new scheme lgps 2014 and contribution setting
DESCRIPTION
New Scheme LGPS 2014 and Contribution Setting. Mike Allen Director of Pensions. New LGPS 2014. New LGPS 2014. Summary of Changes What’s next. Summary of Changes. Increased Retirement Age. Linked to State Pension Age SPA: currently 65 66 by October 2020 67 by 2028 68 by 2046. - PowerPoint PPT PresentationTRANSCRIPT
New Scheme LGPS 2014 and Contribution Setting
Mike AllenDirector of Pensions
New LGPS 2014
• Summary of Changes
• What’s next
New LGPS 2014
Summary of Changes
Current scheme New scheme
Scheme basis Final Salary CARE
Accrual rate 1/60th 1/49th
Indexation CPI for DB’s and pensioner’s CPI on all
Normal Pension age 65 SPA
Employee contributions 5.5% to 7.5% 5.5% to 12.5%
Vesting period 3 months 2 years
Contributions flexibility None 50/50 option
Pay used Pensionable pay Actual pay
Outsourcing LGPS still available
Protection 85 year rule, pre 2008 service Pre 2014, plus 10 year of retirement
• Linked to State Pension Age
• SPA: currently 6566 by October 202067 by 202868 by 2046
Increased Retirement Age
Actual Pensionable pay Gross contribution After tax relief Current rate (if full time)
Up to £13,500 5.5% 4.4% 5.5%
£13,501 to £21,000 5.8% 4.64% 5.8, 5.9 or 6.5%
£21,001 to £34,000 6.5% 5.2% 6.5%
£34,001 to £43,000 6.8% 5.44% 6.8%
£43,001 to £60,000 8.5% 5.1% 6.8 or 7.2%
£60,001 to £85,000 9.9% 5.94% 7.2%
£85,001 to £100,000 10.5% 6.3% 7.2 or 7.5%
£100,001 to £150,000 11.4% 6.84% 7.5%
Greater than £150,000 12.5% 6.88% 7.5%
Contributions Payable
50/50 Scheme
• 50% contributions
• 50% service accrual (1/98th)
• 100% death cover
• Re-enrolled into full scheme every three years
• For benefits accrued after 1/4/2014• To calculate contribution rate to be paid• Non-contractual overtime• Allowances• Arrears of pay• ‘Assumed Pensionable Pay”
Separate pay figures will be required for Actual Pay (new scheme) and Final Pay (protected benefits) e.g.:
• A member leaving employment• End of Year contribution returns
Pensionable Pay
Protections
• Pre 2008 service
• 2008 to 2014 service
• Post 2014 service
• All retirees within 10 years of age 65 at 31 March 2012
• 2 calculations to pay the better of
• Old benefits (Pre 2014 scheme for all service)
• New benefits (Pre 2014 & Post 2014)
Protections - continued
Unchanged
• Ill health
• Redundancy early retirement
• Death benefits
• Additional contributions
• CARE• 1/49th
• NRD=State pension age• Actual pay for benefits and contributions• New contribution rates• 50/50 scheme• Protection for all service to 31/3/2014• Best of both for those within 10 years of retirement
Summary
Current Situation:
• Benefit and Administration Regulations published
• Transitional Regulations (Protections etc.) due shortly
Further Regulations/Consultations due on:
• Cost Control
• Governance
Summary
• Newsletters
• Briefing note on key issues
• Website
• Workshops
• Guidance Notes
• Revised on-line notifications and Guides
Support for Employers
• Newsletter/formal notification of changes
• Website
• Benefit Modellers
• Posters
Support for Members
Contribution Setting
• Once every three years
• Sets employer contribution rates for the next 3 years
• Aims to ensure fund solvency
The valuation process
• Funding level
• Recovery period for past service deficit
• Covenant strength
• Type of employer
• Open or Closed to new members
What determines contribution rates?
LPFA’s aims
• Ensure appropriate contribution rate for each employer
• Recognise individual employer strength
• Identify how covenant strength can be improved
• Reduce risk of employer debt falling on other scheme employers
• Results finalised
• Employers notified of contribution rate payable
• Discussions on phasing options for any increases
• Discussions around security and covenant strength
• New rates payable from April 2014
Next Steps