Monday, 17 February 2014

PENSIONS URGENT UPDATE


URGENT UPDATE

 

 

Local Government Pension Scheme (LGPS) 2014 England and Wales

 

The Regulations changing the LGPS in England and Wales will come into force with effect from 1 April 2014.

 

A final reminder that anyone who has currently opted out of the LGPS (England and Wales) but wants to ensure the earnings link protection on any final salary benefits they have earned up to April 2014 (there may be some protection for those who opt back in within 5 years of opting out) MUST rejoin immediately. If the cost of the contributions is a problem then they should be reminded that from April there will be an option to pay half their normal contribution rate for half the pension. They should approach their employer’s pension department and ensure that the forms to rejoin have been returned and received by the pensions department before the end of this month.  If they are not actively contributing to the scheme then any benefits they earned before they opted out, that fall outside the proposed five year window protection to opt back in, will go up in line with prices (currently Consumer Price Index) not earnings.

 

Anyone in the LGPS (England and Wales) thinking of paying Additional Voluntary Contributions to maximise tax free lump sum payment when they retire (so they don’t have to exchange so much of their pension for cash at the relatively poor exchange rate of £12 cash £1 pension) should elect to pay the contributions BEFORE April 2014. Members should also ensure that the election form is in the hands of their employer or their Pension Fund Administering Authority before 1 April 2014.

 

If members elect to pay after April (or if their forms are received late) then when they retire they are likely only to be able to take part of their AVC fund as a cash sum (currently 25% of the value). They will have to buy extra pension from the LGPS, or at whatever the annuity rates will be in the future, from a pension provider such as an insurance company. Members, especially those near retirement, should consider paying AVC’s if they can afford it and approach their employer pensions department for details of the AVC arrangement operated by their employer/LGPS fund. They can as an alternative buy extra pension in the LGPS.

 
LGPS transitional regulations update

 

These Regulations have been delayed due to the Government debating whether Councillors should continue to be allowed to join the LGPS.  However, as far as we are aware, the protections that were agreed as part of the negotiations on the new LGPS scheme are all included. UNISON has been involved in drafting the regulations.

 

As drafted the regulations would mean the 'rule of 85' protection will go over into the LGPS 2014 unchanged. So any part of a person's service currently covered by the rule of 85 would not be reduced for early payment if s/he decides to retire at 60, unless they have not completed enough service by that time to satisfy the rule, or the member has tapered protection.

 

Those who voluntarily decide to retire between the age of 55 and 60 with full or part protection for the rule of 85, would have an early retirement reduction unless the employer agreed to pay to remove it. There is still fine tuning to be done about the level of the reduction in such cases. We think that UNISON has been successful in arguing that the reduction will only count back from age 60, not 65, (or from the date the member attains the 85 year rule if after age 60), but this will be confirmed when the regulations are laid.

 

We also expect that the current definition of final pay and protections on pay will remain the same for all service up to April 2014. Underpinning protection for those who were within 10 years of their normal retirement age at April 2012 is also in the current draft.

 

UNISON is pushing for the transitional regulations to be laid as soon as possible, to remove uncertainty. We are concerned that, because of the delay in bringing the transitional regulations into law, some members are considering leaving the scheme or even resigning their jobs - under the false impression that the protections will not be implemented and the equally false impression that leaving the scheme would somehow protect their past service rights in the LGPS.

 

All those who want to ensure the final earnings protection on their LGPS service to April 2014, should make sure they are contributing to the LGPS when the regulations change in April.

 

 

Local Government Pension Scheme (Miscellaneous Amendments) Regulations 2014

 

These regulations were finally were laid before Parliament on Friday, 17 January; to come into force on 10 February. They make a number of technical amendments including clarifying the employer duties for automatic enrolment and re-enrolment of staff into the LGPS. The Explanatory Memorandum carries further detail and this is available to download along with the Statutory Instrument (SI 2014/44) from the OPSI website - www.opsi.gov.uk .

  

LGPS Shadow Scheme Advisory Board

 

The LGPS Shadow Scheme Advisory Board has issued a report on the call for evidence on fund mergers and methods to increase efficiency this can be found at: http://www.lgpsboard.org. UNISON was the only union to submit a response and this helped influence the shape of the report and recommendations. We expect the government to produce and options paper on fund mergers and other options in the coming months.

 

The board is seeking a legal opinion on a range of issues such as who is responsible for paying benefits should a fund go bust and in whose interests are funds invested? We expect the opinion to inform the forthcoming governance regulations, which will set procedures for running the scheme at national and fund level in the future.

 

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