New LGPS 2014 and Automatic Enrolment workshop

Agenda LGPS2014-basic details LGPS2014 –employer roles LGPS2014 – employer discretions LGPS2014- communications plan Question and answer session Auto Enrolment- basic details Auto Enrolment- employer responsibilities Auto Enrolment- the pension regulators role Question and answer session

Disclaimer Everything I discuss is subject to change out of my control Benefit regulations all received Transitional regulations in draft/released ??? The transitional regulations will instruct us how to hand previous pension rights particular concerns on: The underpin Treatment of transfers Pay drops

LGPS Summary of changes Current schemeNew scheme Scheme basisFinal SalaryCARE Accrual rate1/60 th 1/49 th IndexationCPI for DB’s and pensioner’s CPI on all Normal Pension age65SPA Earliest retirement age6055 Employee contributions5.5% to 7.5%5.5% to 12.5% Contributions flexibilityNone50/50 option Pay usedPensionable payActual pay Vesting period (entitlement to a refund) 3 months2 years Protection85 year rule, pre 2008 service Pre 2014, plus 10 year of retirement

Retirement age Linked to SPA SPA: currently by October by 2028* 68 by 2030* *still waiting for pension act to be ratified

Retirement from 55 Member driven retirement now from age 55 Employers will have the option to agree to ‘honour’ reductions under 85 year rule but no obligation Either way likely to be too expensive for most members to consider

Early retirement costs Just for comparison purposes 55 year old on £35k with 20 years service

Contributions Actual Pensionable payNew rate After tax relief Current rate (if full time) After tax relief Up to £13,5005.5%4.4%5.5%4.4% £13,501 to £21,0005.8%4.64%5.8, 5.9 or 6.5% 4.64% to 5.2% £21,001 to £34,0006.5%5.2%6.5%5.2% £34,001 to £43,0006.8%5.44%6.8%5.44% £43,001 to £60,0008.5%5.1%6.8 or 7.2%5.44% to 5.14% £60,001 to £85,0009.9%5.94%7.2%5.14% £85,001 to £100, %6.3%7.2 or 7.5%5.14% to 4.23% £100,001 to £150, %6.84%7.5%4.23% Greater than £150, %6.88%7.5%4.23% Subject to amendment by treasury

50/50 scheme 50% contributions 50% service accrual 100% death cover Enrolled into full scheme after 3 years Brought back into full scheme if assumed pay needed Employer pays full contribution

Actual pay For benefits accrued after 1/4/2014 And to calculate contribution rate to be paid Overtime Bonus Allowances Major benefits to part time employee’s But For many years to come we will require 2 pay figures on a member leaving employment. Query on how assumed pensionable pay will be applied.

Employer Contributions Paid on Actual pay Assumed pensionable pay while on ‘relevant’ child related leave (i.e. Ordinary maternity, paternity or adoption leave or paid additional maternity, paternity or adoption leave) Assumed pensionable pay whilst on sick leave reduced or zero pay

Protection for pre 2014 service Pre 2008 service 2008 to 2014 service Post 2014 service

Age 65 before 1 April 2022 All retirees within 10 years of age 65 at 31 March 2012 covered by the ‘underpin 2 calculations to pay the better of Old benefits (60 th pension, final pay with retirement age 65) New benefits (49 th pension ON CARE basis linked to SPA)

Winners and Losers Winners Not expecting much (any) further salary growth Part time employees Happy to work to SPA Anyone covered by the underpin Overtime workers? Losers Expecting pay increases greater than CPI Those on greater than £43,000 Keen to retire as early as possible

Employer responsibilities LGA have produced 2 guides (HR and Payroll) Key points are Monitor changes between full scheme and 50:50 Record pay in both pre and post 2014 formats Register when a member in the 50:50 section received assumed pensionable pay

Monthly return Why? LGPS2014 more complex with 2 pay figures 50:50 section with movements between 25 year guarantee to scheme design (flying pig alert) Benefits for employers Ensures that all requirements of the LGPS2014 scheme are complied with. Will minimise end of year queries Will ensure that data is up to date as TPR starts to take on monitoring role

Monthly return 2 Queries to be reported to your fund site Member in 50:50 section now on assumed pensionable pay- you will need to confirm if due to long term sickness and if so bring them back in to the full sections Will need a unique identification for each post

E forms The monthly return is the ideal method of informing us of changes however we have updated the e forms: Joiner Change of Hours Auto enrolment form (for members) Change of section (full scheme/ 50:50) Leavers form- this will still be required even if you submit the monthly return to confirm/verify reason for leaving

Handouts State pension age calculator Low flyer/medium/high flyer Early retirement costs 4 member driven leaflets FAQ document Fact sheet- with disclaimer Payroll guide HR Guide Monthly return guidance note and FAQ Monthly return template

Future scheme cost control Scheme based on a 1/3 rd cost paid by member and 2/3rds paid by the employer. 6.5% member average contribution 13% employer contributions For future service only- no allowance taken for past service deficit or previous early retirement costs Figures taken on a national basis and if the employer figure exceeds the 13% by 2%:commitment to hold discussions on how to bring the employer rate back within this threshold would begin.

Governance Discussions are still ongoing on the final details of the governance of the scheme. 4 level Responsible Authority- DCLG Scheme manager Pension board Scheme advisory board There is also consultation on the best way to deliver LGPS currently 89 funds- likely to be substantially reduced

Discretions New discretions needed List to follow but I expect least 5 new discretions will be needed Switching on 85 year rule for voluntary retirements between Funding of additional pension (will be referred to as SCAPC shared cost additional Pension contributions) Flexible retirement Waiving of actuarial reductions Award of additional pension

Unchanged Ill health Redundancy (employer driven) early retirement Death ARCs/AVCs New factors will be required for Transfers Divorce

Planned communications Letter to member Modeller Leaflets Videos Website Posters Visits/ talks (Could be a charge)

Website reform Update as soon as new information is made available

Summary for new scheme CARE 1/49 th NRD=State pension age Actual pay for benefits and contributions New contribution rates 50/50 scheme Protection for all service to 31/3/2014 Best of both for those within 10 years of retirement

Questions on LGPS2014 A chance to ask any questions

What is AE What is Automatic Enrolment Government requirement that all employees must be enrolled into a pension scheme (pension saving) The Government has appointed The Pension Regulator to act a the enforcer or policeman Minimum amounts payable by employee and employer

Categories of employee Under age 2222 to SPAOver SPA Less than £5668Entitled worker Between £5668 and £9440 Non eligible job holder Over £9440Non eligible job holder Eligible Job Holder Non eligible job holder

Staging dates 120,000 or more1 October , ,9991 November ,000-49,9991 January ,000-29,9991 February ,000-19,9991 March ,000-9,9991 April ,100- 5,9991 May ,000-4,0991 June ,000-3,9991 July ,000-2,9991 August ,250-1,9991 September ,2491 October November January February April 2014

Transitional Arrangements Good news DB (or Hybrid scheme); Always open to all employees; and Transitional arrangement allow to defer automatically enrol current optants.

Employer duties 1 Pre staging date Decide if using transitional delay Decide if using postponement Inform all employees of staging date Write to all employees who are not in the scheme (either using transitional delay or enrolling them from staging date) Amend joiner pack to remove mention of opt out Informing LPFA of those employees being auto enrolled

Employer duties 2 From staging date forward Bring all new employees into pension scheme Bring in any employee who reaches age 22 Bring in any employee who breaks £786 (£833) on given month

Employer duties 3 After your staging date Register with the pension regulator (within 4 months of your staging date) Three years anniversary bring all members who opt out back into the scheme

LPFA’s role We must Enrol any members notified to us for enrolment; Provide details of possible opt out; and Keep records.

But we can do more We will provide the following to employers Guidance notes; Draft letter’s from Employer; Electronic opt out route; and Website page purely on Auto enrolment. Electronic opt out route linked into yourfund contacts Timetable communications ‘suggestions’ around your staging date

Optants Someone who has opted out previously; and Assuming they are over 22 (and less than SPA) and are on a salary of greater than £9440 they will need to be brought back into the scheme.

Every 3 Years The whole exercise for optants will need to be repeated every three years! 2014, 2017, 2020

Questions A chance to ask any questions on Auto enrolment

Any other business End of contracted out NI from 2016?

Thank you Contact details Neil Lewins Technical Officer