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Local Government Pensions Update

Proposed New Scheme:

LGPS 2014

GMB Presentation

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Background

• Coalition’s 3 fold attack:• Change to pension indexation from RPI to CPI

• 50% increase in member contributions to the LGPS through the Osborne Pension Tax

• Hutton report advocating increased retirement ages and reduced benefits

• Talks started across the public sector with government proposing 1/100th accrual rate for all public sector schemes (except their own which remains 1/40th)

• GMB campaign to distinguish LGPS due to real risk of mass opt outs

• November 30th Day of Action• ‘December Principles’ for Union-LGA LGPS negotiations

agreed by government

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LGPS Negotiations

Treasury Proposal

DCLG ProposalNegotiated Proposal

CARE scheme CARE scheme CARE scheme

1/60th accrual 1/70th accrual 1/49th accrual

Individual pension age link to state pension

age

Immediate pension age rise to 66 then state

pension age

Individual pension age link to state pension

age

9.6% average member

contribution

8.5% average member

contribution

6.5% average member

contribution

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Contributions

Annual Actual SalaryHeadline/Gross

ContributionContribution After Tax

Relief

Less than £13,500 5.5% 4.40%

£13,500 – £21,000 5.8% 4.64%

£21,001 - £34,000 6.5% 5.20%

£34,001 – £43,000 6.8% 5.44%

£43,001 - £60,000 8.5% 5.10%

£60,001 - £85,000 9.9% 5.94%

£85,001 - £100,000 10.5% 6.30%

£100,001 - £150,000 11.4% 6.84%

More than £150,000 12.5% 6.88%

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Benefits I

• Defined benefit career average scheme• 1/49th accrual and CPI revaluation• Individual pension age linked to state

pension age (minimum age 65)• Contributions and pensions based on

actual salary (inc overtime)• Contribution flexibility with 50/50 option• Outsourced members to retain

membership of LGPS

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Benefits II

50/50 section of the LGPS 2014 is for members who would otherwise opt out of the LGPS

• While in the 50/50 section, members:• Contribute half the main scheme rate (on average 3.25%)• Build up pension with a 1/98th accrual rate

  LGPS 2014 LGPS 2008

Basis of PensionAverage Pay Over Career Revalued

by InflationFinal Salary

Accrual Rate 1/49th 1/60th

Revaluation Rate CPI N/A

Pension AgeIndividual pension age = to state

pension age (minimum 65)65

Contribution Flexibility – 50/50 Option

Yes, members can pay 50% contributions for 50% of the pension

benefitNo

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Retirement

• No scheme retirement age in LGPS 2014• Members can retire at anytime after 55• Pension taken before the individual’s state

pension age will be reduced; pension taken after will be enhanced

• Future changes in state pension age will apply to all service in the LGPS 2014 (excluding protected service built up before April 2014)

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Protection

• All service before April 2014 is protected - linked to final salary and existing retirement age

• Rule of 85 transitional protection will be honoured

• ‘Better of’ calculation for members aged 57 – 59 when the new scheme starts

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Further Information

www.lgps.org.uk

•Detailed Guides to New Scheme

•Frequently Asked Questions