Local Government Pension Scheme Employer Training

Introduction Good Morning and Welcome  What are your learning objectives for today?  Is there anything in particular you would like covered?  The purpose of today.

Different Bodies within the Pension Fund  Scheduled Bodies – e.g.County Councils, District and City Councils, Schools which are under LEA control, Academies, Police Authorities and Fire and Rescue Authorities.  Designating Bodies – e.g. Town and Parish Councils.  Admission Bodies – two types Community Admission Bodies Transferee Admission Bodies

New Employees Eligibility Whole-time – For 3 months or more Part-time – For 3 months or more Mutual obligation casual – For 3 months or more Scheduled BodyEmployee Right Automatic Entry Employee Right Automatic Entry Employee Right Automatic Entry Designating Body (previously Resolution Body) Employer Choice Automatic Entry Employer Choice Automatic Entry Employer Choice Automatic Entry Admission BodyEmployer Choice By Election Employer Choice By Election Employer Choice By Election

Contributions  Employee contribution rate is based on your whole-time equivalent pensionable pay, except for term-time only staff.  Rates range from 5.5% to 7.5% (protection for staff previously paying 5% thru to April 2011)  Employers determine pay to be used for contribution banding purposes

Contribution Bands BandRange (2009/2010 and 2010/2011) Contribution Rate 1£0 - £12,6005.5% 2£12,601 - £14,7005.8% 3£14,701 - £18,9005.9% 4£18,901 - £31,5006.5% 5£31,501 - £42,0006.8% 6£42,001 - £78,7007.2% 7More than £78,7007.5%

Examples of pay for contribution banding purposes  Part-time employees – An Employee who works 18.5 hours per week for 52 weeks per year, receives £10,000 per year. The full time equivalent pay will be £20,000 so will pay a contribution rate of 6.5%

 Term-time Workers – Someone whose contract of employment provides for a regular pattern of periods of work and periods of no work. E.g Teaching Assistants, Seasonal Workers and Tourist Officers. An employee who works 18.5 hours per week for 39 weeks per year receives annual pay of £7500. The pay to use for determining the contribution rate is £7500 x 37/18.5 = £15,000, so will pay a contribution rate of 5.9%

 Multiple Employments – Where an employee has more than one post, the contribution band must be assessed in respect of each post.  For further information please refer to Pensions Advice Note No 5Pensions Advice Note No 5

Ee’s Conts Pension Fund Er’s Conts Contribution Bands (increased by CPI annually) Actuarial Valuation (every 3 years) Guaranteed Benefits based on Pay and Service Employer Policy

Forms required for New Members  A9 Form A9 Form  ACT 1 Form ACT 1 Form  ACT 2 Form ACT 2 Form  ACT 5 Form ACT 5 Form

Opting not to join or opting out within 3 months  Option Out Form – PEN 7.Option Out Form – PEN 7.  This is to be returned to the Payroll Department for action.  Copy to the Pensions Service.

Existing Pensionable Employees  A Variation in pensionable status requires the relevant sections of the A9 form to be completed by the employer.A9 form  Please ensure that the name,N I No and Post/Job are always completed.

 The following are reasons for a variation in pensionable status form to be completed:  Change in contractual hours per week and/or number of weeks per year.  Change of name  Change of address  Amendment to date of birth  Change of National Insurance Number

The Pensions Service also needs to be notified if a pensionable employee is/has:  Suffered (voluntary or involuntary) a reduction in their pensionable remuneration.  on approved unpaid leave of absence.  on Jury Service.  had a period of Unpaid Maternity/Adoption/Paternity Leave.  absent due to Strike Action.  on Unauthorised Leave. Further information on above is on pages 6 to 9 of the training notes.pages 6 to 9

Increasing Your Benefits 1  Additional Voluntary Contributions (AVC’s)  Pay a fixed amount or % of your pay into your own investment “pot” with Prudential  Conts limited to 50% of pensionable pay  Vary your contributions when you wish and choose your investment fund and risk  When you retire purchase an annuity or convert your pot into further local government pension/lump sum

Increasing Your Benefits 2  Additional Regular Contributions (ARC’s)  Purchase additional LGPS pension in multiples of £250 up to maximum of £5000  Enter contract for a specified period  Pension reduced if paid before 65, except IH  Added Years  No longer available since 1 st April 2008  Existing contracts continue  Personal, Stakeholder pensions,FSAVC’s

Estimates of Pension Benefits  An employee can request an estimate of pension benefits should they wish to retire anytime between 60 and 75. They just need to write to the Pensions Service.  For estimates in respect of ill health, redundancy, efficiency, flexible retirement and voluntary with employers consent between 55 and 60, the request has to come from the employer using the PEN 12 form.PEN 12 form

Leavers/Optants Out When a pensionable employee ceases membership of the Local Government Pension Scheme. i.e. leaves or opts out of the Pension Scheme with 3 or more months in the pension scheme, the following forms are required:  Form PEN 8 Form PEN 8  Form PEN 8A or Letter PEN 8A for Redundancy aged 55+ Form PEN 8ALetter PEN 8A for Redundancy aged 55+  If the employee is retiring on ill health grounds, a PEN 10 form, is to be completed by Heales and sent via the employer to the Pensions Service.PEN 10 form

Form PEN 8  When completing the form you will need to be aware of the policies which are in place for the discretions within the Local Government Pension Scheme Regulations.  The form enables the Pension Service to check that the information held on their records are correct.  The form also enables the Pension Service to calculate the Pension Benefits.  The part of the form which causes the biggest problems for employers is the calculation of the final years pensionable remuneration. Some examples follow on the next three slides.

Final Years Pensionable Remuneration  John Briggs  Left 31 st May 2010  Age 65  No breaks in service.  Final year = 1 st June 2009 to 31 st May 2010  Salary = £18, = £19, to = 10 months x £18,000/12 = £15, to = 2 months x £19,200/12 = £3,200 Total =£18,200

Final Years Pensionable Remuneration continues  Judith Simms  Left 23 rd August 2010  Age 28  Break in service for unpaid maternity leave for period 24 th May 2010 to 23 rd August 2010  Final Year is 24 th August 2009 to 23 rd August 2010  Salary = £12, = £13,200 Calculate pay for period to = 273 days to = 7 mths 8/31ths x £12,000/12 = £7, to = 1 mth 23/31ths x £13,200 = £1, total = £8, The amount then needs to be grossed up to equivalent of 365 days. £8, x 365/273 = £11, £11, is the figure you put into 5d of the PEN 8 Form

Further Pensionable Remuneration calculation  Matthew Collins  Left 28 th February 2010  Age 52  Break in service for approved unpaid leave from period 1 st June 2009 to 31 st July 2009  Salary = £24, = £27,000 Calculate pay for the following periods: to = 92 days to = 212 days to = 1 month x £24,000/12 = £2, to = 2 months x £27,000/12 = £4, to = 7 months x £27,000/12=£15,750 total = £22,250 The amount then needs to be grossed up to equivalent of 365 days. £22,250 x 365/304 = £26, £26, is the figure you put into 5d of the PEN 8 Form

Form PEN 8A In order to complete the Form PEN 8A:Form PEN 8A  You will need to now how much pensionable service the employee has. and  Refer to the Decision Guider, so that the correct award can be given.Decision Guider Once completed you will need 3 copies, one for the employee, one for your records and one to be sent to the Pensions Service. As well as sending the employee the Form PEN 8A you will need to send the form quoted in the paragraph you have inserted onto the form PEN 8A. This will be either a Form PEN01ACT or Form PEN 4A and/or Form PEN 4.Form PEN01ACT Form PEN 4AForm PEN 4. Should the reason for leaving be redundancy and the employee is over age 55 please use the PEN8A – redundancy letter.PEN8A – redundancy letter

Please note  Should you have an employee continue in employment, who is in the pension scheme and coming up to age 75, you should bring them out of the pension scheme two days before their 75 th birthday and forward the PEN 8 etc to the Pensions Service at least two weeks before retirement. The pension benefits are payable on the day before their 75 th Birthday. If the benefits are paid later than this there are tax implications.

Retirement Age  Anyone can voluntarily take benefits from age 60  HOWEVER, if taken before age 65 a percentage reduction may be applied  Old “Rule of 85” determined whether benefits available before 65 unreduced  Complex protection rules determine how “Rule of 85” now applies

Rule of 85 Protections  Started after 30/9/2006 = no protection  If started prior to 1/10/2006 full protection would apply to pre 1/4/2008 service PLUS:-  If Age 60 by 31/3/2016 = full protection for service to 31/3/2016  If Age 60 between 1/4/2016 and 31/3/2020 = “tapered” protection for service from 1/4/2008 to 31/3/2020  If Age 60 after 31/3/2020 = no protection for service after 31/3/2008

Ill Health Pensions 1  Must be permanently incapable of current job  Must have employment terminated by employer on those grounds  Must have a reduced likelihood of obtaining gainful employment before 65  Gainful employment = 30 hours per week for period of at least 12 months  Benefits are in three Tiers

Ill Health Pensions 2  Tier 1– Unable to undertake gainful employment before age 65 – 100% enhancement of service to age 65 (paid permanently)  Tier 2 – Unable to obtain gainful employment within 3 years – 25% enhancement (paid permanently)  Tier 3 – Likely to obtain gainful employment within 3 years - zero enhancement (paid temporarily for a maximum of 3 years, must be reviewed after 18 months to establish whether the ex-employee is immediately capable of gainful employment or it should have been a Tier 2)

Ill Health Process  Refer to Pensions Information Note 2010/01 and Pensions Advice Note 4.Pensions Information Note 2010/01 Pensions Advice Note 4  Follow the Checklist For Managing a Possible Ill-Health Pension Case.Checklist For Managing a Possible Ill-Health Pension Case.

Discretions The Local Government Pension Scheme Regulations give employers a significant amount of choice regarding how they choose to apply regulations. These are collectively referred to as discretions. Within your training pack you have a list of all the discretions within the Local Government Pension Scheme.

Information in your pack  Pensions Employer Training Notes (includes A9, ACT 1, ACT 2 and ACT 5 Forms)  Decision Guider  Form PEN 7 – option out form  Form PEN1ACT – Pension Application Form  Form PEN 4  Form PEN 4A  Form PEN 8  Form PEN 8A  Letter PEN 8A – Redundancy aged 55+  Form PEN 12  Pension Advice Note 5  Copy of Regulation 18 – Flexible retirement  An explanation of Augmentation  List of Employer Discretions  A Contributions Manual – this explains everything you need to know, from determining the correct contribution rate to how to pay the contributions over each month.  Ill-health Pension Forms, Flowcharts and Checklists

Contact Pensions  Telephone:   Website: