Pensions

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.

Further information is available here – LGPS Agreed Changes Come Into Effect April 2014

UNISON MEMBERS VOTE TO ACCEPT CHANGES TO LGPS 

UNISON members across England and Wales have voted 90.2% in favour of accepting the proposed changes to the Local Government Pension Scheme (LGPS).

UNISON is the largest public service union and its members in the Local Government Pension Scheme span local government, police and probation, schools, colleges, universities, water, transport and environmental services, private companies and the voluntary sector.

The union, led the negotiations, which resulted in proposals to maintain the current contribution levels for 90% of LGPS members, introduce a 50/50 ‘low cost’ scheme for the low paid, and move from a final salary to a career average scheme.

Welcoming the ballot result, UNISON Head of Local Government Heather Wakefield said:

‘These were tough negotiations, but with a focus on the majority of members who earn less than £21,000 a year, we have ensured that current LGPS members can afford to remain in the scheme and those who could not afford to do so to date can now join via the 50/50 option.

“This is vital for many of our members who have suffered a decline in earnings as a result of the Coalition’s pay freeze policies. Contributions are now on a fairer ‘progressive’ basis. We will continue to campaign with all of the union, through the TUC, against the proposals to increase the state retirement age.

“UNISON will now move into the next stage of discussions on improving the governance of the new scheme which is due to come into effect in 2014.”

For more information visit – http://www.unison.org.uk/pensions/lgps.asp

Among the improvements to the LGPS negotiated by Unison are:

  • No overall contribution increase – 90% of members will pay the same or lower contributions than now – you will only pay more if you earn over £43,001 a year.
  • A career average scheme which uses all your pensionable pay to calculate your pension, increase in line with the Consumer Prices Index (CPI)
  • An improved 1/49th accrual rate, which means your pension builds up faster each year
  • Pensionable pay will include non contractual overtime and additional hours worked by part-time and term-time wokrers – so more of your earnings will count towards your pension
  • Most part time workers will pay less for their pension as contributions for part timers will be based on actual pensionable earnings from 2014, not the full time equivalent as they are now
  • A new 50/50 option means that after April 2014 you can choose to pay half the contribution to receive half the pension in those years while keeping full survivor benefit and ill-health pension protection. You can opt back into the full contribution for full pension rate at any time.
  • If you are transferred to a private or voluntrary sector employer, you will still have the right to stay in the LGPS.

Current scheme members’ pensions benefits for service before 1 April 2014 are protected and will still be calculated on final pensionable salary on leaving service or retirement. The current normal pension age of 65 will continue to apply to this part of your pension. The existing Rule of 85 protections will still apply and members will not have their pension reduced if they are made redundant after the age of 55 regardless of normal pension age.

If you want to find out more about how these changes will affect you then go to http://www.unison.org.uk/pensions/lgps.asp

 

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