Pensions Liaison Officers Group Presented by Catherine Drew

Pensions Liaison Officers Group Presented by Catherine Drew Viv Ray Emma Shand

Agenda • • • Shared Service update Member Self Service update Auto Enrolment update New 2014 LGPS update Employer Discretions Communications

Shared Service Peninsula Pensions provides pension administration for the Devon County Council and Somerset County Council Pension funds. • Somerset CC staff transferred to Devon CC on 1 st September 2013 • Since February 2014 both teams now located at Great Moor House in Exeter. • Restructure of section now complete with recent interviews taking place for vacancies. • Hopefully section fully staffed by April – training required for new roles and new staff members. • Both Altair pension administration systems were merged 21 st February 2014 • One combined system critical to deliver good service • All members of the team will work on both Devon and Somerset members • Integrated workflow and document imaging

Member Self Service (MSS) • Facility for members to access own pension record – like online banking – – • • Ability to check details held on record Change postal and email address Benefit Projector (Deferred, Death Bens & Vol Ret) Can only view what we allow them to see Portal now on our website Currently being rolled out in specific employer order Devon fund employers only for first batch Somerset fund employees can assess MSS by getting activation code on website • Will be contacting Somerset fund employees soon

Auto-Enrolment update Changes from 10 th February 2014: Employees with contracts of < 3 months who are Eligible Jobholders will automatically be brought in to the LGPS on: o Staging Date if not reached yet if Postponement not used or o When becomes Eligible Jobholder if Postponement not used or o If using postponement (up to 3 months) at end of period of postponement or o When employee opts in The earliest of the above dates (see next slide for table on joining)

JOINERS CONTRACTUAL OR AUTO-ENROLLED Staging Date New employee starts after Staging Date Existing employee who becomes Eligible Job Holder after Staging Date Contract for over 3 months Eligible Job Holder joins LGPS automatically unless Transitional Period being used by employer. If using Transitional Period then Eligible Job Holder will automatically be brought into LGPS on 1 st October 2017. ALL employees join LGPS automatically (Contractual enrolment). Can use up to 3 months postponement in case of pay ‘spike’. If postponement not used then must join LGPS immediately. Postponement cannot be used. Contract under 3 months (includes casual & NOMO) Eligible Job Holder joins Employees join LGPS Can use up to 3 months LGPS automatically (Contractual postponement in case of pay ‘spike’. unless Transitional enrolment) unless employer If postponement not used then must Period or Postponement is using Postponement for up join LGPS immediately. being used by employer. to 3 months. If using Transitional Period then Eligible Job Holder will automatically be brought into LGPS on 1 st October 2017.

New Benefits • • • Effective from 1 st April 2014 Career Average Revaluation Earnings scheme (CARE) Members will have a personal account Contribution year will be April to March Accrual rate is at 49 th, better than 60 th Actual pensionable pay used in calculation – not FTE Accruing pension is increased each year in line with CPI Nomination of a co-habiting partner no longer an option New member needs to opt to keep benefits separate if has previous PB, otherwise automatically amalgamated • If chooses to keep PB separate can have another opt to amalgamate on leaving. • New scheme no longer open to new Councillors and existing members must end membership at end of current office term

Employee Contributions • 9 different pay bandings – now confirmed as those shown in the regulations • Most members will pay the same or lower contributions in the new scheme • Pay bandings based on actual pay not FTE, therefore part-timers may pay less contributions • Pay bandings increased each April in accordance with Pensions Increase

Employee Contributions (cont) • Employers must inform members of their pay bandings at 1 st April 2014 and any subsequent changes. • Must include information of where to appeal about pay bandings within 6 months. • Employer to decide on how and when they will assess employees pay banding i. e. Annually, on pay change, overtime average etc. • Employer needs to inform their payroll provider of their decision on rebanding.

Employee Contributions LGPS 2014 EMPLOYEE CONTRIBUTION RATE From To Gross Rate Up to £ 13, 500 5. 5% £ 13, 501 to £ 21, 000 5. 8% £ 21, 001 to £ 34, 000 6. 5% £ 34, 001 to £ 43, 000 6. 8% £ 43, 001 to £ 60, 000 8. 5% £ 60, 001 to £ 85, 000 9. 9% £ 85, 001 to £ 100, 000 10. 5% £ 100, 001 to £ 150, 000 11. 4% More than £ 150, 000 12. 5%

50/50 Option • New option for member to pay 50% employee contributions • Employer continue to pay full 100% contributions • Member cannot elect for 50/50 option on the same day as electing to join LGPS – can only elect once joined LGPS • Election form and notes will be available on website • Election form to be returned to employer • Employer to complete date of entering 50/50 section on form in space provided • Form then returned to Peninsula Pensions so that record can be updated

50/50 Option (cont) • Benefits for period in 50/50 scheme will be half of full scheme, however • Death Grant and Ill-health cover will remain at full rate • Member reverts to 100% scheme o Every 3 years on re-auto enrolment date even if only elected for 50/50 option in previous 12 months and o if member goes onto no pay sickness/injury in 2 nd month. Member can then opt again for 50/50 scheme on return to work. • If member elects for 50/50 option, watch if paying any additional pension contributions as may need to stop – if applicable check with Peninsula Pensions

New Pensionable Pay definition • New definition of pensionable pay to include non contractual overtime • New definition of pensionable pay to include additional hours • No longer required to uprate pensionable pay to full-time • Pensionable pay is now applicable to when it was paid, not to the period of work it relates to. • If paying Redeployment Allowance employer needs to decide whether it is pensionable or not – if classed as compensation then not pensionable. • There is no pay protection for > April 2014 benefits – however pay protection for < April 2014 benefits remains if drop within 10 years of leaving. • If member paying additional pension contributions as a % which started before April 2014 then contributions continue to be deducted on old definition of pensionable pay

CARE Pension Calculation Pension = 1/49 th of Actual Pensionable pay for the year Example £ 15, 000(actual PP) x 1/49 th = £ 306. 12 pension (50/50 scheme accrual rate = 1/98 th) Following year in April above pension will increase with revaluation adjustment (see next slide for examples)

CARE Pension – Year on Year Date Transaction Total Year 1 Deposit £ 15, 000 X 1/49 £ 306. 12 Year 2 Interest £ 306. 12 X 0. 03 £ 9. 18 £ 315. 30 Deposit £ 15, 600 X 1/49 £ 318. 37 £ 633. 67 Year 3 Interest £ 633. 67 X 0. 03 £ 19. 01 £ 652. 68 Deposit £ 16, 000 X 1/49 £ 326. 53 £ 979. 21 Year 4 Interest £ 979. 21 X 0. 03 £ 29. 38 £ 1, 008. 59 Deposit £ 16, 000 X 1/49 £ 326. 53 £ 1, 335. 12

Retirement Options • Normal pension age (NPA) is now the same as the state retirement pension age. No actuarial reduction or increase. • Late retirement if taken after NPA the benefits will be increased (currently 0. 014% per day) • Redundancy and Efficiency retirement – no change • Flexible retirement – no change except post 2014 benefits will be actuarially reduced if taken before NPA • Ill-Health retirement – no change except : o Tier 1 enhancement is to NPA (new State Retirement ages)based on benefits calculated using APP o Tier 2 will be 25% of Tier 1 enhancement. o Slight change in ill-health certificate wording – wont be able to except old certificates if dated April 2014 onwards

Retirement Options • New voluntary retirement option between age 55 – 60, however member will suffer full actuarial reduction. • It may be possible for employer to waive actuarial reduction, but then there will be a Strain Cost. • 85 year rule not applicable as this is a new retirement option and therefore protections do not apply. • Awaiting revised actuarial reduction table from Government Actuary Department, likely to be the same as now (see next slide) with extra years added.

Early retirement reductions Current Actuarial Reductions when retiring before NPA (Subject to change)

Additional Pension and AVCs • Member can buy extra pension by paying Additional Pension Contributions (APC) or to pay for ‘lost’ pension due to unpaid absences(see next slide for information on absences) • APC doesn’t include provision for survivor’s pension • APC calculated in accordance with awaited GAD guidance – not expected until after Transitional Regulations! • Member can pay through payroll deduction by either lump sum or regular contributions • Regular contributions must be paid over a minimum period of 1 year and multiplies of years • Additional pension limit is £ 6, 500 p. a. (Increases in line with PI each year) • Decision being made on medical requirement to buy APC • Employer can choose to pay the APC in full or part. Will need employer discretion to be able to do this. • AVC - Members can now contribute up to 100% of pay (after statutory deductions).

Absences Shared Cost APC and APC • Member no longer required to pay pension contributions for first 30 days of unpaid absence. • To buy ‘lost’ pension for unpaid absence the member elects to pay APC. • It is no longer possible for the member to pay the pension contributions they would have paid for the period • LGA to produce an on-line calculation for members, with print off forms for member to send to employer and Peninsula Pensions. • Employer needs to inform member of Shared Cost APC if elects within 30 days of return to work – is policy information good enough? • If member opts to pay for period of unpaid leave/child related leave within 30 days of returning to work, then employer must pay 2/3 rd of Additional Pension Contribution (APC) costs with employee paying the remaining 1/3 rd.

Absences (cont) Shared Cost APC and APC • • • If member elects after 30 days then member pays full amount unless employer has policy discretion to pay part APC only applicable to non-statutory unpaid child-related leave. If member on unpaid absence which spans pre and post April 2014 then different processes need to apply to each period. If member doesn’t return to work following unpaid absence then can’t buy ‘lost’ pension Strike: v Member can pay for missed period by paying full APC cost. v Employer cannot contribute to APC cost v No longer available for member to pay 16% contributions.

Leaver Options • Refund of contributions can now be paid if member has under 2 years service. • Employer still refunds through payroll if member has < 3 months service; over 3 months service Peninsula Pensions will refund. • Member can’t have refund if has another continuing concurrent employment. • Members with > 3 months and < 2 years service have choice of refund or deferred benefit, however must claim refund within 12 months of leaving or defaults is deferred benefit. • New < 2 years service refund option only available to those that leave from April 2014.

Protections • Member with pre 2014 service will have full protection on < 2014 benefits including the age they can take them unreduced. • Pre 2014 protection doesn’t apply to those taken Voluntary Early Retirement before age 60 as this is a new option. • Protection can be lost if member has break in any public service pension scheme > 5 years and then joins former DB benefits with current membership. • Still awaiting final Transitional Regulations which will confirm exactly what 85 year protection applies to. • If member suffers drop in pensionable pay within 10 years of leaving then continues to have pay protection. • Any Certificates of Material Change will still apply on leaving < 2014 benefits if within time limit of 10 years from issue.

Underpin UNDERPIN – Members who meet following criteria get highest benefits between 2008 and 2014 scheme: o Active member on 31 st March 2012, and o Within 10 years of NPA on 1 st April 2012, and o Receive benefits on or after NPA, and o No break > 5 years from any public service pension scheme o Has not received payment of any > 2014 benefits before NPA However, as post 2014 benefits based on accrual rate of 1/49 th, unless big change in pensionable pay, new 2014 scheme benefits likely to be better.

Pensionable Pay on leaving Post April 2014 • New definition of pensionable pay • Employers need to provide actual pensionable pay for each contribution year (April to March) or part thereof if left during year. • Any Assumed Pensionable Pay (APP) must be included in the figures provided to Peninsula Pensions (see slide on APP) • Employers no longer required to uprate pensionable pay to full-time equivalent • Need to exclude any pay that relates to pre April 2014. • Payment after leaving must be notified to Peninsula Pensions to include additional pensionable pay amount and date when it was paid. • APP not required to be recalculated if payment after leaving made.

Pensionable Pay on leaving Pre April 2014 • Old pensionable pay figure still needed to calculate pre 2014 benefits • Need to check best of last 3 years and if pay reduced in previous 10 years the best 3 year average in last 13 years. • On leaving inform Peninsula Pensions if Certificate of Material Change effective. • Pensionable pay figure remains as 2008 regulation definition • Employers therefore will need to hold 2 different pensionable pay figures for employees with pre 2014 service. • New LEAVERS FORM (new names!) being created to include all information needed. Likely to have separate remuneration form. • Still need to inform Peninsula Pensions of any payments after leaving so that benefits can be recalculated

Assumed Pensionable Pay (APP) • If member on reduced or no pay due to sickness, injury; or on statutory child related leave (CRL) or reserve forces leave, employer needs to calculate Assumed Pensionable Pay (APP) for the applicable period. • APP is calculated at an annual rate based on the pensionable pay received in the 3 complete months before the start of the applicable period. • The annual figure is then apportioned to the applicable period and replaces any pay received in that period. • Even if member on CRL and receiving full pay APP average is previous 3 complete months before CRL starts. • When calculating 3 month APP include any APP that was applicable for that 3 month period.

Assumed Pensionable Pay (cont) • If the 3 months pay being used to calculate APP includes period before 1 st April 2014 then 2008 definition of pensionable pay is used for the period before 1 st April 2014. • Once APP has been calculated then it doesn’t get recalculated if the employee received back dated pay. • Ignore any lump sum payments made in the previous 3 month as will already have been included in PP. • APP calculations need to be done each month so that it is included in the new monthly returns and end of year annual pensionable pay for members. • Examples in LGA payroll guide

New Data requirements • • • New data requirements in addition to what is currently provided Data for 2013/14 will be same as previous years Need to provide separate data for each job Need to provide separate data for MAIN scheme and 50/50 scheme Provide actual pensionable pay figures to include any assumed pay Peninsula Pensions has recently sent out email to all employers requesting pay data on a monthly basis from April 2014 Email included examples of data required. Those wishing to use spreadsheet a more detailed example will follow shortly Peninsula Pensions will create an employer guide on data issues Any problems please contact Peninsula Pensions asap

Comparison Table Basis of Pension Accrual Rate LGPS 2014 LGPS 2008 Career Average Revalued Earnings (CARE) Final Salary 1/49 th (1/98 th for 50/50 scheme) 1/60 th Revaluation Rate Revaluation adjustment (section 9(2) of the Public Service Pensions Act 2013) Based on Final Salary Pensionable Pay including non-contractual overtime and additional hours for part time staff Pay excluding non-contractual overtime and non-pensionable additional hours Employee Contribution Rates See LGPS 2014 Employee Contribution Rate on next page See LGPS 2008 Employee Contribution Rate on next page Yes Contribution Flexibility Normal Pension Age members can pay 50% contributions for 50% of the pension benefit – death grant and ill-health benefits paid at 100% Equal to the individual member's State Pension Age No 65

Comparison Table (cont) LGPS 2014 Voluntary Early Retirement Age 55 – 60 (Full actuarial reduction) LGPS 2008 Age 60 earliest can retire Full protection for all < 2014 benefits Protection and underpin Lump Sum Trade Off None Underpin if within 10 years of NPA at 31/03/2012 (comparison between old and new scheme) Trade £ 1 of pension for £ 12 lump sum 3 x Actual Pensionable Pay Death in Service Survivor Benefits 1/160 th accrual based on Tier 1 ill health pension enhancement Ill Health Provision Tier 1 - Immediate payment with service enhanced to Normal Pension Age Tier 2 - Immediate payment with 25% service enhancement to Normal Pension Age Tier 3 - Temporary payment of pension for up to 3 years Tier 1 - Immediate payment with service enhanced to Normal Pension Age (65) Tier 2 - Immediate payment with 25% service enhancement to Normal Pension Age (65) Tier 3 - Temporary payment of pension for up to 3 years CPI (RPI for pre-2011 increases) 2 years 3 months Death in Service Lump Sum Indexation of Pension in Payment Vesting Period

Action List Ensure payroll system is able to deal with the following required data: § New pay bandings § New definition of pensionable pay and 2008 definition of pensionable pay § Separate data for MAIN and 50/50 pension sections § Calculation of Assumed Pay each month § Monthly data return § Shared Cost Additional Pension Contributions

Employer Discretions • Employers must publish new discretions by 1 st July 2014 for the following: a) Funding of additional pension (Reg 16(2)(e) & 16(4)(d)) Employer can choose to pay for APC in whole or part b) Flexible Retirement (Reg 30(6)) Same as existing discretion c) Waiving of actuarial reduction (Reg 30(8)) Flexible Retirement and Early retirement (55 -60) d) Award of additional pension (Reg 31) Employer APC for active member or member leaving on redundancy/efficiency

Employer Discretions (Cont’d) • Draft transitional regulations also state employer needs policy on: – Whether, in respect of pre 1/4/2014 membership, to “switch on” 85 year rule for members voluntarily retire on or after age 55 and before age 60 – whether to waive, on compassionate grounds, the actuarial reduction applied to benefits from pre 1/4/14 membership where 85 year rule “switched-on”

Employer Discretions (Cont’d) • Employers must still retain old discretions to cover pre 2014 benefits • Employers must regularly review discretions • Don’t forget to send copy of discretions to Peninsula Pensions Template and guidance notes will be on our website from April 2014

Communications Website: www. peninsulapensions. org. uk Why use it? • • • Provides guidance on procedures and regulations Dedicated Employers section Links to Employers newsletters “Pensions Line” Latest news Employers forms Ability to confirm monthly contribution details on-line (DCC Fund only) • Contact details for Peninsula Pensions staff

Communications Employers Section of Website: • Notes and checklists for new Employers and Academies • Access to all information on Auto-enrolment including letters and flowcharts • Documents and Forms For Employers Must have a login and password to complete forms • Links to Employers newsletters “Pensions Line” For access to website and to receive Pensions Line email emma. shand@devon. gov. uk

Communications/Misc • Pensions Forms – Names have been changed mirror their function – Always use forms on website as latest versions • Employers Guide/Training Pack – slightly delayed but will be updated for new scheme. Plan for “How to…. Section” • CARE Guide – In development to provide guidance on data required for new scheme.

Communications/Misc • Annual return letters going out shortly • Discretions policy template to be revised and bulk exercise to contact employers • Member roadshows/seminars planned for May/June • Employer Self Service (ESS) – facility to process estimates, check records & interfacing of information for current employees. Still under development. • Feedback forms

Useful Links • • • LGA Website LGA Payroll Guidance on LGPS 2014 LGA HR guidance on LGPS 2014 Website LGPS regulations and guidance Peninsula Pensions website

Contact Details Website: www. peninsulapensions. org. uk Email: pensions@devon. gov. uk catherine. drew@devon. gov. uk duncan. kohn@devon. gov. uk viv. ray@devon. gov. uk emma. shand@devon. gov. uk Telephone: 01392 383000 and ask for Pensions/contact’s name

Questions