit other than
pay
None
Need to be 63 or less
Yes
No – fixed monthly
amounts
AND FINALLY……………IT’S POSSIBLE TO
PAY ALL TYPES OF ADDITIONAL CONTRIBUTIONS AT THE SAME
TIME – SALARY ALLOWING!!!
Employer ARCs and Augmented Service
– What are they?
– When are they awarded?
– What is the cost to employer?
– What is the benefit to the member?
– Comparing the 2 choices
Employer Additional Regular Contributions (ARCs)
– Employer must have a policy on awarding ARCs
– Employer can award a maximum additional pension of £5,000
– Employer can make the award anytime during member’s
employment.
– GAD tables available to calculate cost depending on age of
member.
– Cost must paid to pension fund within one month of award
– Additional pension awarded does not provide for additional
dependants pension.
– If member leaves before age 65, pension awarded will be
actuarially reduced.
Augmented Service
– Employer must have a policy on awarding augmented service
– Employer can award a maximum of 10 years service.
– Employer can make the award anytime during member’s
employment or up to 6 months after the member has retired on
redundancy or efficiency grounds or member held a joint
appointment.
– Augmented Service does not effect 85 year rule date
– Fund actuary will determine cost of augmented scheme to
employer.
– Cost must paid to pension fund within one month of award.
– If member leaves before normal pension age then benefits
derived from augmented service award will produce an employer
‘Strain Cost’. (Axis does not calculate this amount)
Comparison
ARCs
• Provides pension
• No dependants benefits
• Employer pays now
• Tables available
• Pension reduced if retires
early
• Need employer policy
Augmented Service
• Provides service
• Dependants benefits
• Employer pays now
• Actuary to provide cost
• Strain Cost if retires early
• Need employer policy
Default Retirement Age (DRA)
• Government committed to phasing out DRA of
65. Expected to be abolished from 01/10/11.
• Compulsory Annuity Age of 75 – consultation
looking at abolishing it from April 2011. Interim
provisions included in Finance (No 2) Act 2010
to alter age 75 to 77. Depending on outcome of
consultation changes to LGPS may follow.
• LGPS Admin Regs 50 (6) states
“A person who is entitled to a retirement pension under
regulation 16 (retirement benefits) or 17 (retirement after
normal retirement date) of the Benefits Regulations may
choose to defer payment until a date no later than the
day before his 75th birthday.”
• The pension should be uplifted by 0.02% and the
retirement grant (if payable) uplifted by 0.01% for each
day after the member’s 65th birthday but before the
member’s actual retirement date.
Example
Mr A N Example, preserved benefit,
65 on 3/9/2010,
elects for payment 04/09/2015,
1828 days late,
Pension = £5326.03pa x 1828 x 0.02% =
£7273.23pa
Lump sum = £15978.09 x 1828 x 0.01% =
£18898.88
Academies
• New scheduled
employer
• Employers
contribution rate
• How to become an
academy
Charter Mark
• On 19th August 2010 we were awarded the Charter Mark Award for
•
•
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the third year running.
Charter Mark was set up by the Cabinet office in 1992 as a tool to
help organisations improve their customer service
All current award holders will loose their award on the 30th June
2011.
There is a new replacement for Charter Mark called, Customer
Service Excellence
Customer Service Excellence Award is a lot harder to attain
We are looking at doing a Pre assessment in the new year,
Our aim to achieve this award in June 2011.
VACANCY MANAGEMENT POLICY
•
Introduced by Devon County Council in November 2009
•
Stated that when an employee leaves employment approval would be
needed from the Financial Management Team on whether the post could be
replaced.
•
June 2010 policy was amended to state that when an employee leaves
employment that post remains vacant and cannot be replaced unless it is a
providing a frontline service i.e Social worker etc.
•
So far at Devon Pension Services, we been unable to fill 2 full time posts and
one part time post
ELECTRONIC INTERFACING
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Information is extracted from your payroll database and recorded onto a
spreadsheet
The Spreadsheet is then passed to us on a monthly basis
This information can then be loaded direct to AXIS (Our Pensions
Database)
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•
Advantages
You would no longer need to complete EAS1s or EAS1As
We would no longer need to input the information manually
•
You would need to contact your IT department to design a program that can
extract this information
• We have already set this system up with DCC payroll in February of
this year
• Currently testing this with Plymouth City Council
• This may not benefit smaller employers
• Looking at Online EAS1s
• If you are interested you can contact Jane Aplin on 01392 688221 or
email Jane.Aplin@devon.gov.uk
Latest LGPS news
• Retail Price Index out,
Consumer Price index in
• Transfer Factors under active
review
• Ill-health certificates –
‘obtaining any gainful
employment’ change to
‘capable of undertaking any
gainful employment’.
Latest LGPS news
• 3rd Tier Ill health retirements –
reinstatement albeit with %
reduction after age 60 (55 with
employers agreement).
• Pension credit benefits
payable from age 60 with %
reduction.
• Valuation
• EAS5s
Latest LGPS news
• Re-employed & rejoining deferred
members now permitted to
aggregate any of their previous
periods of membership, provided
that they elect to do so in the first
12 months of their new period of
membership.
• Additionally, until 1 October 2011
there is the opportunity for all active
members to aggregate in this way.
Contact Info
Viv Ray, Deputy Pensions Manager
Email: viv.ray@devon.gov.uk Tel: 01392 688211
Mike Germon, Deputy Pensions Manager
Email: mike.germon@devon.gov.uk Tel: 01392 681776
Annette Wass, Additional Benefits Team Manager
Email: annette.wass@devon.gov.uk Tel: 01392 688219
Shirley Cuthbert, Employer Liaison Officer
Email: shirley.cuthbert@devon.gov.uk Tel: 01392 688218
Web address www.devon.gov.uk/pensions
Pensions Shared mailbox pensions@devon.gov.uk