Local Government Pension Scheme - Peninsula Pensions

Local Government Pension Scheme - Peninsula Pensions

Pension Liaison Officer Group 2nd July 2013 Presented by Emma Shand Employer Liaison Officer Shirley Cuthbert Deputy Pensions Manager Viv Ray Deputy Pensions Manager Agenda Auto-enrolment Update LGPS 2014 What the new scheme means for employers Looking to the Future Auto-Enrolment

Speaker: Viv Ray (Deputy Pensions Manager) Auto-Enrolment Agenda Experience Reminder Auto-Enrolment Experience Do not underestimate the time needed to set up new processes to comply with AE. You need to talk to your payroll provider at least 12 months before your staging date to establish what service they will be providing. Do not accept any opt out forms if:

Member has completed old opt form. New form available since January 2013 on Devon Pension Services website or by contacting pension section Dated before employee has joined LGPS. Can only opt out once joined pension scheme. Member has only completed one form for multiple post. Each post the member wishes to opt out of must have separate opt out form. Employer must send starters data and opt out data on spread sheets within one month of employee joining LGPS and/or opting out. Employer must include ALL starters even if they have opted out before deduction of pension contributions. DPS are required to hold this information. Ensure you fully understand what you are required to do to comply with Auto Enrolment rules. Auto-Enrolment

REMINDERS Do you know when your Staging Date is? Have you made a decision whether to use the Transitional Period and/or Postponement? Is everything in place for sending out letters to ALL your employees at your Staging Date? Do you have in place, processes for assess your employees each month to check their auto enrolment eligibility? Have you got monthly procedures in place for notifying Devon Pension Services of new starters and those that have opted out? AE NEWS GOOD NEWS! Will Auto Enrolment rules be abandoned for Defined

Benefit schemes such as the LGPS? Maybe! (see DWP consultation ended 7th May 2013) Auto-Enrolment Any Questions? Auto-Enrolment Useful website addresses Pensions Regulator: www.thepensionsregulator.gov.uk Department of Work and Pensions: www.dwp.gov.uk/policy/pensions-reform/workplace-pension-reforms/

Devon Pension Services www.devon.gov.uk/pensions LGPS 2014 Speaker Shirley Cuthbert (Deputy Pensions Manager) LGPS 2014 Video http://lgps2014.org/content/video-overviewlgps-2014 LGPS 2014 Proposals Feature

LGPS 2008 LGPS 2014 Basis of Pension Final Salary Career Average Revalued Earnings (CARE) Accrual rate

1/60th 1/49th Normal Pension Age Age 65 State Pension Age (Minimum age 65) Earliest voluntary retirement age

Age 60 Age 55 Contribution flexibility None 50/50/Option Revaluation CPI

Active rate?/ CPI LGPS 2014 Proposals Feature LGPS 2008 LGPS 2014 Definition of pensionable pay Pay excluding noncontractual overtime and

non-pensionable additional hours Pay including noncontractual overtime and additional hours for parttime staff Lump sum option Trade 1 of pension for 12 lump sum Trade 1 of pension for 12 lump sum

Death in Service lump sum 3 x pensionable pay 3 x pensionable pay Death in Service survivor 1/160th (based on Tier 1 benefits ill health enhancement) 1/160th (based on Tier 1 ill health enhancement)

Feature LGPSLGPS 2014 Proposals 2008 LGPS 2014 Ill- health retirement Tier 1 service enhanced to Normal Pension Age (65) Tier 2 - 25% service

enhancement to NPA (65) Tier 3 temporary payment of pension up to 3 years Tier 1 service enhanced to Normal Pension Age (State Pension Age) Tier 2 - 25% service enhancement to SPA (min 65) Tier 3 temporary

payment of pension up to 3 years Redundancy/efficiency retirement Age 55+ Age 55+ Qualifying period for benefits 3 months

2 years Contributions Possibly From LGPS 2014 Possibly To Gross Rate Up to 13,500 5.5%

Cont After Tax Relief 4.40% 13,501 21,000 5.8% 4.64% 21,001 34,000

6.5% 5.20% 34,001 43,000 6.8% 5.44% 43,001

60,000 8.5% 5.10% 60,001 85,000 9.9% 5.94%

85,001 100,000 10.5% 6.30% 100,001 150,000 11.4%

6.84% 12.5% 6.88% More than 150,000 CARE Date Transaction

Year 1 Deposit 15,000 X 1/49 306.12 306.12 Year 2 Interest

306.12 X 0.03 9.18 315.30 Deposit 15,600 X 1/49 318.37 633.67

Interest 633.67 X 0.03 19.01 652.68 Deposit 16,000 X 1/49 326.53

979.21 Interest 979.21 X 0.03 29.38 1,008.59 Deposit 16,000 X 1/49

326.53 1,335.12 Year 3 Year 4 Total 50/50 option Pay 50% contribution for 50% of pension Only affects the amount of pension you build up other benefits remain

Encourage members to join/stay in Could be useful for high earners to avoid annual allowance/lifetime allowance charges Will be automatically enrolled back into 100% scheme for Auto Enrolment 50/50 Example Main Scheme (5.8%) Net contribution 1 years Pension DIS lump sum 50/50 Option (2.9%)

58 per month 1/49th x 15,000= 306pa 29 per month 1/98th x 15,000 = 153 pa 3 x 15,000 = 45,000 3 x 15,000 = 45,000 Linking NPA to SPA

LGPS 2014 Normal Pension Age (NPA) linked to State Pension Age (SPA) - minimum of 65 If retire before NPA pension will be reduced. If retire after NPA pension will be increased SPA is increasing to 66 with future increases to 67 and beyond Office for Budget Responsibility to set future link between SPA and life expectancy 19 www.local.gov.uk Protections Benefits before April 2014 will be unaffected for all members

Keep normal retirement age 65 Keep 85 year rule protections Continue to be linked to final salary on leaving Members aged 55+ at 06/04/2012 will get the greater of 2008/2014 scheme Will 50/50 option affect protections? Continue in LGPS if outsourced Examples Please visit www.LGPS2014.org What the new scheme means

for employers Presented by Emma Shand Employer Liaison Officer Introduction The reform of LGPS in 2014 will have implications for Payroll systems Changes as a result of changes to pensionable pay and move to Career Average Revalued Earnings Scheme (CARE) Legislation yet to be laid but payroll requirements are expected to remain same Further developments may impact on information provided

Key Requirements Payroll records for each job Separate sections of the scheme Employee Contribution Rates

Employer Contribution Rates Additional Contributions New Definition of Pensionable Pay Assumed Pensionable Pay Pay received spanning 31/3/2014 and 1/4/2014 Payroll Records Multiple employments - Each job must be held separately Ability to deduct appropriate contribution rate for each job Potentially change employee contribution rates each pay period due to variations of pensionable pay Ensure employee contribution rates determined by pensionable pay received not full-time equivalent pay

Ability to hold separate cumulative pensionable pay and employee contributions for each job Payroll Records continued Report changes in contractual hours Report periods of absence Ability to hold pensionable pay accumulations to date of any protections member has Ability to hold pensionable pay accumulations at age 65 for members aged 55 and over at 1/4/2012 Deduct employee and employer contributions on any pensionable emoluments and include in cumulative pensionable pay

Separate Sections of the Scheme 2 Sections: Full section (100/100) and 50/50 section Payroll systems must: Be able to operate the 50/50 Section on any or all of the jobs Have ability to deal with movement between full section and 50/50 section and back (and vice versa) within one financial year Hold cumulative contributions paid and pensionable pay for each section AND each job per Scheme year. Ensure cumulative figures for any periods in each section are totalled Report start and end dates for each period in full and 50/50 sections Employee Contribution Rates

Contribution rates determined by and calculated on actual pensionable pay received Deducted on pensionable pay received If Assumed Pensionable Pay (APP) used contributions deducted from pensionable pay received not APP Rates remain same unless employer changes rate due to change in employment or pensionable pay Payroll must hold cumulative contribution amounts for each job per section of scheme Employer Contribution Rates Payable on pensionable pay received except during: Ordinary or paid maternity leave Ordinary or paid paternity leave

Ordinary or paid adoption leave Employer contributions payable on Assumed Pensionable Pay (APP) for above Employer contributions are not halved for 50/50 section Additional Contributions No change here Still need facility to deduct additional pension contributions as percentage of pensionable pay or a flat rate Still need facility to deduct Additional Voluntary Contributions (AVCs) Pensionable Pay New Definition

From 1/4/2014: Non-contractual overtime will be pensionable Excess hours for part-time staff will be pensionable Exclusions will be listed in scheme regulations if not listed its included for pensionable pay Pensionable Pay New Definition Payroll systems must: Operate 2014 scheme definition of pensionable pay Hold seperately, per job, pensionable pay cumulative each year in line with 2007 pay definition

Final Pensionable Pay Final pay for pre 2014 benefits (2007 regs) = based on FTE pensionable pay due for last 365 days Post 1/4/2014 CARE scheme benefits accrue year by year = based on actual pay or APP received in scheme year (ending 31st March) Though basis of scheme changes from 1/4/2014, final pay will still be at date of leaving Final Pensionable Pay Anyone with pre 1/4/2014 service two remuneration calculations needed: Final pensionable remuneration for last 365 days to

date of leaving and previous years if applicable (without non-contractual overtime) PLUS Actual pensionable pay 1st April to date of leaving (including non-contractual overtime) Assumed Pensionable Pay (APP) APP only applies to the relevant employment when a member goes onto reduced contractual pay or no pay: Sickness or injury Ordinary or paid additional maternity, paternity or adoption leave Relevant child-related leave

Absent on reserve forces leave APP continued Payroll system must: Calculate APP for each job Calculate APP for period of ordinary and additional maternity, paternity or adoption leave for each job Ensure cumulative figures for pensionable pay include APP for relevant periods for each job Ensure the actual pensionable pay for periods of reduced pay is not included in the cumulative pensionable pay figure for each job Ability to deduct appropriate contributions on actual pensionable pay received during reduced pay period and hold

APP in the accumulations for each job Pay relating to pre 31/3/2014 Pay or back-pay received after 31/3/2014 relating to period before 1/4/2014 is excluded from cumulative pay figure for the year NOT included in calculation of CARE pension (post 2014) Next Steps Provisions for pre 2014 membership and final pay are being agreed and will be shared shortly Local Government Association (LGA) website links to

Briefing Note for Employers Payroll specification document is to be developed aiming to provide more details expected August/September 2013 LGA will provide training for employers August/September 2013 Looking to the future Speaker Shirley Cuthbert (Deputy Pensions Manager) Looking to the future We are moving

New location - Great Moor House, Exeter New phone number 01392 383000 With effect from 16th September 2013 Letters to employers August 2013 Letters to all members August 2013 Shared service

Improved database Web based platform - Altair Employer Self Service (ESS) currently being trialled Member Self Service to follow (MSS) - allow members to update certain fields eg change of address - calculate own estimates Password Protected Communication Employers Pensions Line main source of providing information Employees Pensions Post, keeping

employees up to date with developments Electronic communication sending updates straight to email addresses Annual Benefit Statement The Personal Touch Employer meetings and training Member presentations Drop in sessions

Prudential & us State Pension Reform 2017 Contracting out to cease - scheme members & employers will pay more National Insurance - no affect on Scheme benefits - no affect to income received into Fund Any questions Further Information LGA website:

http://www.local.gov.uk/web/lgaworkforcepensions/home. LGA latest news containing information on scheme reform LGPS website: http://www.lgps.org.uk/lge/core/page.do? pageId=97977. Information on the agreement reached between employers, trade and government on the benefit structure of the scheme see of the LGPS The New LGPS 2014 Project. unions Reform LGPS 2014 member website: www.lgps2014.org. A dedicated website for information for scheme members about the reforms

to the LGPS from 1 April 2014 DCLG: https://www.gov.uk/government/consultations/localgovernment-pension-scheme-2014-and-2008-scheme-amendingregulations. Most recent DCLG consultation Contact Info Email addresses: [email protected] [email protected] [email protected] [email protected] [email protected]

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