pension liaison officers’ group (plog)
DESCRIPTION
PENSION LIAISON OFFICERS’ GROUP (PLOG). 11 May 2011. Agenda. 1.Welcome/Attendance (David Anthony) 2Auto-enrolment and NEST (Andy Cunningham) 3.Ill Health Insurance (Andy Cunningham) 4AVCs with Prudential (Prudential) BREAK 5.Pension Reform (David Anthony) Hutton Review Budget - PowerPoint PPT PresentationTRANSCRIPT
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Local Government Pension Scheme
11 May 2011
PENSION LIAISON OFFICERS’ GROUP (PLOG)
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Local Government Pension Scheme
Agenda
1. Welcome/Attendance (David Anthony) 2 Auto-enrolment and NEST (Andy Cunningham)3. Ill Health Insurance (Andy Cunningham)4 AVCs with Prudential (Prudential)
BREAK 5. Pension Reform (David Anthony)
– Hutton Review– Budget
6. New Monthly and Yearly Returns (Martin Summers)7. Pension Remunerations and Pensionable Pay (Martin
Summers)8. Pension Tax Relief Update (Martin Summers)9. Future Developments (David Anthony)
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Local Government Pension Scheme
2. Auto-enrolment 2012 and NEST
What is ‘Auto-enrolment’?• New legal obligation to automatically enrol ‘eligible employees’
into ‘qualifying workplace pension scheme’
• Eligible employees:
- Aged between 22 and state pension age
- Earn above the personal allowance amount
• Qualifying workplace pension scheme:
- Defined Contribution Scheme/NEST
- Defined Benefits Scheme (such as the LGPS) or certain other types of scheme
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Local Government Pension Scheme
2. Auto-enrolment 2012 and NEST
What is ‘Auto-enrolment’? (continued)
Employer Contributions• Employers must contribute at least 3%
Start dates and entry requirements• October 2012-2016, depending on the size of the organisations
(largest organisations first)• Requirement to automatically enrol people into a eligible
scheme (although they can still opt-out)
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Local Government Pension Scheme
2. Auto-enrolment 2012 and NEST
What is NEST?
• NEST = National employment savings trust• Arm’s length non-departmental Government body set-up to give
organisations a straightforward way to meet 2012 requirements• Defined Contributions (DC) Pension Scheme• Employers can use NEST for just some of its employees• Key advantages are that:
- It is Government backed (hence secure)
- It is likely to be widely used, therefore members who change jobs are likely to still be able to access the same scheme
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Local Government Pension Scheme
2. Auto-enrolment 2012 and NEST
Further information:
Auto-enrolment
www.pensionsadvisoryservice.co.uk
NEST
www.nestpensions.org.uk
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Local Government Pension Scheme
3. Ill Health Insurance
What is it?
• Insurance to protect you against the risk of incurring pension strain costs as the result of one or more people going on ill-health retirement.
• Provided by Legal & General in collaboration with Hymans
How much will it cost?• It depends on the profile and number of take up.
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Local Government Pension Scheme
3. Ill Health Insurance
Points to consider
• Ill health strain costs are currently recovered through future contributions rather than upfront – hence they are spread over time
• For employers with a relatively large number of members or for those in a funding pool (e.g. town and parish councils) – the risk would appear manageable, particularly given the point above
• Smaller, stand alone employers (particularly those with shorter contracts) may find the risk ‘unmanageable’, particularly if they ceased and the costs became payment quickly.
Next Steps• Hymans/Legal & General are likely to send out a letter shortly providing
further details.
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Local Government Pension Scheme
4. AVCs and Prudential
Separate slides…
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Local Government Pension Scheme
5. Pension Reform – Hutton Report
THE DEALPublic Service Workers
• A good pension in retirements
• Defined benefit pension
• Accrued rights protected
• Fair process of change
• Better Management of Schemes
Taxpayer
• Fairer sharing of benefit of living longer
• Future-proofed
• Fixed costs
• Greater transparency of costs
• Single legal framework
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Local Government Pension Scheme
5. Pension Reform – Hutton Report
Recommendations:
The Member• Move from Final salary to CARE• Maintain Final Salary for accrued benefit• Normal Retirement Age aligned to State Pension Age
The Employer • Ceiling to be set for Ers contributions (agreed by Government)
• Not permit entry to non public sector workers
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Local Government Pension Scheme
5. Pension Reform – Hutton Report
Recommendations:
Scheme Governance
• Properly trained & competent Pension Committee• Member nominees on Committee• Common framework for public pension schemes• Revised legal framework for scheme – separate entity?
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Local Government Pension Scheme
5. Pension Reform – Hutton Report
Scheme Administration
• LGPS remains funded• Improved transparency – centralised data / benchmarking• More co-operation / sharing of contracts
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Local Government Pension Scheme
5. Pension Reform – Hutton Report
The Unknowns:
• Accrual rate? • Timescales – by 2015• Transition arrangements• How many schemes to administer?• Employers contribution ceiling and mechanism• Definition of ‘non public sector worker’
Await the Governments decision on what to implement – but no ‘cherry picking’
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Local Government Pension Scheme
5. Pension Reform – Budget
• RPI to CPI for Pension Increase • Employers reducing staff levels• Pay freeze for public sector workers• Proposed increase of employees conts
– On average 3% – protect lower paid
• Increased opt-outs?
• Long term affordability of the scheme!
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Local Government Pension Scheme
6. New Monthly and Yearly Returns
• Review of information to be submitted
• Pension Regulator requirements on data held– Common data
• Changes to format/data required
• Pilot with small number of employers
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Local Government Pension Scheme
6. New Monthly and Yearly Returns (continued)
• Monthly returns
• Pension Contributions – in line with contributions paid
to the fund
• FTE percentage
• Pensionable remuneration – this is to confirm that
contributions received are in line with the FTE (audit requirement)
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Local Government Pension Scheme
6. New Monthly and Yearly Returns (continued)
• Starter/Leaver and Changes information
• One spreadsheet
• Different tabs for each set/type of data
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Local Government Pension Scheme
6. New Monthly and Yearly Returns (continued)
• Annual returns
• Pension contributions – all contributions paid
• Pensionable remuneration
• FTE percentage
• Reconciled against contributions received during the year
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Local Government Pension Scheme
7. Pension Remunerations and Pensionable Pay
• Employers responsibility– Best of last 3 years
• Members responsibility– Miscellaneous Regs– Choose best 3 year average in the last 10 years
• Level of knowledge
• Training
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Local Government Pension Scheme
8. Pension Tax Relief Update
• Changes April 2011 and April 2012
• April 2011 – annual allowance reduced from £255,000 to £50,000
• April 2012 – Lifetime Allowance reducing from £1.8million to £1.5million
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Local Government Pension Scheme
8. Pension Tax Relief Update
• Annual Allowance
• What fund has done for members?
• Information provided in Newsletter to active members distributed in January 2011
• High earners communicated too individually
• Website information – calculator provided
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Local Government Pension Scheme
8. Pension Tax Relief Update
• Annual Allowance
• Reported by Pensions Department to members and HMRC
• Tax payable by scheme or member?
• When is tax paid and benefits adjusted?
• Further clarification to follow
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Local Government Pension Scheme
8. Pension Tax Relief Update
• Annual Allowance
• Brief outline
• Growth in the value of pension “pot” during the year
• Affected members – high earners, long service, significant pay increase, augmented benefits
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Local Government Pension Scheme
8. Pension Tax Relief Update
• End of previous year• • Pension £10,000 per annum• Lump Sum £20,000• • £10,000 x 16 + £20,000 = £180,000• • Assume CPI is 3% =£185,400•
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Local Government Pension Scheme
8. Pension Tax Relief Update
• End of current year• Pension £14,000 per annum• Lump Sum £27,000• • £14,000 x 16 + £27,000 = £251,000• • Growth in benefits• £251,000 less £185,400 = £65,600• • Excess above annual allowance = £15,600 (taxable)
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Local Government Pension Scheme
8. Pension Tax Relief Update
• Lifetime Allowance
• Reduction in allowance from £1.8m to £1.5m
• Protection for members already above the limit
• Members apply to HMRC for confirmation of personal Lifetime Allowance (similar to 2006 changes)
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Local Government Pension Scheme
9. Future Developments
• Annual Benefit Statements– Combined DWP info
– (July-Sep?)
– Members surgeries
• Communications– Active Members newsletter
– Roadshows for post Hutton scheme
– Enhance members & non-members knowledge of benefits
– Reward Statements
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Local Government Pension Scheme
9. Future Developments
• Secure Portal– Electronic transfer of data
– Password protect!
• Workflows & Imaging – Task management system
– Benchmarking data
• Stakeholders Surveys