Support Staff Pension Presentation

Local Government Pension Scheme Update

The Scope of the Hutton Report – Schemes covered        

Local Government Pension Scheme Teachers’ Pension Scheme NHS Pension Scheme Civil Service Pension Scheme Armed Forces Pension Scheme Police Pension Scheme Firefighters’ Pension Scheme UK Atomic Energy Authority Pension Scheme

Public Sector Schemes Comparison Scheme

Contribution Employer Cont.

Normal Pension Age

Average Pension

Police

9.5% - 11%

24.2%

55

£14,000

Firefighters

8.5% - 11%

14.2% - 26.5%

55 or 60

£12,000

6.4%

14.1%

60 or 65

£10,000

0%

29.4%

55

£8,693

5% - 8.5%

14%

60 or 65

£7,000

Civil Service

1.5% - 3.5%

3% - 18.9%

60 or 65

£6,200

Local Government

5.5% - 7.5% 13.20% (avge.)

65

£4,044

Teachers Armed Forces NHS

Why is Change Needed?   





Current system is seen to be unfair Life expectancy has increased Increased cost to taxpayer – unfunded schemes Final salary schemes do not reflect true pay / contribution history Change is needed to retain high quality defined benefit schemes

Hutton’s Recommendations        

No change from a defined benefit basis, but…

Move from a final salary arrangement to one based on career average earnings Raise the normal retirement age Uniformed service retirement age to increase to 60 Increased employee contribution Cap on employer contribution accrued rights should be protected Implementation by 2015

The Government’s Response to the Hutton Report       

Introduction of career average scheme for new service Final salary basis protected for old service Increased retirement age for new service with a link to State pension age Retention of existing retirement age for old service Increased employee contribution at around 3% more No increase in contributions for those earning less than £15,000 pa Increase in contributions pegged to 1.5% for those earning £15,000 - £18,000 pa

Some Frequently Asked Questions‌

Will I Have to Pay More?   



Increased contributions are possible LGPS contribution rates were reviewed in 2008 Funded nature of LGPS means that other changes will be implemented instead Risk of opt-outs – Hutton has said this needs to be avoided

LGPS – current rates FTE Pay

Contribution rate

Up to £12,901

5.5%

£12,901 to £15,101

5.8%

£15,101 to £19,401

5.9%

£19,401 to £32,401

6.5%

£32,401 to £43,301

6.8%

£43,301 to £81,101

7.2%

Over £81,101

7.5%

How Does a Career Average Scheme Work?   



Each year is calculated individually CPI adjustment made to each year’s benefits Earlier years’ values have more increases applied to bring them up to date At retirement, all the revalued individual years are added together

Career Average Schemes – Better or Worse than Final Salary? 







Less generous for employees who have rapid pay progression, particularly in their later years Similar benefits for those with steady pay growth Career average method is still a “defined benefit” arrangement Remember: service to date of change will still be based on final pay

Pay

…the “Steady Eddie”

Years

Pay

…the “High Flyer”

Years

Will I Have to Work Until Age 65? 



 

Remember – your benefits built up to the date of any change will have the same retirement date and calculation as before New service worked after the date of change may have a later payment date for full benefits Most employees already have a retirement age of 65 in the LGPS 85 year rule protections will remain

But Didn’t the LGPS Change a Few Years Ago? 

Yes, changes were made to:Removal of the 85 year rule  Banded employee contributions  Change from 80th’s to 60th’s 

 

Change from RPI to CPI will help reduce scheme costs Further changes are still needed

Should I Opt Out?  

  

Personal decision occupational pension schemes are extremely valuable Employer contribution Tax and NI savings Think very carefully before opting out – independent advice

Remember…

Nothing has been decided yet  Further consultation is planned later this year 

What You Get Now   

An index-linked pension linked to pay and service Tax free lump sum in most cases A range of retirement options  

  

voluntary retirement age from 60 in most cases Early retirement from 55

A range of dependants’ cover including death in service lump sum of 3 x pay Enhanced benefits if you have to leave work because of permanent ill health The facility to top up your benefits

Get in Touch… 

By ‘phone:



By e-mail:



pensionpayments@birmingham.gov.uk

By post:



0121 675 7070

Pensions Team PO Box 14345 Birmingham B2 2HZ

On the web:

www.wmpfonline.com