The New Look LGPS 2008
Employer’s Workshop

• Overview
• Eligibility
• Banded contributions
• Leave of absence
• Year end
• Writing a policy
• ARCs and AVCs
• Final Pay
• Ill Health Retirement
• Early retirement and 85 year rule
• Death and Survivor benefits
• Questions

• The cost of providing pension benefits is increasing because members are living longer
• The LGPS was reviewed to ensure “affordability and sustainability”
• The new scheme is, on balance, a little bit better
• The average member will pay a bit more for it

• Old scheme: 1/80 th pension with automatic 3/80ths lump sum (equates to a 1/64 th scheme)
• New scheme: 1/60 th pension with the option to give up
25% to create a lump sum at the rate of £1 annual pension to £12 lump sum
• Conclusion: The new benefit package is more flexible and 1/60 th of final pay is slightly better than 1/64 th

• An employee with a contract of three months or more automatically enters the new scheme unless they opt out
• Employees of an admitted body may elect to join the
LGPS if their job is covered by an admission agreement
• Casual workers who have a contract of three months or more with “mutuality of obligation” join the scheme as above

• A statutory requirement
• Driven by equality
• Employers must publish a policy on banding
• Employers must inform members about the changes and their policy on banding
• Each decision on banding can be appealed

• 0 £12,000 =
• More than £12,000 - £14,000 =
• More than £14,000 - £18,000 =
• More than £18,000 - £30,000 =
• More than £30,000 - £40,000 =
• More than £40,000 - £75,000 =
• More than £75,000 =
5.5%.
5.8%
5.9%
6.5%
6.8%
7.2%
7.5%

• Bands are always based on whole-time equivalent pay (including part-time workers)
• The only exception is term-time only workers who are treated as being whole-time for the purpose of banding
• Treat each job separately
• The “protected” 5% contribution paid by former manual workers will be phased out by 2011 (5.25% 2008/09)
• The bands are index linked each year

• Mr A has 2 jobs
1.
£12k pa 3 days a week
2.
£ 7k pa 2 days a week
• Treat separately
Job 1 = 12,000 ÷ 3 x 5 = £20,000
Band 6.5%
Job 2 = 7,000 ÷ 2 x 5 = £17,500
Band 5.9%

• Mrs B earns £20,000
Works full time term time only
• Not to be treated as part time
• Band 6.5%

• Banding is an employer discretion
• Decisions:
– What pay is included?
HCC sets the bands on basic pay and regular additions (e.g. London weighting)
– When should it change?
HCC only changes bands if there is a significant change in the contract of employment

• Mr C Basic pay £28k
Variable pay £3k last year
• If policy = no variable
Band 6.5%
• But 6.5% deducted from ALL pay

• Miss D original salary £16k p.a.
In August – new job £20k p.a.
• Employer policy = change on contractual change
• Miss D - band 5.9% until August band 6.5% from September

• Members on sick leave pay contributions on the pay they actually receive
• If they go to zero pay, the contributions are deemed to be paid
• The employer must pay contributions at the rate they would have done if the employee had been at work

• The member pays contributions on the pay they actually receive during the statutory period (up to 9 months)
• They can extend this period and count up to 12 months if they elect to buy the balance in excess of their statutory / contractual entitlement
• They pay contributions based on the last rate of pay they actually received (usually SMP)
• The employer must pay contributions at the rate they would have done if the employee had been at work.
They are only required to pay contributions for the optional period if the member elects to pay their contributions.

• Members may elect to pay contributions in order to count up to three years authorised leave without pay
• The employee must pay contributions for the first 30 days
• They must elect to pay the balance within 30 days of returning to work / leaving employment (their representatives can make an election if they have died)
• The contributions are based on the pay that the employee would have received if they had been at work
• The employer must pay contributions if the member pays theirs

• The employer must record the contribution band at the beginning of each year.
• Your year end return must include the date of each change of band and the earnings and contributions relating to each band
• You need to calculate a final pay figure at the end of each year
• The annual benefit statement (ABS) will be based on the figure provided

Mr. Average
1 / 4 / 08 - 30 / 9 / 08
6 x £1000 x 5.5%
1 / 10 / 08 - 31 / 3 / 09
6 x £1200 x 5.8%
= £330.00
= £417.60

Mr. Average
• Total contributions
• Final pay figure (2008 / 9)
= £ 747.60
= £13200.00

• The employer must publish a policy on a number of issues affecting employees
• Please refer to the section on employer’s discretions in the Employers’ Guide which outlines the key points
• Please draft your policy with care

• Added years no longer available from 1 st April
2008
• Additional regular contributions (ARCs) introduced
• Option to buy up to £5000 annual pension by regular payments
• AVCs with Standard Life

• Best of the last 3 years
• Average of best 3 year block falling in the last 10 if pay has dropped
• Certificates of protection removed
• Need to keep payroll records!

• Must be certified as being permanently unfit to perform their duties
• The members are placed in three tiers depending on how likely they are to obtain gainful employment
• “Gainful employment” is understood to mean being capable of working at least 30 hours per week for at least a year

• Tier 1 – members who have no reasonable prospect of obtaining gainful employment: Pensions benefits are enhanced by their potential membership to 65
• Tier 2 – members who are not likely to obtain gainful employment within a reasonable period: Pension benefits are enhanced by 25% of their potential membership to age 65
• Members who were 45 or over on 31 st March 2008 with continuous membership from that date get the better of the old and new enhancements

• Tier 3 – members who are likely to enter gainful employment within a reasonable period have their basic pension put into payment.
• They must undergo a medical review after 18 months.
• If they obtain gainful employment or fail a medical review they are treated as deferred beneficiaries
• A “reasonable period” is defined as being 3 years

• The early retirement age is increasing to 55 with effect from 1 st April 2008
• Members with continuous membership from
31 st March 2008 can still retire from 50 until 1 st
April 2010
• Members cannot retire before 60 unless their employer consents

• 85-year rule: Is only useful if you choose to retire early, draw your pensions benefits immediately and your pension would otherwise be subject to reductions (ill-health, redundancy, efficiency and age 65 retirement pensions are never reduced)
• There are three bands of protection for members who joined the scheme before 1 st October 2006
(although there is talk of extending them)

i. Total protection to 2008. The service built up before 2008 of all members will be treated as if the 85-year rule still applied.
ii. Total protection to 2008 and tapered (sliding scale) protection for service built up between 2008 – 2020. The post 2008 service of members who are 60 between 1 st April
2016 and 31 st March 2020 will be treated as though the 85year rule still applied – although it will be progressively watered down the closer their birthday is to 2020.
iii. Total protection to 2016. The service of members who will be 60 by 31 st March 2016 will be treated as though the 85year rule still applied.

• The death in service grant has been increased from two to three times annual pay
• The pension in payment guarantee has been increased from 5 to 10 years
• The deferred death grant (equal to three years’ pension) has been replaced by 5 years’ pension

• Members who die in service have their dependents’ benefits based on their potential service to age 65
• Although enhancements are better, death in service grants are bigger and pensions are guaranteed for longer, dependents’ short-term pensions have been abolished

• Pensions are payable to spouses, civil partners and nominated cohabiting partners
• They are paid at a rate of 1/160 th of final pay for each year membership
• They are only based on post 6 th April 1988 membership for civil partnerships and nominated cohabiting partners

• Must be nominated by the member (nomination form)
• The member must be eligible to marry or enter into a civil partnership with the nominee
• They must be able to prove that they have lived together for at least two years

• Under 17
• Under 23 and in continuous full-time education
• If an eligible child is permanently incapacitated by reason of infirmity of mind or body their pension is payable for life

• Where a spouses’, civil partners’ or cohabiting partners’ pension is payable each child received a 1/320 th pension not exceeding two pensions (1/160 th )
• If no partners’ pension is payable, each child receives a
1/240 th pension not exceeding two pensions (1/120 th )
• If there are more than two children, the pension awarded would be divided equally between them
• All the figures quoted above are fractions of the new
1/60th pension

• Information with Annual Benefit Statements
• DVD on new scheme
• Website including FAQs
• New Scheme booklet
(timing to be confirmed)
• Dedicated email address for questions: lgps2008.solutions@serco.com

• Implement banded contributions
• Review casuals’ contracts
• Circulate information re Nominated
Co-Habiting Partners
• Communicate Scheme changes to your scheme members

• Website www.hertdirect.org/pensions
Follow link to Scheme Employer Guidance
• DVD on new scheme
• Email questions to: lgps2008. solutions@serco.com