LGPS 2011

Employer Training

Objectives

• Understand what changes are being made

• Know what you have to do to implement them

Areas to be covered

• New contribution rates

• What counts as pensionable pay

• Eligibility to join the scheme

• Casual employees

• Buying additional benefits

Areas to be covered

• Employer awards

• Unpaid leave

• Multiple employments

• Ill-health retirements

• Minimum retirement age

Contribution Rates

• Everyone’s rate changed from 01.04.08

• Rate to be applied dependent on pensionable pay

• For part-timers, use full–time equivalent pay to determine rate

• For term-timers, use full-time, term-time pay to determine rate

Contribution Rates April 2011

Salary Range Contribution Rate

<£12,900 5.5%

>£12,900-£15,100 5.8%

>£15,100-£19,400 5.9%

>£19,400-£32,400 6.5%

>£32,400-£43,300 6.8%

>£43,300-£81,100 7.2%

More than £81,100 7.5%

Contribution Rates

• Final decision on band belongs to employer

• Example: Member has basic pay of £17,500 and no pensionable extras – rate is 5.9%

Member has basic pay of £17,500 and £3,000 bonus – rate is 6.5%Member has basic pay of £17,500 and variable bonus – rate is employer’s decision

Contribution Rates

• Member works 18 hours per week out of 36, part-time pay is £12,000 pa, rate to use is 6.5% (full-time pay is £24,000), membership is recorded as 50%

• Member works full time week (36 hours) but only 48 weeks per year. Pay received is £17,000, rate to use is 5.9%, membership recorded as 92.31%

• Member works 18 hours per week out of 36 and 48 weeks per year. Pay received is £8,500, rate to use is 5.9% (full-time, term-time pay is £17,000), membership recorded as 46.15%

Contribution Rates

• Bands increased each year in line with Orders made under Pensions (Increase) Act 1971

• Employer’s decision on if and when to review members’ rates

• Options include: each time pay changes (i.e. promotion during the year),

each 1st April (or when cost of living increase applied),never

Contributions: Protected rate

• Protected 5% rate abolished

• Phased contribution rates until member matches normal rate

• Contributions from 01.04.2011 in accordance with normal rate

Contributions: Protected rate

Year commencing Contribution Rate

01.04.2008 5.25%

01.04.2009 5.5%

01.04.2010 6.5%

Pensionable Pay

• Includes: basic salaryContractual overtimeHonoraria/bonusAnything specified in contract as pensionable

• Not included: non-contractual overtimeTravelling allowance or expensesPayment in lieu of holidaysPayment in lieu of noticePayment as inducement not to terminate employment

Eligibility

• Last day in scheme must be no later than 2 days before 75th birthday

• Must have contract of at least 3 months

• Effectively excludes some casual employees

• Contributions can be backdated if contract extended beyond 3 months

Casual Employees

• Mutuality of obligation: if you have work to offer it must be offered to that employee, who must accept

• New casuals must have 3 month mutual obligation contract to be eligible

• Current casuals must have mutuality of obligation to remain in scheme

Casual Employees

31/03 01/04Member on

01/04?

M.O. on

M.O. on No M.O.,

worked on

No M.O., worked on

No M.O. worked on

Additional Benefits

• All AVCs and current added years contracts to continue as normal

• Added years abolished

• Replaced by additional pension

• Can buy up to £5,000 p.a. in multiples of £250

• Paid for by additional pension contributions

• To be deducted in same way as added years contributions

Employer awards

• Ability to award up to 10 years extra membership remains

• New ability to award additional pension

• Can award up to £5,000 pa in multiples of £250

• Paid by lump sum, or additional employer contributions

Unpaid leave

• Regulations have been clarified

• Contributions for first 30 days of unpaid leave must be paid

Multiple Employments

• Must be treated separately for contribution rates

• Do not have to be member in all employments

Ill-health Retirements

• 3 tiers of ill-health• Dependent on possible recovery to be capable of

undertaking “gainful employment”• Gainful employment = any job of at least 30

hours per week, for at least 12 months• 1st tier = Very improbable to recover, 100%

membership enhancement• 2nd tier = may recover, 25% membership

enhancement• 3rd tier = will be capable within 3 years, no

enhancement

Ill-health Examples

• Mr Smith, retires aged 44 with no real likelihood of recovery. Enhancement 21 years (100% potential membership between LDS and 65th birthday)

• Mrs Jones, retires aged 35 with reduced likelihood of recovery. Enhancement 71/2 years (25% potential membership between LDS and 65th birthday)

• Mr Alas, retires aged 50 (over 45 on 31.03.08) with 20 years membership and reduced likelihood of recovery. Enhancement 62/3 years because of protections

Earliest Retirement Date

• Increased from age 50 to 55

• Ill-health benefits still payable from any age