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Monday, 17 February 2014
PENSIONS URGENT UPDATE
Pension Scheme (LGPS)
2014 England and Wales
The Regulations changing the LGPS in England and Waleswill come into force with effect from 1 April
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
pensionfrom 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
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.
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.
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.
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.
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.
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
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.