from 1 April 2015 V7 11 Nov 2014 Introduction Insert name of presenter Insert presenters organisation What will we look at today What is changing What remains the same The protections in place for benefits in the final salary scheme ID: 362962
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Slide1
‘New Career Average Scheme from 1 April 2015’
V7– 11 Nov 2014Slide2
IntroductionInsert name of presenterInsert presenter’s organisation Slide3
What will we look at today?What is changingWhat remains the sameThe protections in place for benefits in the final salary schemeSlide4
The Facts…The way contributions are worked out using pay bands stays as it isif you are not full-time, your rate will be based on what you earn, not your job’s FTEYou build up pension at a better rate … 1/49th is better than 1/60th You can still take your pension anytime from age 60 to 75Slide5
1/49th is 22% more than 1/60thfinal salary career averageSlide6
1/49th is 22% morecareer average final salarySlide7
The Facts – What’s not changingGuaranteed defined benefit schemeValuable life cover - 3 times payPension for dependantsIll-health coverOption to take tax free cash lump sum Employer pays too…Still an excellent schemeSlide8
The tiered contributions table will be retained Rate of pay Contribution rates 2014/15Less than £20,934 5.5%Between £20,934 and £27,205 Between 5.6% and 6.0%Between £27,206 and £34,152 Between 6.1% and 6.5%Between £34,153 and £48,141 Between 6.6% and 7.5%Between £48,142 and £54,235 Between 7.6% and 8.0%Between £54,236 and £72,620 Between 8.1% and 9.0%Between £72,621 and £109,862 Between 9.1% and 10.0%
More than £109,863 10.1% and overSlide9
The Facts – New SchemeExample - Contributions
Jennifer is part-time
Hours of work
30 hours per week
Full time equivalent Pensionable Pay
£25,220
Actual Pensionable Pay
£21,617
Contribution rate in 14/15 if use full time equivalent pay
5.9%
Contribution rate in 14/15 if use actual pay
5.6%
Employer contributions
At least 2 times more than members contributionsSlide10
The Facts – New SchemeGreater Contribution Flexibility New option to pay less - 50/50 Options to pay more- APC additional pension conts- AVC additional voluntary conts Slide11
The Facts – New SchemeHow does new 50/50 section work?Pay half your normal contributionsGet half your normal pension Any member can join this section - Elect in writing Same level of life and ill-health cover as in the main sectionShort term option (maximum 3 years)Slide12
The Facts – New SchemeAdditional Pension Contributions (APCs)Buy up to £6,500 extra pensionPay regularly or by lump sumCost paid for by you, get a pension for you only (your employer can also award extra pension or pay towards cost)
Buy extra pensionSlide13
The Facts – New SchemeShared Cost APCPeriods of:Unpaid authorised leave and Unpaid additional relevant child related leaveLost PensionShared Cost Employer 2/3rds, Employee 1/3rdElect within 30 days of coming back to workSlide14
The Facts – New SchemeExtra Cover Ill-health coverLife CoverSurvivors PensionsReduced/ no pay – sick leave and new parent leave coverSlide15
The Facts – New SchemeHow is my pension worked out?Pension worked out every Scheme YearRate of build-up is 1/49th pensionable pay (half that if in 50/50 section) Pensionable Pay - new definitionPension added to your Pension Account
More than one job? Separate Pension Account for each jobEvery year Pension revalued to keep it in line with the cost of living
Certificates of protectionSlide16
The Facts – New SchemeExample - How is my pension worked out?Susan’s Pension Account
Scheme Year
Actual Pay
Cost of Living Adjustment
1
1 April 2015 to
31 March 2016
£24,500
3%
2
1 April 2016 to
31 March 2017
£25,333
3.1%
…In main section of the schemeSlide17
The Facts – New SchemeExample - How is my pension worked out?Scheme YearOpening BalancePension Build up in year
Total Account 31 MarchCost of living adjustment
Updated Total Account
1
£0.00
£24,500/49 = £500
£500
3% = £15
£515
2
£515
£25,333/49 = £517
£1032
3.1% =
£32
£1,064Slide18
The Facts – New SchemeWhen can I take my pension?Anytime from age 60 to 75Normal Pension Age = State Pension AgeNormal Pension Age = paid in fullWhat's my State Pension Age? Find out at www.gov.uk/calculate-state-pensionTake earlier than Normal Pension Age = reduction
Take later than Normal Pension Age = increaseSlide19
The Facts – New SchemeWhat reductions apply if drawing your pension early?Years early
Pension Male
Pension Female
Lump Sum
(for membership to
31 March 2009)
1
6%
6%
3%
2
11%
11%
6%
3
16%
15%
8%
4
21%
20%
11%
5
25%
24%
14%
6
29%
28%
16%
7
33%
31%
19%
8
36%
35%
21%
9
39%
38%
23%
10
42%
41%
26%Slide20
The Facts – New SchemeOther types of retirement (No change)Ill-health Payable at any age, 2 Tier system, employer decides Any enhancement worked out by reference to NPA Redundancy/ Efficiency
Payable from age 55 (50 if you were a member in 2006)No reduction for early payment
Flexible Retirement
Employer consent from age 55
Draw some or all of your pension
Remain in work (lower grade and or less hours - see your Employer’s policy)Slide21
The Facts – ProtectionsIn before April 2015?All pension built up before changes = fully protectedMembership up to 31 March 2015 based on final pay when you leaveProtected Normal Pension Age = 65Final Pay protection for reduction or restriction in pay through certificates of protection…Remember all pension is drawn at the same time (pre and post 2015) Slide22
The Facts – ProtectionsSounds confusing ? … let’s break it down Up to 3 different calculations when working out your pension (depending on when you joined)Slide23
The Facts – ProtectionsMembership up to 31 March 2009
Membership from 1 April 2009 to 31 March 2015
Membership from 1 April 2015
Annual Pension
= Membership x Final Pay / 80
+
Annual Pension
= Membership x Final Pay / 60
+
Annual Pension
= Pensionable pay for each year / 49
(half that if in 50/50 section)
Automatic tax-free cash lump sum
= 3 x Annual Pension
No automatic tax-free cash lump sum*
No automatic tax-free cash lump sum*
* Option to convert pension into tax-free cashSlide24
The Facts – ProtectionsRule of 85What is it? Age (min 60) plus membership in whole years = 85In on 30 November 2006Protection up to April 2008 if under 60 on 31 March 2020Protection up to April 2020 if 60 by 31 March 2020 Slide25
The Facts – ProtectionsProtection for those nearing retirementTo ensure you get the same as you would have before scheme changed = Underpin checkLikely that for many new scheme is betterSlide26
The Facts – ProtectionsWho is protected by the Underpin? Active on 31 March 2012Within 10 years of your Normal Pension Age on 1 April 2012No disqualifying break in service of more than 5 yearsNot taken any pension already before your Normal Pension Age Slide27
The Facts – ProtectionsExisting ContractsHave you already got a contract to buy more pension or membership?Could include:Added Years (buying additional membership)Additional Voluntary Contributions (AVCs)Additional Regular Contributions (ARCs)Additional Survivor Benefit Contributions (ASBCs)
Preston part-time buy-back
These continue under the new scheme - under the same rules as
before. Slide28
The Facts – ProtectionsProtection if you leave and re-join the LGPS in the future You leave and come back …With a break of 5 years or less (in LGPS or any Public Service Pension Scheme) …thenOn any pre 1 April 2015 benefits you continue to have a final salary link (used to work out your final salary benefits)Slide29
The Facts - Future?Cost Management processReview contribution rates and benefits every three yearsEnsure the Scheme’s long-term futureMore robust governanceThe LGPS remains a great schemeSlide30
Some examplesSlide31
ExamplesSlide32Slide33Slide34
More informationhttp://www.scotlgps2015.orgSlide35
Contact your FundWebsite Fund to add own detailsEmail Fund to add own detailsTelephone Fund to add own details
scotlgps2015.orgSlide36
DisclaimerThese slides explain the changes to the Local Government Pension Scheme(LGPS) from April 2015 as well as the protections in place for members of the scheme who have built up benefits in the scheme before 1 April 2015.It reflects known changes at the time of V7’s publication on 11 11 14. The information contained in these slides has been produced by the SLOGPAG communications sub-group. It represents the current understanding of the law. It should not be treated as a complete and authoritative statement of the law.
Readers may wish, or will need, to take their own legal advice on the interpretationof any particular piece of legislation. No responsibility whatsoever will be assumed
for any direct or consequential loss, financial or otherwise, damage or
inconvenience, or any other obligation or liability incurred by readers relying on
information contained in these slides.