The draft regulations set out the following proposals as the basis for a new scheme that will come into being on 1 April 2008.

Transcription

1 WINTER 2007 New Look LGPS The Department for Communities and Local Government (DCLG) finally, on 22 December 2006, issued their proposals for a new scheme design for the Local Government Pension Scheme in England & Wales. The closing date for comments is 28th February. Further detail can be found on our website, The draft regulations set out the following proposals as the basis for a new scheme that will come into being on 1 April Keynotes Final Salary Defined Benefits Scheme based on an accrual rate of 1/60th for each year of service with no automatic entitlement to lump sum but an option to convert pension into a tax free lump sum (within overriding limits) at a conversion factor of 12 of lump sum for each 1 of pension New Look LGPS April 2008 Annual Meeting Pre-Retirement Seminars 2007 Valuation FRS17 Normal Retirement Age of 65 for men and women with ability to retire early with appropriate reduction in benefits to compensate for early payment Payments of Benefits in cases of Redundancy & Efficiency from age 55 A three tiered Ill health Retirement Scheme, providing three different levels of benefit depending on degree of ill health Flexible Retirement from age 55 Survivor Benefits, accruing at 1/160th for spouses, civil registered partners, co-habiting partners and children Lump Sum Death Benefit, in respect of active members, of three times actual salary Employers Forum Lump Sum Death Benefit, in respect of deferred members, of five times annual pension LGC Finance Awards Lump Sum Death Benefit, in respect of pensioner members, of ten times annual pension less any pension paid Joiners Working Group Retired Members Events Tiered Employee Contribution Rates of 5.5% on pensionable earnings below 12,000 and 7.5% for earnings above 12,000 Changes to the definition of Final Pay Replacement of the current arrangement to Purchase Additional Membership with a new facility to purchase additional pension up to a maximum of 5,000 pa Facility for Employers to Augment Membership or Annual Pension Facility to have Scheme AVC Providers Continued on page 3

2 A NNUAL MEETING OF THE NORFOLK PENSION FUND 6th February 2007 The Music Room, Assembly House Norwich Tea/Coffee served from 6.00 pm Meeting starts at 6.30 pm. The meeting is open to all scheme members and employers. Invitations were sent with the Annual Benefit Statements. The closing date for registration has now passed, however, if you would still like to join us call or We look forward to seeing you there! Page Valuation T he regulations that govern the Local Government Pension Scheme require the Fund Actuary to complete a full valuation of the Fund every three years. The last valuation was undertaken at 31 March 2004 and the next valuation will be undertaken at 31 March this year. The aim of the valuation is to establish to what extent the assets held by the fund cover liabilities to pay benefits to members. All LGPS funds in England and Wales will be valued at this time. As part of the Valuation, the Actuary sets the employers contribution rates payable for the three- year period until the next formal valuation is completed. The 2004 valuation set the rates payable from 1 April 2005 to 31 March 2008 and the 2007 Valuation will set the rates payable by employers from 1 April 2008 to 31 March The valuation of the Fund and, in particular the liability to pay future benefits, is a complicated process. We expect the initial results to be available by the end of 2008 and to share them with employers at our winter Employers Forum meeting in December. Legislation requires the valuation to be signed off by 31 March In order to achieve this timetable, it is important that we have clean membership data as soon as possible after 31 March We will be contacting employers in a separate communication detailing our requirements, but employers can help achieve this by the timely and accurate submission of their year-end membership data (Form SR56) and by answering any queries raised as quickly as possible. At the last formal valuation, the Fund was assessed as holding sufficient assets to cover 82% of the future benefits payable. We have undertaken monitoring in the interim valuation period. The most recent exercise undertaken at 31 August 2006, indicated that this had improved to 90%, well ahead of the deficit recovery plan expected by the Actuary at the last full valuation. Sadly, however, we would caution against any expectation that employer contribution rates will be lower than those certified at the last valuation. Cost pressures on funding future pensions continue to grow, particularly low interest rates and increasing longevity. Please do not hesitate to contact Alex Younger on if you have any queries or concerns regarding the valuation process. We will keep you informed as the exercise progresses. Pre Retirement Planning For anyone who expects to be retiring in the next eighteen months. For some people, the transition into retirement or semi-retirement will be a welcome change and present few problems; for others, it will mean a totally new way of life. In order to help you make this transition, this two-day event will provide you with information on subjects such as state benefits, financial advice and leisure activities. Most sessions will be delivered by specialist speakers with ample time set aside for your questions and concerns. Dates for 2007: 12 & 13th February 12th & 13th March 2nd & 3rd April 21st & 22nd May 18th & 19th June 16th & 17th July Contact Corporate Training & Development (CTD) /

3 NEW LOOK LGPS SCHEME APRIL 2008 Transfer arrangements It is proposed that all active members as at 31 March 2008 will automatically become members of the new scheme on 1 April Membership accrued up to 31 March 2008 will be banked and eventually calculated against the final pay at date of leaving or retirement on the basis of 1/80th pension and 3/80ths lump sum. From 1 April 2008 additional separate benefits will accrue in the new scheme. Cost-sharing sharing mechanism It is proposed that a cost-sharing mechanism between employee and employer, in respect of increases in scheme costs above those indicated in the departments costings, be established by 31 March Page 3 Protection for existing members - The protections provided by the current regulations, following the removal of the rule of 85 from October 2006, will continue to apply. Therefore, members who will be age 60 and would have satisfied the rule of 85 by 31 March 2016 will have full protection if they wish to retire before that date. Members who would have been able to retire between 2016 and 2020 and would have satisfied the rule of 85 will have any reduction applied on a tapered basis on benefits accrued after 31 March All remaining active members, as at 30 September 2006, will have any early retirement factors applied to benefits accrued on post 31 March 2008 membership only. In addition, the increase to age 55 from age 50, as the earliest that benefits (except for ill-health cases) can be paid, will not apply to current members until Final Pay - A new definition of final pay for the calculation of benefits is proposed that will allow members to choose either the final year of membership or an average of any three consecutive years in the last ten years of membership. Ill-Health Retirement It is proposed that the scheme should have a three-tier ill-health benefit structure as follows:- 1. Unable to perform local government employment but immediately able to undertake other gainful employment Accrued benefits paid with no enhancements 2. Unable to undertake gainful employment immediately but likely to be able to do so before normal retirement age Accrued benefits paid with enhancement of 25% of prospective service to normal retirement age 3. Unable to undertake any gainful employment before normal retirement age (continued from page 1) Accrued benefits paid with enhancement of 50% of prospective service to normal retirement age In addition it is proposed that if the enhancement provided in 2 & 3 above is less than would have applied under the 1997 regulations, then the enhancements provided by regulation 28 of the 1997 regulations will apply. Administration Regulations In addition to the proposals for a new scheme contained in the draft regulations, the Department for Communities and Local Government (DCLG) intend to issue new Administration Regulations which will comprise all the provisions of extant 1997 Regulations, less those pertaining to the provision of benefit now covered by the new scheme. In addition, the new administration regulations will contain provisions regarding scheme administration, strategy documents, governance, pension fund annual reports and ill-health retirement guidance. Any queries on the New Look Pension Fund please contact John Briscoe on

4 R ETIRED MEMBERS EVENTS May 2007 After the continuing success of our previous events, our fund managers & actuaries who take part in the Norfolk Pension Fund are sponsoring a series of similar events around the county. An invitation was sent to all retired members of the Norfolk Pension Fund. Monday 14th May Race Course Fakenham Tuesday 15th May Lynford Hall Thetford Wednesday 16th May Racecourse Gt. Yarmouth Thursday 17th May Carrow Road Norwich Friday 18th May Carrow Road Norwich All welcome: if you would like to come along to any of these events, please contact Doreen Metcalf on or by doreen.metcalf@norfolk.gov.uk FRS17 Update.. T he Fund commissions FRS17 reports on behalf of employers at 31 January, 31 March, 31 July and 31 December. The largest of these exercises, comprising more than 30 employers, is as at 31 March. Those employers that we believe require a March report will shortly receive an offer letter from the Fund. It is very important that this letter and the assumptions that it details are shared with your auditors and the attached reply slip is returned. Our terms of engagement with the Actuary require us to have this slip before we can release any report. We will recharge employers for the reports in accordance with the 2007 Charging Schedule that we issued to employers late last year. Page 5 We will make our initial data submission to the Actuary for the March exercise as at 31 January and provide an update of final contribution figures as soon as possible after 31 March. The Actuary should then have draft reports to us by the end of April We will undertake our own checking and review process before issuing the reports; however, we are happy to share the initial unchecked reports with any employer that requires them early. The Accounting Standards Board (ASB) has proposed changes to the required disclosures, which will be effective for accounting periods beginning on or after 6 April 2007, although early adoption is encouraged. The Local Authority SORP has already been published; however, other bodies may wish to adopt the changes for the March 2007 exercise. Please let us know if this is the case. The changes require some additional disclosures in relation to pension obligations but remove the requirement for some others. We will issue a more detailed briefing note from the Actuary with our offer letter for the March exercise. If any other employers would like a copy of the note at this stage, please contact: Alex Younger on

5 T he LGC Finance Awards took place in London on 6th November 2006 and were presented by writer and broadcaster Sandi Toksvig. The awards attracted a record number of entries and we are pleased to announce that the Norfolk Pension Fund received, not one, but two prestigious awards! Bob Summers and Nicola Mark received the awards on behalf of the team Fund of the Year (Medium) Quality of Service Pag CONGRATULATIONS Nicola Mark said Winning these awards is a tremendous achievement for everyone involved in the Norfolk Pension Fund Page 4 A nnual Benefit Statements were sent out in December and once again a huge effort has been involved in making sure that all the information came together in time for the printing and despatch run. This year, together with the ABS, we sent out an A5 booklet. The booklet includes a summary of the accounts, benefits and other general information about the Norfolk Pension Fund. JOINERS WORKING GROUP. A small group of volunteer employers are looking at joiner rates, employer best practice and the information provided to new and potential scheme members, and if it can be improved. The group has already had two very productive meetings, our thanks to Karen Rundle, South Norfolk District Council, Stuart Tinkler, Saffron Housing, Hayley Smith, Norfolk County Council, Dee Young, Broadland District Council and Philip Bull, City College Norwich. If anyone would like further details, please contact Jo Quarterman on or jo.quarterman@norfolk.gov.uk Annual Benefit Statements the numbers in 2006 Active Statements: Total: 23,556 Deferred Statements: Total: 8,470 NEXT EMPLOYER FORUM MAKE A NOTE IN YOUR DIARIES! 19TH JUNE 2007 HOLIDAY INN NORWICH Further details to follow in due course

6 NORFOLK PENSION FUND Winner: - Quality of Service Award (2005 and 2006) Fund of the Year (Medium) Award (2006) Corporate Governance Award (2002 and 2003) write to: The Pensions Team Norfolk County Council, County Hall, Martineau Lane, Norwich, NR1 2DW pensions@norfolk.gov.uk IF YOU WOULD LIKE THIS PUBLICATION IN LARGE PRINT, AUDIO, BRAILLE, ALTERNATIVE FORMAT OR IN A DIFFERENT LANGUAGE PLEASE CONTACT THE ABOVE