Autumn 2012 Kirby Sigston Church (near Northallerton)

Transcription

1 Autumn 2012 Kirby Sigston Church (near Northallerton)

2 LGPS 2014 Update In the last Pensions Focus we outlined the main changes that are set to take place in the new pension scheme. We are now able to give you a more detailed picture of the main features proposed in the new scheme including what s changing, what s the same and more importantly, will the new scheme see you come out better or worse than you would have done under the current scheme. What s new? Career Average Revalued Earnings (CARE) to replace final salary This is seen as a much fairer way of accruing pension benefits and is more beneficial for those members with short service and limited promotion opportunities LGPS retirement age to be linked with the State Pension Age This is a bid to manage the increase in life expectancy. For more information on your State Pension Age, visit anning/statepension/dg_ /50 option If a member feels they can no longer afford the full costs of being a member of the scheme, rather than opting out completely, they can choose the 50/50 option. This allows members to pay half of their banded contribution for half the pension benefits for a chosen period of time without opting out altogether. This aims to attract nonmembers whilst discouraging members opting out in the future New accrual rate of 1/49th This is better than the current 1/60th rate Vesting period of 2 years instead of 3 months The vesting period is the length of service for which a member can claim a refund of their pension contributions. Increasing the vesting period should reduce the amount of short-service preserved pension pots which are currently held in the scheme Contribution rate for part timers Will be based on actual pay rather than full time equivalent pay Protection for members who were over 55 at 1 April 2012 Each member who falls in to this category will be looked at individually when the increase to State Pension Age impacts, and if it proves to be in their best interest to pay benefits at age 65, will be honoured by the Fund Employer s consent to claim benefits before age 60 no longer required Members will be able to retire from age 55 but benefits will be reduced in most cases What s staying the same? Average employee contribution rate still 6.5% Still a defined benefit scheme so your pension benefits are still guaranteed Redundancy and efficiency retirement is still 55+ Lump sum still worked out at 12:1 (every 1 of pension given up buys 12 of lump sum) Death in service grant still 3 x pensionable pay Ill Health provision still based on 3 Tier system For a clearer comparison of the main features of the current and proposed 2014 Local Government Pension Scheme, the following chart may help: LGPS 2014 LGPS 2008 Basis of Pension Career Average Revalued Earnings (CARE) Final Salary Accrual Rate 1/49th 1/60th Revaluation Rate Consumer Price Index (CPI) Based on final salary Pensionable Pay Pay including non-contractual overtime and additional hours for part time staff Pay excluding non-contractual overtime and non-pensionable additional hours Tax Free Lump Sum Trade 1 of pension for 12 of lump sum Trade 1 of pension for 12 of lump sum Normal Pension Age Equal to your State Pension Age (min age 65) 65 Death in Service Lump Sum 3 x pensionable pay 3 x pensionable pay Death in Service Survivor Benefits Ill Health Benefits Contribution Flexibility Cost of Living Increases for Pensions in Payment Vesting Period (window of service that you can claim a refund of contributions) 1/160th x member s pensionable pay x member s service up to age 65 3 Tiers enhancements to Normal Pension Age (equal to your State Pension Age) Yes, you can pay 50% pension contributions for 50% of the pension benefit CPI 1/160th x member s pensionable pay x member s service up to age 65 3 Tiers enhancements to age 65 No 2 years 3 months CPI (RPI for pre 2011 increases)

3 LGPS 2014 Update continued The question that most of you will be asking is, will I come out better or worse under the new LGPS 2014? We ve shown below a comparison chart of what you would have contributed in the current scheme compared to the proposed contribution rates of the new scheme. As you will see, members earning up to 43k per annum will see little or no change to their contributions, with the expectation being that only 5% of members (i.e. the higher paid) will see an increase to their contributions, and some part-time members actually paying less than they do now! It is hoped that the new scheme will be a fairer pension scheme overall and better reflects the needs of the majority of the LGPS workforce of today. Proposed New Scheme Up to 13, % 13,501 21, % 21,001 34, % 34,001 43, % 43,001 60, % 60,001 85, % 85, , % 100, , % More than 150, % Although it is hoped that the proposed changes to the LGPS are acceptable to the employers, the trade unions and the Government, there will still need to be a full consultation process which will take place during the Autumn of Following agreement on the main changes, detailed regulations and guidance will be put in place and the timetable for achieving this is by the end of March This is when we will know exactly how the calculation of pension benefits (from 1 April 2014 onwards) will be carried out. As information becomes available it will appear on both the national LGPS website at and the North Yorkshire Pension Fund website at. Current Scheme Up to 13, % 13,501 15, % 15,801 20, % 20,401 34, % 34,001 45, % 45,501 85, % More than 85, % Your State Pension Age 66, 67 or 68? You are probably aware that the age at which the State Pension is paid out has already changed for women (no longer age 60) and in future will also change for men (will be later than age 65). The Government plans to increase the State Pension Age for men and women in line with average life expectancy so the longer people are living on average, the longer they will have to wait until they can get hold of their State Pension. From April 2014 the date from which a LGPS pension can be taken without a reduction for early payment applying may also change for any pension which is built up in the LGPS from 1 April 2014 onwards. It is proposed that the age will increase from age 65 (for both men and women) to the age at which each LGPS member reaches their State Pension Age. When the final details of the changes to the LGPS are known we will be providing full information on when members can access their LGPS pension and the reductions which will apply for early payment. However, for now, you might want to check on your current State Pension Age because in future this may well affect the amount of LGPS pension you will receive and might have a bearing on when you choose to retire. You can use the online calculator on the Directgov website to calculate your current State Pension Age and to read information about the proposed future increases in the State Pension Age. This can be found at:

4 Free Life Cover for all members! One of the many reasons to pay in to the North Yorkshire Pension Fund (NYPF) is that you automatically get free life cover. If you were to die in service (meaning if you were still paying in to the scheme) a payment of 3 times your pensionable pay would be payable to the person(s) you have nominated to receive the Lump Sum Death Grant. If you are part time, this is 3 times your actual pay. If you are married or in a civil partnership, your spouse will automatically receive a widow s, widower s or civil partner s pension and subject to certain qualifying conditions, a nominated co-habiting partner could receive a survivor s pension. A pension may also be payable for any eligible children you have. It is therefore very important that you keep your Lump Sum Death Grant Nomination form up to date and also let us know if your circumstances change. Your Annual Benefit Statement shows who you have nominated to receive your death grant. If the Nomination section is blank, we have not received a Nomination form from you. The Lump Sum Death Grant Nomination form is available at %20May% pdf You can also download a Co-habiting Partners Nomination form from the Forms page of our website. Thinking of applying for flexible retirement? Some of us find the prospect of retiring daunting, but did you know that you can access your pension benefits and continue to work (in a reduced capacity), to help you ease into retirement? Many members approach the Pensions Team directly for details of flexible retirement, but you must approach your employer in the first instance. Your employer should have a policy on flexible retirement which will explain under what circumstances they will allow the early payment of pension benefits. The policy will reflect the practical issues which are involved such as finding a part-time replacement if an employee goes part-time in their existing post. If it is not possible to offer flexible retirement the employer can turn down the request in line with their policy. Automatic enrolment I ve heard about it, but what is it exactly? The Government has introduced a new law designed to help people save more for their retirement. It requires all employers to enrol workers into a workplace pension scheme if they:` are not already in one in respect of an employment earn over 8, a year (or pro-rata per pay period) in that employment are aged 22 or over, and are under State Pension Age The workplace pension scheme that you are a member of, the Local Government Pension Scheme (LGPS) is a qualifying pension scheme meaning it meets or exceeds the Government s standards. The individual employers that participate in the North Yorkshire Pension Fund will have to comply with this new law at different dates (known as staging dates ). These Can I find further information on this myself? You can run your own quotes on your online pension record(s) see the article on electronic communications for further information on this. Simply select the Benefit Projector and enter the date you would like to retire/flexibly retire and a current pay figure. It is important to remember that the figures provided are an estimate only and you should not make any irrevocable decisions based on these. Remember that Flexible Retirement is completely at your employer s discretion and the Pensions Team can not provide quotes for you. You might also find the Flexible Retirement Q & A document on our website useful QA_v3_April_12.pdf dates are based on the size of the employer s payroll, with the largest employers having to comply earlier. For example, North Yorkshire County Council will have to automatically enrol non-scheme members on 1 January 2013; ex-members who have previously opted out of the scheme will be enrolled back into the scheme on 1 April Will automatic enrolment affect me in any way? If you are an existing member of the scheme automatic enrolment does not affect you in relation to the post(s) you are working in at the point automatic enrolment goes live. Despite this, however, under the new law your employer will write to you to confirm, among other things, that the LGPS is a qualifying pension scheme and your membership will continue unless you choose to opt out or cease to be eligible for membership. You should contact your employer if you have any questions about how automatic enrolment may affect you.

5 Should I top up my pension? This is a personal decision that can only be answered by you (possibly with help from an independent financial adviser). You can get an idea of your expected benefits from the North Yorkshire Pension Fund (NYPF) by running your own quotes on your online pension record. We also provide Annual Benefit Statements each Autumn and the Prudential issue annual Statements to members who have Additional Voluntary Contributions (AVCs). From April 2014, the Local Government Pension Scheme (LGPS) will move to a Career Average Revalued Earnings (CARE) scheme, with a normal retirement age that will mirror your State Pension Age (normal retirement age in the LGPS is currently 65). The new scheme design is not expected to be finalised until March 2013 so we are unable to provide precise details of how the new changes may affect you. However, when you are planning for retirement it s important to remember that many of you will have a normal retirement age greater than 65 for benefits accrued after April You therefore need to ask yourself: if I want to claim my benefits at age 60, for example, and I m not protected by either the 85-year rule, or because I wasn t aged over 55 at April 2012, can I afford to live on my pension benefits after they have been reduced for early payment? How can I top up my pension? Additional Regular Contributions (ARCs) You can buy up to 5,000 extra annual pension (in multiples of 250 per year). This can be used to provide a pension for you or for you and a dependant. Any extra pension bought will be subject to a reduction if paid before normal retirement age. Contributions to ARCs are deducted from pay, in the same way as your North Yorkshire Pension Fund contributions, so you get the same tax relief. For further information visit where you can run your own quote to find out what it would cost you to buy additional pension. Additional Voluntary Contributions (AVCs) AVCs are a simple, convenient and tax-efficient way to boost your retirement income. Again, you receive tax relief through your pay, which means the Government makes a contribution to your AVC pot. Based on the 2012/13 tax bandings, an AVC contribution of 100 would only cost you 80 if you are a standard 20% tax payer. If you pay tax at 40%, the same 100 would only cost you 60! Due to changes to the tax laws in 2006, the whole of your AVC account can, subject to certain limits, be taken on retirement as 100% tax-free cash. Although there is no minimum contribution, it is now possible to pay as much as 50% of your earnings in any year up to the Annual Allowance (a maximum set by Her Majesty's Revenue and Customs (HMRC) which is currently set at 50,000) without incurring a tax charge. As the Annual Allowance takes into account the growth in your LGPS benefits, along with any other pension scheme that you are currently contributing to and any AVCs you pay, the maximum level of AVCs payable will therefore depend on the rate at which your North Yorkshire Pension Fund benefits grow each year. Although most people will be able to pay AVCs without exceeding the Annual Allowance limit, you should check how the Annual Allowance applies if you are considering paying a substantial amount in AVCs in any year by contacting the NYPF. For further information on AVCs call the Prudential s dedicated Pension Connection team on Lines are open between 9am and 6pm, Monday to Friday; calls may be monitored or recorded for quality and security purposes. Short term AVCs - exit penalties As detailed in the Spring 2012 Pensions Focus newsletter, the Prudential have now introduced an exit penalty for short term AVC contracts to cover their administration costs. The exit penalty will only affect those members whose very first AVC contribution was received by the Prudential on or after 19 August 2012 and who go on to withdraw their AVC funds within the first five years of setting up the policy. If you are currently paying AVCs (i.e. your first AVC contribution was received by the Prudential before 19 August 2012), these changes will not affect you. For further information go to then select Short Term AVCs - Important Changes from the Latest updates section on the home page. NYPF Fund Watch Some members have shown an interest in the ongoing funding position of the North Yorkshire Pension Fund. We will keep you updated of the scheme s solvency via your newsletter. As at 30 June 2012, the scheme was 56% solvent (i.e. the value of the assets was sufficient to cover 56% of its liabilities).

6 The move to electronic communications As many of you will now be aware we are moving towards communicating with our members in an electronic format. Not only will it help us to consider the environment and save money it will also help YOU keep track of changes to YOUR pension. You should by now have received a personal identification number (PIN) to access your online pension record(s) at. This facility offers a number of ways for you to keep up to date with your pension. If you have forgotten your PIN you can: Log on to the NYPF website () and select Your Online Record, Click on the Forgotten your PIN? link, or Ring the Pensions Help and Information Line (PHIL), and you will be given your PIN over the telephone once security questions have been answered, or pensions@northyorks.gov.uk requesting a PIN stating your National Insurance number, name and date of birth. Once you have received your PIN you need to register it. This is a simple process as follows: Go to the North Yorkshire Pension Fund website (), select Your Online Record and click Enter. Input your Surname, National Insurance n umber and PIN and select the 'Enter' option again. For your data security, you will be prompted to create two passwords one of which will be requested (along with your PIN) each time you access your online record. Your passwords will default to upper case which you should also use when logging in to your online record. You will also be asked to create two prompts to remind you of what your passwords are (for example mother's maiden name, pet name, favourite colour...etc). Once the registration process is complete you will be able to view your online pension record. Why is it important to register your PIN? Annual Benefit Statements are available (from September 2012) to view on your online pension record unless you have chosen to receive a paper statement. If you wish to opt out of electronic statements, either download the form from our website (homepage) called Electronic Communication or ring the Pensions Help and Information Line (PHIL) on As well as being able to view your Annual Benefit Statements on your online record you can also: Change your personal details, such as your address. It is important that you keep your address up to date so that we can keep you informed of important changes and ultimately pay your benefits when you retire. You can also see the membership details that we hold for you. Run your own pension quotes including retirement and redundancy. The Pensions Team cannot provide redundancy quotes directly to you (as redundancy is a decision made by your employer and not the Pension Fund), however you can run your own quotes on the North Yorkshire Pension Fund s website. If your employer requests a redundancy quote we would provide them with a quote and then it is their decision whether to share the information with you. If you run your own redundancy quotes and you are paying (or have paid) in-house Additional Voluntary Contributions (AVCs) the figures shown will not take in to account your AVC fund. You can also run your own retirement quotes by simply choosing the date you want to retire and ensuring the pay figure is up to date. This is particularly useful if you are under age 55, as the Pensions Team cannot provide figures below this age. Any quote you run must use a retirement date that is between your 55th birthday and age 75. Again, the figure quoted will not include any AVCs that you may have paid. Check who you have nominated to receive any lump sum death benefit. You can also download a form if you want to update your nominees. Contact us with any questions or feedback. With the changes to the Local Government Pension Scheme (LGPS) from April 2014 it is essential that you are aware of your personal circumstances and how these changes will affect you, particularly, the potential changes to your normal retirement age with the LGPS coming into line with your State Pension Age. Your online pension record is a great way to do this but we also update our website homepage with any updates that we think you need to know about. Keep a track of these at. If you have any queries regarding any of these issues please contact us on the Pensions Help and Information Line (PHIL)

7 What will be the effect of absence leave on my pension benefits? Members can be absent from work for a number of reasons, whether this be authorised or unauthorised absence, and can include things such as maternity leave and strike days. Maternity Pension contributions during maternity leave are as follows: Ordinary Maternity Leave (OML) - the first 26 weeks maternity leave is counted as full pensionable service and the contributions you pay will be based on the actual pay you receive Additional Maternity Leave (AML) after 26 weeks, pension contributions are payable for as long as you are receiving maternity pay of some kind o If no pay is received you will have the option to pay contributions when you return o You should speak to your employer when you return from maternity leave about paying extra pension contributions due if you go into a period of nil pay after the 26 week period to cover the full period of maternity leave so you have no break in your pensionable service o You can choose not to make up the pension contributions, in which case you will have a break in service equal to the period where you received nil pay Drop In Sessions and Roadshows Due to the impending launch of the LGPS 2014 we are reviewing our Communications Strategy and will not be booking any further pension drop in sessions or roadshows in the near future. This is until we have a clearer picture of how the LGPS 2014 will look and the changes that this will bring for our members. All roadshows and drop in sessions that are already scheduled will still go ahead as planned. You can still talk to us about your pension at any time by calling our dedicated Pensions Help and Information Line (PHIL ). Our office opening hours are Monday to Thursday and to on Fridays, although working flexibly means you may catch us outside of these times! You can also visit our website at where you will find lots of useful information, guidance notes and updates on the LGPS 2014 as well as downloadable forms. Don t forget that you can use your online pension record to change your address, run your own pension estimates, view your Annual Benefit Statement and much more. We encourage you to take advantage of these facilities as much as you can and would welcome any feedback on how we can improve our service to you. Below are details of the drop in sessions and roadshows that we have booked up until the end of Drop In Sessions Date Venue (County Hall) Friday 16 November 2012 Meeting Room 2 Roadshows Date Tuesday 30 October 2012 Venue Harrogate Borough Council, Harrogate Strike absence In most cases, the effect will be negligible: for pension purposes a day will be taken out of the service calculation which will result in a small reduction in pension benefits. You can recover the break by paying 16% in pension contributions for that day. The 16% is a standard amount which includes a sum towards the employer's pension contribution. If you choose not to repay your contributions, and you leave or retire within a year of your strike break it may affect the calculation of your final pensionable pay (used to calculate your pension benefits). For more details of the above events or to book a place, please contact us. Your employer should contact you following any industrial stike action to confirm whether you want to repay your pension contributions.

8 Contact us: Pensions Help and Information Line (PHIL) - (01609) pensions@northyorks.gov.uk We can also contact you by We want to cut costs, protect the environment and get information to you more speedily by using rather than sending letters through the post. We cannot do this without your permission so please pensions@northyorks.gov.uk quoting your name, date of birth, National Insurance number and your address, confirming we may use your address for future communication. If we have your address, you can be assured of receiving pensions information including the Pensions Focus newsletter - promptly rather than waiting for it to be printed and posted or passed on by your employer. Don t risk missing important pensions information! Opening Times The phone lines at County Hall are staffed from 8.30 to (16.30 on Fridays) although working flexi time you may catch us outside of those hours. Remember to have your National Insurance Number to hand for identification purposes. Fax Number: (01609) All Additional Voluntary Contributions queries for the Prudential should be directed to their Pension Connection Service on If you would like this information in another language or format such as Braille, large print or audio, please contact Jo Wade, Communications, Training and Support Team Leader: Tel: or by at jo.wade@northyorks.gov.uk 57034J 09/12