Local Government Pension Scheme Overview of the Local Government Pension Scheme Rachel Lamb Deputy Head of Peninsula Pensions (Technical) Te

Overview of the Scheme What is the Local Government Pension Scheme (LGPS)? Benefits of joining the scheme Increasing benefits How much will it cost? What happens on leaving? Member Self Service

What is the LGPS? Nationwide scheme for all local government employees under age 75 – occupational funded scheme (90 local pension funds) Operates under government legislation – one of several Public Services Pension Schemes Defined Benefit (DB) scheme – Benefits set out in law The Pension Fund is separate from the council’s budget Post 2014 Career Average Revalued Earnings (CARE) scheme Pre 2014 Final Salary Pension Scheme

LGPS 2014 Overview LGPS 2014 - current scheme commenced on 1st April 2014 following public sector pension reform report issued by Lord Hutton in 2011 recommending schemes should be: Affordable/Sustainable/Fair On review, the LGPS changed from Final Salary to Career Average Revaluation Earnings scheme (CARE) Employees are contractually automatically enrolled into the LGPS from day one of eligible membership - Casual’s contract less than 3 months not automatic but do have option to join* *May be automatic if government led auto-enrolment thresholds met

Benefits of joining the scheme Guaranteed defined benefit funded scheme Individual Pension Accounts – pension benefits calculated on a yearly basis with accrual rate of 1/49th of ACTUAL pensionable pay Tax free member contributions with a reduced 50/50 option to pay half contributions and accrue half pension – Employer pays contributions too Option to take tax free cash lump sum Index-linked pensions based on Consumer Price Index (CPI) Built in Ill-health benefits / life cover Pension for dependants Normal retirement age is the state pension age for both men and women - Able to retire from Age 55 without employers consent.

How does LGPS CARE work? Each year the member builds up a slice of pension (1/49th) based on their pensionable salary in that year Each slice is revalued in line with the revaluation rate until retirement At retirement, the slices built up each year are added together to calculate the total pension Early retirement reductions are applied as appropriate

Example (CARE) Calculated on 1/49ths of actual pay for each year in the scheme Contribution year is April to March Accruing pension is revalued each year in line with Consumer Price Index Scheme Year Opening Balance Pension Build up in year Total Account 31 March Cost of living adjustment Updated Total Account 1 £0.00 £24,500/49 = £500 £500 3% = £15 £515 2 £25,333/49 = £517 £1032 3.1% = £32 £1,064 3 £26,100/49 = £532.65 £1564.65 2% = £31.29 £1595.94 4 £26,500/49 = £540.82 £2136.76 1% = £21.37 £2158.13 5 £27,100/49 = £553.06 £2711.19 3% = £81.34 £2792.53 Example

Tax Free Lump Sum At retirement you can exchange some of your annual pension for a tax free lump sum at the rate of £1 pension for £12 lump sum e.g Retirement Pension = £20,000 pa, and you elect to give up £1,000pa pension, you will receive a £19,000 pension and a tax free lump sum of £12,000 There are Maximum lump sum limits set by HMRC.

…Remember all pension is drawn at the same time (pre and post 2014) In LGPS before April 2014? PROTECTIONS for benefits built up before April 2014: All pension built up before changes = fully protected Membership up to 31 March 2014 based on final pay when you leave Protected Normal Pension Age - 65 (for almost all members) Final Pay protection for reduction or restriction in pay …Remember all pension is drawn at the same time (pre and post 2014)

* Option to convert pension into tax-free cash The 3 Tranches Membership up to 31 March 2008 Membership from 1 April 2008 to 31 March 2014 Membership from 1 April 2014 Annual Pension = Membership x Final Pay / 80 + = Membership x Final Pay / 60 = 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* * Option to convert pension into tax-free cash

Your retirement benefits Include: CARE Scheme pension Previous Final Salary pension Any transferred in / topped up membership Any lump sum

How much will it cost? Your contributions will be based on your actual pay As contributions are taken before you are taxed, you receive tax relief on the contributions you pay 50/50 option – Pay half contributions, receive half benefits - Employer’s Contributions remain at 100% PAY BANDS Contribution Rates Up to £13,600 5.5% £13,601 - £21,200 5.8% £21,201 - £34,400 6.5% £34,401 - £43,500 6.8% £43,501 - £60,700 8.5% £60,701 - £86,000 9.9% £86,001 - £101,200 10.5% £101,201 - £151,800 11.4% Over £151,800 12.5%

50/50 Scheme One scheme, two sections Since April 2014, the new Local Government Pension Scheme (LGPS) regulations introduced two sections of the scheme: the main 100/100 section, and the 50/50 section. Pay half normal contributions and get half normal pension (Employers remain at 100%) – Pension accrues at 1/98th instead of 1/49th Same level of life and ill-health cover as in the main section Short term option (maximum 3 years) Any member can join this section – Election form on our website No limit to the number of times can move between each section of the scheme. If multiple employments, can elect for the 50/50 option in one, some or all employments. Will go back into Main section after nil pay period and Auto-enrolment re-enrolment date but can elect again for 50/50 Section

Increasing your benefits Transfer previous pension rights into the LGPS from any other arrangement Additional Pension Contributions (APCs) Purchase additional pension via one off lump sum or pay additional monthly contributions. Maximum is an additional £6755 pension pa (increases each year). Additional Voluntary Contributions (AVCs) Pay additional contributions into an AVC fund run through Prudential - runs alongside main LGPS scheme. No limit to how much can be paid in (100% after statutory deductions) On retirement this fund is used to purchase an annuity – member has option of Tax Free Cash or can purchase LGPS pension on retirement. No additional contributions payable by employer unless Shared Cost arrangement Shared Cost APC only if member opts to pay for periods of unpaid authorised leave or unpaid additional relevant child related leave within 30 days returning to work (*or longer period as employer allows), then employer must pay 2/3rd of Additional Pension Contribution (APC) costs with employee paying the remaining 1/3rd.

What happens on leaving? If you have been in the scheme less than 2 years you may be entitled to a refund If you have been in the scheme more than 2 years, you can - - Defer your pension, or -Transfer it to another pension provider two (2 safeguards: – Members with pots of £30k or more must get Independent Financial Advice from FCA authorised adviser – Defined Benefit Schemes to be permitted to reduce TVs if necessary)

Opt-Outs Members automatically contractually enrolled into LGPS at start date Can opt out at any time during career and opt back in as many times as they wish Member downloads opting out form from our website and sends completed form to their payroll department – Employers MUST NOT issue opt out forms to employee’s. Payroll department will action for next available pay period Entitlement to benefits Less than 3 months membership = Refund of contributions via payroll More than 3 months & less than 2 years = Refund paid by Pensions subject to tax deductions More than 2 years membership = Preserved Benefit awarded Members have the right to opt out and opt back in as often as they wish

What happens on leaving? Early Retirement - Scheme members have the option to retire from age 55 but there will be a reduction applied for early retirement. Flexible Retirement –If a member reduces their grade or take a drop in hours from age 55 with their employers consent the pension can be brought into payment early. Redundancy from age 55 - Payable immediately with no reduction applied. Ill health retirement – The pension could be brought into payment immediately and may also be enhanced depending on the member’s ability to undertake future employment

Death Benefits Benefits also payable on death before retirement Spouse’s pension based on service/160ths Continues after remarriage Civil Partners and co habiting partners – based on post April 1988 service only Co habiting partners – we will need evidence of living together/financially dependant Children’s Pension – payable up to 18 (or max 23 if full time education) or for life if permanently disabled or dependent Death Grant (Death in Service) 3 x actual pensionable salary Death Grant (Death on pension) 10 Years of pension - less pension already paid if member has post April 2008 pension service (Payable in accordance with the will, or if no will, to the estate) Benefits also payable on death before retirement

Summary of benefits Secure Annual Pension A Tax free lump sum The option to draw your pension from age 55 to 75 The 50/50 option on member contributions Ill Health cover Death benefits cover for your loved ones

What is the LGPS Self Service Facility? The self service allows all members which covers, active, deferred and pensioners to view information we hold on them. Once signed up to the self service you can:- Calculate your own estimates/projections View annual statements Update your contact details View your pay advice, P60s and update your bank details once you have retired

Where can I sign up to the self service? The self Service facility can be found on our website at www.peninsulapensions.org.uk and you can access by clicking on the below Icon Once you have joined the pension scheme we will send you an activation key to login Please note all communication we send out at Peninsula Pensions is electronic, so you need to sign up to receive your annual statements from us. If you do not sign up you will not receive any statements from us.

Disclaimer The information contained in these slides are the authors interpretation of the current regulations. The information is subject to change due to various factors including, but not limited to, changes to rules and regulations introduced by the Government Actuary's Department, HMRC and/or the CLG. Changes can happen at short notice and may be implemented prior to the Council issuing any future revised documentation. Readers should take their own legal / financial advice on the interpretation of any particular piece of legislation. No responsibility whatsoever will be assumed by Peninsula Pensions 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.