Pension Liaison Officer Group2nd July 2013

Presented byEmma Shand – Employer Liaison Officer

Shirley Cuthbert – Deputy Pensions ManagerViv 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-EnrolmentExperience

•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 Serviceswww.devon.gov.uk/pensions

LGPS 2014

Speaker Shirley Cuthbert

(Deputy Pensions Manager)

LGPS 2014 Video

http://lgps2014.org/content/video-overview-lgps-2014

LGPS 2014 ProposalsFeature 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 non- contractual overtime and non-pensionable additional hours

Pay including non- contractual overtime and additional hours for part-time 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 benefits

1/160th (based on Tier 1 ill health enhancement)

1/160th (based on Tier 1 ill health enhancement)

LGPS 2014 ProposalsFeature LGPS 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

ContributionsLGPS 2014

Possibly From Possibly To Gross Rate Cont After Tax Relief

Up to £13,500 5.5% 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%

More than £150,000 12.5% 6.88%

CAREDate Transaction     Total

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

Year 3 Interest £633.67 X 0.03 £19.01 £652.68

  Deposit £16,000 X 1/49 £326.53 £979.21

Year 4 Interest £979.21 X 0.03 £29.38 £1,008.59

  Deposit £16,000 X 1/49 £326.53 £1,335.12

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%) 50/50 Option (2.9%)

Net contribution £58 per month £29 per month

1 years Pension 1/49th x £15,000= £306pa

1/98th x £15,000 = £153 pa

DIS lump sum 3 x £15,000 = £45,000 3 x £15,000 = £45,000

19

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

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

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

Introduction

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 Scheme2 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 PayFinal 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 PayAnyone 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 StepsProvisions 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 unions and government on the benefit structure of the scheme – see ‘Reform of the LGPS – The New LGPS 2014 Project’.

• 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/local-government-pension-scheme-2014-and-2008-scheme-amending-regulations. Most recent DCLG consultation

Contact Info

• Email addresses:–pensions@devon.gov.uk–pensionssecure-mailbox@devon.gcsx.gov.uk–emma.shand@devon.gov.uk–shirley.cuthbert@devon.gov.uk–viv.ray@devon.gov.uk