New Scheme LGPS 2014 and Contribution Setting Mike Allen Director of Pensions

New LGPS 2014

Summary of Changes What’s next New LGPS 2014

Summary of Changes Current schemeNew scheme Scheme basisFinal SalaryCARE Accrual rate1/60 th 1/49 th IndexationCPI for DB’s and pensioner’sCPI on all Normal Pension age65SPA Employee contributions5.5% to 7.5%5.5% to 12.5% Vesting period3 months2 years Contributions flexibilityNone50/50 option Pay usedPensionable payActual pay OutsourcingLGPS still available Protection85 year rule, pre 2008 servicePre 2014, plus 10 year of retirement

Linked to State Pension Age SPA: currently by October by by 2046 Increased Retirement Age

Actual Pensionable payGross contributionAfter tax reliefCurrent rate (if full time) Up to £13,5005.5%4.4%5.5% £13,501 to £21,0005.8%4.64%5.8, 5.9 or 6.5% £21,001 to £34,0006.5%5.2%6.5% £34,001 to £43,0006.8%5.44%6.8% £43,001 to £60,0008.5%5.1%6.8 or 7.2% £60,001 to £85,0009.9%5.94%7.2% £85,001 to £100, %6.3%7.2 or 7.5% £100,001 to £150, %6.84%7.5% Greater than £150, %6.88%7.5% Contributions Payable

50/50 Scheme 50% contributions 50% service accrual (1/98 th ) 100% death cover Re-enrolled into full scheme every three years

For benefits accrued after 1/4/2014 To calculate contribution rate to be paid Non-contractual overtime Allowances Arrears of pay ‘Assumed Pensionable Pay” Separate pay figures will be required for Actual Pay (new scheme) and Final Pay (protected benefits) e.g.: A member leaving employment End of Year contribution returns Pensionable Pay

Protections Pre 2008 service 2008 to 2014 service Post 2014 service

All retirees within 10 years of age 65 at 31 March calculations to pay the better of Old benefits (Pre 2014 scheme for all service) New benefits (Pre 2014 & Post 2014) Protections - continued

Unchanged Ill health Redundancy early retirement Death benefits Additional contributions

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 Summary

Current Situation: Benefit and Administration Regulations published Transitional Regulations (Protections etc.) due shortly Further Regulations/Consultations due on: Cost Control Governance Summary

Newsletters Briefing note on key issues Website Workshops Guidance Notes Revised on-line notifications and Guides Support for Employers

Newsletter/formal notification of changes Website Benefit Modellers Posters Support for Members

Contribution Setting

Once every three years Sets employer contribution rates for the next 3 years Aims to ensure fund solvency The valuation process

Funding level Recovery period for past service deficit Covenant strength Type of employer Open or Closed to new members What determines contribution rates?

LPFA’s aims Ensure appropriate contribution rate for each employer Recognise individual employer strength Identify how covenant strength can be improved Reduce risk of employer debt falling on other scheme employers

Results finalised Employers notified of contribution rate payable Discussions on phasing options for any increases Discussions around security and covenant strength New rates payable from April 2014 Next Steps