Local Government Pension Scheme June 2012 Employer Discretions Policy Local Government Pension Scheme Andy Cunningham, Employer Relationship Manager, Wiltshire Pension Fund

Local Government Pension Scheme To be covered 1.Background: LGPS governance and the role of the Wiltshire Pension Fund 2.Employer Discretions (including examples) 3.Redundancy age 55 or over (not an employer discretion) 4.Examples of costs relating to employer discretions 5.Administering Authority discretions 6.Additional information available

Local Government Pension Scheme 1. Background about the LGPS and Wiltshire Pension Fund The LGPS is a nationwide, funded pension scheme which is administered at a county level. Department of Community and Local Government (CLG) is responsible for drafting the LGPS Regulations which are then passed by parliament. Wiltshire Pension Fund is responsible for administering LGPS in the Wiltshire and Swindon area. The LGPS Regulations has certain areas which are open to employer or administering authority (i.e. Wiltshire Pension Fund) discretions. Employer & Administering Authority Discretions must be laid out in a policy for them to be enforced.

Local Government Pension Scheme BMC12: Augmentation of membership of an active member (up to 10 years) [any age] (Required in Policy Statement) Example answer: [Employer Name] will only exercise this discretion in exceptional circumstances. This discretion will only be exercised with the expressed permission of the staff sub- committee after consideration of the costs that would apply. 2. Employer Discretions (continued) - Statutory Discretions

Local Government Pension Scheme 2. Employer Discretions (continued) - Statutory Discretions BMC 13: Whether to grant additional pension to a member (up to £5,000pa) [all ages] (Required in Policy Statement) Example answer: [Employer Name] will only exercise this discretion in exceptional circumstances. This discretion will only be exercised with the expressed position of the staff sub- committee after consideration of the costs that would apply.

Local Government Pension Scheme BMC 18(1): Whether all or some benefits can be paid if an employee reduces hours/grade and continues to work (“flexible retirement”) [age 55 onwards] (Required in Policy Statement) Example answer: [Employer Name] will consider employee requests to take flexible retirement on a case by case basis after taking into factors such as service delivery and any costs to [Employer Name]. The Finance Manager will be responsible for agreeing to all requests to take flexible retirement. 2. Employer Discretions (continued) - Statutory Discretions

Local Government Pension Scheme 2. Employer Discretions (continued) - Statutory Discretions BMC (3): Waiving actuarial reduction on flexible retirement. (Required in Policy Statement) Example answer: [Employer Name] will only waive the actuarial reduction on flexible retirement in exceptional circumstances following approval from the staffing sub committee

Local Government Pension Scheme BMC30 (2): Whether to allow early payment of benefits age (Required in Policy Statement) Example answer: [Employer Name] will not normally allow employees to receive their pension early. Before allowing any employee to receive their pension early, [Employer Name] will obtain an estimate of any costs that will apply. The staffing sub- committee will be responsible for agreeing to any requests to take early retirement taking into account factors such as service delivery and any costs to [Employer Name] 2. Employer Discretions (continued) - Statutory Discretions

Local Government Pension Scheme BMC30 (3): Waiving actuarial reduction on early retirement. (Required in Policy Statement) Example answer: [Employer Name] will only waive the actuarial reduction on early retirement in exceptional circumstances and as the result of the expressed permission of the staffing sub committee and after considering the costs that would apply. 2. Employer Discretions (continued) - Statutory Discretions

Local Government Pension Scheme 2. Employer Discretions (continued) - additional discretions Admin 16(4)(b)(ii): Whether to extend 12-month period to combine previous LG service. [Employer Name] will only allow an extension to the 12- month period to combine previous LG service where it can be reasonably shown that the member was not provided with the required information within 6 months of starting.

Local Government Pension Scheme 2. Employer Discretions (continued) - additional discretions BMC 3 Determine rate of employees’ contributions. Examples: [Employer Name] will only review all employees contribution band as at 1 April each year. Hence, when a member salary changes (either temporarily or permanently) during the year, the member will remain on the same employee contribution rate until the following April OR [Employer Name] will review all employees contribution bands when there has been a change to a member’s full-time equivalent salary at some point during the year. A member’s contribution rate will not be reviewed as the result of one-off additional payments (such as honorariums)

Local Government Pension Scheme 2. Employer Discretions (continued) - additional discretions Admin 22(2): Whether to extend the period for a member to elect to pay contributions to cover unpaid leave of absence, maternity, paternity, or adoption leave beyond 30 days after returning to work or leaving. [Employer Name] will only allow an extension to the 30 day period to pay contributions to cover unpaid leave if it can be shown that the member was not made aware of this option within 2 weeks of returning to work.

Local Government Pension Scheme 2. Employer Discretions (continued) - additional discretions Admin 83(8): Whether to extend 12-month period to allow a transfer-in of non-LG pension rights. [Employer Name] will only allow an extension to the 12-month period to combine previous non-LG service where it can be shown that the member was not provided with the required information within 6 months of starting.

Local Government Pension Scheme 3. Redundancy (age 55 or over) Redundancy is not an employer discretion. This is because any LGPS member who is aged 55 or over that is made redundant has an statutory right to receive their pension without reductions w/e from their leaving date

Local Government Pension Scheme 4. Examples of cost The Member: 57 year old, male, 15 years service, final year salary of £32,000. The benefits: Early Retirement without reductions with one additional year The strain costs: Early Retirement: c £ Additional year: c £ (Note: the costs would be similar for redundancy)

Local Government Pension Scheme 4. Examples of cost The Member: 62 year old Female, Final year salary of £17,000, 20 years of LGPS service The benefits: Early Retirement without reductions (agreed as part of a compromise agreement) The strain costs: Early Retirement: c £13 000

Local Government Pension Scheme 5. Administering Authority Discretions (selected) A41(2) Whether to require any strain on Fund costs to be paid “up front” by Employing authority following redundancy, flexible retirement, or the waiver (in whole or in part) of any actuarial reduction on flexible retirement (but not waiver of reduction in full on compassionate grounds). WPF will require costs relating to redundancy, flexible retirement and the waiver of any actuarial reduction on flexible retirement to be paid “up front”. WPF will invoice for such payments and will require payment to be made within its normal invoice terms. If there is any cost to the fund for deferred benefits being released at the employers consent before the former member attains age 60 these may be (or will be) recharged to the former employer of the member concerned.

Local Government Pension Scheme 5. Administering Authority Discretions (selected) A42(1)&(7) Decide frequency of payments to be made over to Fund by employers and whether to make an admin charge. Employers will be required to be make payments by the 19th of month following when the deduction is made. WPF will not charge an admin charge for this as administration costs form part of the employer contribution rate.

Local Government Pension Scheme 5. Administering Authority Discretions (selected) A42(4) Decide format and frequency of information to accompany payments to the Fund Information accompanying payments will also be required by the 19th of month following when the deduction is made.

Local Government Pension Scheme 5. Administering Authority Discretions (selected) A64(1)(b) Specify information to be supplied by employers to enable admin. authority to discharge its functions WPF will specify the standard information and actions required by employers, their format, frequency and level of accuracy in an online Employer’s Guide and Administration Strategy.

Local Government Pension Scheme 5. Administering Authority Discretions (selected) A83(9) Allow transfer of pension rights into The Fund WPF will allow members to transfer in pension rights in accordance with the LGPS regulations.

Local Government Pension Scheme 6. Additional Information Available Other Employers Discretions Policy: These can be found the ‘active members’ area of the website. Template, example policy and explanation of terms etc: Employer’s Guide website Administering Authority’s Discretions Policy: Employer’s Guide on the website.

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