Local Government Pension Scheme LGPS from April 2014 What is the impact on payroll systems? 1.

IMPORTANT Information relating to the new regulations, is additional to any current requirements. All data currently provided should continue, as membership under previous regulations will be protected using pre 2014 scheme rules i.e. still based on final pay at retirement. There is no change to the current deadlines to provide data for year end or termination of scheme membership. 2.

Separate Records The payroll system must have the ability to: Hold separate cumulative pensionable pay figures and employee contributions for each job. Deduct the appropriate employee contribution rate in each job (which may be different for each job). 3.

Sections Main Section (full contribution rate) 50/50 Section (half contributions to receive half benefits) This 50/50 option will enable members to pay half their full rate of contribution and build up half pension during that period. It is designed to be a short term option in times of financial hardship and therefore provides an alternative to opting out of the scheme altogether. Note : Employer contribution is still the full contribution rate (not half) 4.

Sections (Continued) 5. Separate cumulative amounts for Pensionable Pay and Employee Contributions should be maintained for each section. However, it is not necessary to maintain separate cumulative amounts for Employer Contributions in each section. Members may move between sections in the same financial year and payrolls will need the capability to report start and end dates for each period in the main and 50/50 sections plus the related cumulative values. For example: to Main SectionPensionable Pay£ Employee Contributions£ to /50 SectionPensionable Pay£ Employee Contributions£ to Main SectionPensionable Pay£ Employee Contributions£177

Sections (Continued) 6. Members can be in different sections in each job. A movement between sections is only effective from the beginning of the next available pay period and will occur in the following circumstances: o If the member elects to do so o If the member goes on no pay due to sickness or injury o Automatic re-enrolment date

Pensionable Pay Pensionable pay from April 2014 is, basically, the same as the 2008 regulations, except: o Non-contractual overtime and additional hours will be pensionable. o Loss of Earnings Compensation Payments / Marked Time / Protected Pay will be non-pensionable in all circumstances 7.

Pensionable Pay (Continued) Any pensionable pay received after 31 March 2014 that relates to a period before 1 April 2014 should not be included in the cumulative pensionable pay for financial year 2014/15 Note: To differentiate between the old and new definitions of pensionable pay, Kent will use the terms ‘Final Salary Pensionable Pay’ and CARE Pensionable Pay’ 8.

Example Contribution Rate as at 31 March 2014 = 5.5.% Contribution Rate as at 1 April 2014 = 5.8% Scenario 1: April 2014 Payslip Arrears for March (contributions paid at 5.5% but do not include in 2014/15 CARE Pensionable Pay as this relates to March) Overtime worked March paid April (non pensionable as relates to March) 9.

Example Contribution Rate as at 31 March 2014 = 5.5.% Contribution Rate as at 1 April 2014 = 5.8% Scenario 2 : May 2014 Payslip Arrears for March and April (March contributions paid at 5.5%, April contributions paid at 5.8% but only include April amount in 2014/15 CARE Pensionable Pay) Overtime worked April paid May (contributions paid at 5.8% and include in 2014/15 CARE Pensionable Pay) 10.

Assumed Pensionable Pay (APP) Assumed Pensionable Pay (APP) is calculated whenever the normal CARE Pensionable Pay is reduced as a result of either: o sickness or injury o child related leave (i.e. ordinary maternity, paternity or adoption leave and any paid additional maternity, paternity or adoption leave) In the above circumstances APP is added to the cumulative pensionable pay for the relevant job (and section) instead of the CARE Pensionable Pay received (if any) Cumulative Pensionable Pay is the total of pensionable pay and/or APP in either section 11.

Example 1 Tom is paid monthly and drops to reduced contractual pay due to sickness on 15 June then on 15 September he drops to nil pay. He returns to normal working on 1 December. At the date of the relevant event he was in the 50/50 section of the Scheme. The Cumulative CARE Pensionable Pay accrued throughout is as follows: June 14 days of actual CARE Pensionable Pay plus 16 days of APP is added to Cumulative Pensionable Pay (50/50 section) July APP is added to Cumulative Pensionable Pay (50/50 section) August APP is added to Cumulative Pensionable Pay (50/50 section) September APP is added to Cumulative Pensionable Pay (50/50 section) October APP is added to Cumulative Pensionable Pay (main section) as this is the next pay period following the drop to nil pay November APP is added to Cumulative Pensionable Pay (main section) December Actual CARE Pensionable Pay is added to Cumulative Pensionable Pay (main section) 12.

Kate is paid monthly and goes onto maternity leave from 16th June The ordinary maternity leave and paid additional maternity leave run out after 39 weeks (i.e. on 15th March 2015). She is in the main section of the Scheme and is paying a contribution rate of 6.8%. The calculation is as follows: Example 2 Month Cumulative Employee Contributions (main section) Cumulative Pensionable Pay (main section) JuneActual CARE Pensionable Pay x 6.8% 15 days of actual CARE Pensionable Pay plus 15 days of APP JulyActual CARE Pensionable Pay x 6.8%APP AugustActual CARE Pensionable Pay x 6.8%APP SeptemberActual CARE Pensionable Pay x 6.8%APP OctoberActual CARE Pensionable Pay x 6.8%APP NovemberActual CARE Pensionable Pay x 6.8%APP DecemberActual CARE Pensionable Pay x 6.8%APP JanuaryActual CARE Pensionable Pay x 6.8%APP FebruaryActual CARE Pensionable Pay x 6.8%APP March15 days actual CARE Pensionable Pay x 6.8%15 days APP AprilNil If the employee has a reduction in pay they will continue to pay contributions on the amount of actual CARE Pensionable Pay received (if any) and NOT on any amount of APP being added to the Cumulative Pensionable Pay. 13.

Employee Contribution Rates BandPensionable Pay range for an employmentContribution rate for that employment 1Up to £13,5005.5% 2£13,501 to £21,0005.8% 3£21,001 to £34,0006.5% 4£34,001 to £43,0006.8% 5£43,001 to £60,0008.5% 6£60,001 to £85,0009.9% 7£85,001 to £100, % 8£100,001 to £150, % 9£150,001 or more12.5% From April 2014, there are 9 bands as opposed to 7 bands currently. 14.

Employee Contribution Rates (Continued) You must also be able to take contributions at 50% of these rates if a member is in the 50/50 section. Please note that the contribution table above is an indicative guide to what the contribution rates and bands are likely to be from April The agreed final table for April 2014 is still to be confirmed by the Department of Communities and Local Government (DCLG). 15.

How to determine the rate? Employee contributions from April 2014 are banded using the actual CARE Pensionable Pay for the employee, as opposed to the WTE Pensionable Pay which is currently used. The employer determines the rate by estimating the member’s annual pensionable pay for the forthcoming Scheme year (1 April to 31 March), using just contractual pay or contractual pay plus an estimate of non-contractual overtime Note: whichever method you choose to use, it must be consistent for all employees with the same pay frequency. 16.

When to determine the rate? Employers will need to determine the appropriate contribution rate in the following circumstances: On 1 April 2014 for existing Scheme members Commencement of employment for new employees in the LGPS from April 2014 Current employees opting into the LGPS from April 2014 Employees automatic enrolment date or re-enrolment date from April

When to review the rate? Employees will remain in that band unless the employer notifies payroll that the band should be changed (or agrees an automated process with the payroll provider). Employers are permitted, under the regulations, to review the appropriate band ‘where there is a change in employment, or a material change which affects the member’s Pensionable Pay in the course of a financial year’. For example: Promotion/demotion Pay awards Change in hours 18.

When to review the rate? (Continued) There is no regulatory requirement to have a policy on this, however, as in the 2008 scheme, an employer should consider having a policy to ensure consistency of approach. Employers may also wish to put in place a process to regularly review the actual CARE Pensionable Pay being received in order to ensure the correct rate is being applied. 19.

Employer Contributions Employer contributions are only paid on actual CARE Pensionable Pay apart from the following circumstances when employer contributions are payable on APP: sickness or injury child related leave (i.e. ordinary maternity, paternity or adoption leave and any paid additional maternity, paternity or adoption leave) Employer contributions are not split between the two sections of the scheme but must be split between different jobs. The employer contribution rate will be a single rate for all employees of that employer. Employers contributions may be paid if the member is paying Additional Pension Contributions (APC) 20.

Additional Contributions There are two types of Additional Contributions: Additional Pension Contributions (APC) Additional Voluntary Contributions (AVC) Note: Members will continue paying on any existing contracts 21.

Additional Pension Contributions (APC) These can be used to: - Buy extra pension - Buy lost pension for unpaid leave of absence (including child related leave) - Buy lost pension for strike These may be one off or regular and will always be cash amounts not percentages. Payroll systems will need to hold separate employee and employer cumulative values for APCs. 22.

Additional Voluntary Contributions (AVC) Additional Voluntary Contributions are made by the employee and will be either a cash amount or a percentage of pensionable pay. Payroll systems will need to hold separate employee cumulative values for AVCs. Payments should continue to be sent to the AVC provider. 23.

Summary of Additional Data Requirements Important: these details will be required for each job 24.

Any Questions? 25.