LGPS and public sector update. Shaun Tetley Payroll and pension manager Portsmouth City Council

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1 LGPS and public sector update Shaun Tetley Payroll and pension manager Portsmouth City Council

2 CIPP 2017 Annual Conference Shaun Tetley Payroll and Pension Manager Portsmouth City Council

3 LGPS update The LISA threat APC and standard AVC Salary sacrifice AVC Other pension information State pensions and personal tax accounts HMRC

4 It is important to realise that you have access to a good quality pension scheme at the present time, and in the future, with a scheme which provides you with: Guaranteed level of income when you retire - not dependent on share prices and not affected by stock market fluctuations; Life Cover and Family Benefits in the event of your death; Permanent Ill Health Cover

5 Anybody who has an option to join a public sector pension schemes and fails to do so should be: denied the right to a bank account and committed to a lunatic asylum! Work and Pensions Committee chairman Frank Field

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7 LGPS Before 1 April 2008 LGPS 1 April March 2014 Basis of pension Final Salary Final Salary Accrual Rate 1/80 th 1/60th Contribution Rate 6% Normal Pension Age 65 From 5.5% 7.5% 65 Early retirement Automatic Tax-free cash Ill health Employer consent was only required for early retirement before age 60. Possible reduction. Yes At any age unreduced if the member was no longer capable of performing the duties of their old job. Employer consent was only required for early retirement before age 60. Possible reduction. No At any age unreduced. Three levels of benefit available depending on the member's likelihood of being capable of working. Maximum retirement age

8 LGPS 1 April 2014 Basis of pension Accrual Rate Career Average Revalued Earnings (CARE) 1/49 th Contribution Rate From 5.5% 12.5% Normal Pension Age Early retirement Automatic Tax-free cash Ill health The higher of age 65 or SPA. From age 55 no employer consent required. Possible reduction. No At any age unreduced. Three levels of benefit depending on your likelihood for being capable of working in future. Maximum retirement age 75

9 Is the 1/49 th accrual rate generous? Is the 1/49 th accrual rate sustainable? What will happen in the future?

10 The poor scheme member must find LGPS pensions are incredibly complex Tapered Protection

11 95,000 Exit Cap Recovery of excess cap Future movements in SPA Recovery of exit payments where staff return to the public sector Cap and collar reviews Future changes to accrual rates Possible restriction on automatic payment of pension benefits on redundancy Annual benefit statements are not easy to understand as the scheme keeps changing

12 The Lifetime ISA is likely to result in staff opting out of occupational and auto enrolment pension schemes There is a "real danger" the new Lifetime ISA will see young people opting out of workplace pensions and having to work until they drop, former pensions minister Steve Webb has warned. Read article here. Pensions could be completely scrapped in five years time following the implementation of the new Lifetime ISA,Money Saving Expert founder Martin Lewis has warned. Lewis said the introduction of a Lifetime ISA is perhaps the biggest change we have seen in the Budget for a very long time, and one we ll still be talking about in 15 years time.

13 From April 2017, anyone between age 18 and 40 can open a Lifetime ISA and pay in up to 4,000 per annum You can save up to 4,000 a year in a LISA as a lump sum or by putting in cash when you can. The state will then add a 25% bonus on top. So if you save 1,000, you'll have 1,250 and if you save the full 4,000, you'll have 5,000. And that's before interest or growth. As well as saving for a pension, the pot can be used at any age towards payment of a deposit on a first home valued at no more than 450,000 (after a minimum of 12 months saving) or for any reason at or after age 60

14 Savings can also be withdrawn as a lump sum (taxfree) in the event of terminal illness at any age Any other withdrawals before the age of 60 will mean forfeiting the government bonus on the part withdrawn (plus any interest or growth on that bonus), and will also attract a 5% charge You can save into a Lifetime ISA as well as saving into a pension if you can afford it! For the detailed gov.uk information on LISA s click here For the user friendly guide to LISA s head to the Martin Lewis content by clicking here

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16 Contributions Term Benefits More information available from Additional Pension Contributions (APCs) Fixed monthly amount. Maximum additional pension that can be bought in 2017/18 is 6,755 The calculator can be located at pc/index.php Fixed number of years agreed at outset. Fixed and provides some protection against the effects of inflation. The pension scheme administrator or website. Standard Additional Voluntary Contributions (AVCs) Flexible contributions. Tax-relief is given through the payslip at your marginal rate of tax Flexible stop and start contributions. If contributions stop, charges will still be deducted Flexible additional pension, an annuity from outside the LGPS, tax-free cash or a mixture Choice of AVC providers (Prudential and Zurich) 16

17 Shared Cost Salary Sacrifice Additional Voluntary Contributions 17

18 To provide staff with an enhanced pension saving opportunity that delivers a higher yield through the tax system to the current standard AVC The AVC must be implemented through a Salary Sacrifice Shared Cost Additional Voluntary Contribution arrangement (SSSCAVC) Portsmouth are one of the first councils in the country who have implemented this type of scheme HMRC have given approval to the Portsmouth SSSCAVC arrangement We have been working with Prudential to develop and implement the scheme 18

19 AVC deductions can be varied (up or down) Both tax and NICs savings are made SSSCAVC s have no effect on the main LGPS benefits It does not affect future pay increases, shift allowances, overtime rates etc. It does not reduce redundancy pay It does not affect the state retirement pension The council saves 13.8% national insurance contributions on the SSSCAVC contribution 19

20 You decide how much you want to save As an example you may decide to save 100 per month The rules require you to contribute 1 towards the AVC You enter into a salary sacrifice agreement to reduce your salary by 99 and this is paid by your employer into your AVC As a result 100 is paid into your AVC each month The next slide shows the savings you make 20

21 Standard AVC AVC per month 100 Tax saving 20 NIC saving 0 Total Saving 20 Net cost 80 SSSCAVC AVC per month 100 Tax saving 20 NIC saving Total saving Net cost Percentage Growth 25% Percentage Growth 46.8% AVC per year 1200 Tax saving 240 Net Cost 960 AVC per year 1200 Tax /NIC saving Net Cost

22 Payment of 100 per month SSSC AVC ISA Amount saved after 12 months Tax/NIC saving Net cost of saving Yield before interest through tax/nic saving 46.8% 0% Interest on SSSCAVC / ISA * Growth after tax/nic saving and interest Total yield 55.6% 1% *Interest assumptions: AVC growth of 6% and ISA growth of 1%

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24 It is important to remember that saving into an SSSCAVC is a long term savings plan This is why the government allows tax and NIC savings because you are saving towards your retirement The local government AVC is unique in terms of the options that are available to you when you retire, these are: Take your AVC pot as tax free cash (subject to HMRC limits) Buy additional LGPS pension with your AVC pot Purchase an annuity Flexibly draw down your AVC and delay receiving your LGPS pension 24

25 The Local government Association provide useful website information as follows: Members website Regulations website LGPS Advisory Board website

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30 The LGA have published a useful leaflet covering GDPR to view click here

31 Member takes flexible retirement, rejoins the LGPS and then takes voluntary full retirement Member takes flexible retirement, rejoins the LGPS and is then made redundant Member is entitled to claim their pension at any age but this will be subject to actuarial reduction if this is claimed before State Pension Age. Note the 2 year vesting period to qualify for the post flexible retirement Local Government Pension does not apply and the member has an entitlement to a further LGPS pension regardless of the period of membership (but the benefits will be reduced if claimed before State Pension Age). Member is entitled to immediate payment of pension (unreduced). Any strain charge would be payable by the employer. Note the 2 year vesting period to qualify for the post flexible retirement Local Government Pension does not apply and the member has an entitlement to an unreduced LGP regardless of the period of membership in respect of the post flexible period of pension membership.

32 Did you know that the Local Government Association provide an facility to deal with technical enquiries covering LGPS Before contacting them check if your administering authority knows the answer! If not send an with the detailed enquiry to:

33 The Association of British Insurers delivered the pensions dashboard prototype to government ministers in March pension firms and 6 technology companies, led by the ABI have held talks over many months over how the dashboard should look and how it will be run The technology is aimed at allowing people to access all of their pension savings from different schemes and providers along with their state pension in one place The government expects the service to be launched by 2019 Access will be via a secure gateway route similar to Personal Tax Accounts Currently public sector DB schemes will not be included This could herald the end of lost pensions

34 Looking for workplace pensions Click here to start your search Looking for personal pensions If you re looking to trace a personal pension, then please contact us. We ll need as much information as possible regarding the scheme, your dates of employment and copies of any certificates you still have. One of our pensions specialists, can talk you through what we ll need and, what we ll do, to try to help you find your pension.

35 Click here to read the article

36 The State Pension age (SPA) will increase to 68 between 2037 and 2039 (7 years earlier than the current legislation) The change will affect everyone born between 6 April 1970 and 5 April No one born on or before 5 April 1970 will see a change to their SPA Why is the SPA continually changing? Legislation agreed in the last parliament introduced a process of reviewing the State Pension age around every five years. It will consider changes in life expectancy, wider changes in society and the sustainability of the State Pension

37 Average number of years State Pension paid beyond age 65 Year Average period state pension paid % of adult life years 23% years 33.6% Life expectancy table Year born Girl Boy 1951 Age 82.4 Age Age 93.6 Age 90.8

38 So what can you do if you have not reached your SPA but are worried that you might not have enough NI contributions to qualify for a state pension (or to get the maximum amount)? You can make voluntary Class 3 National Insurance contributions There is a state pension top up calculator and further information available at

39 Have you opened your own Personal Tax Account?

40 HMRC have published 2 webinars to help with setting up a PTA and signing in How to set up your Personal Tax Account. Find out how to set up your account What information you ll need What services you can access in your account Watch this webinar How to sign in to your Personal Tax Account. Find out how to sign in to your Personal Tax Account once you ve set it up. Watch this webinar.

41 What a Personal Tax Account contains

42 What a Personal Tax Account contains

43 Example of PTA State Pension information

44 Did you know that you can contact HMRC by ? The address is uk By contacting HMRC by , you are confirming that you understand and accept the risks involved in using . HMRC may not always be able to reply by , in which case the reply will be sent by post

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46 HMRC is looking for volunteers to join its user panel to help improve its online services and GOV.UK content. Upon joining, volunteers will be asked to complete a short survey to ensure they are invited to take part in the most relevant research. Once signed-up panel members might be asked to try new online transactions, answer more questions by and talk to researchers. You can say no to an invite and can unsubscribe at any time.

47 Do you want to attend a free public sector update in London? The date for your diary is 1 February 2018 Held at the excellent PwC headquarters in Embankment, London Topical content covering Payroll, Pensions and HR Speakers already booked include Jeff Houston (Head of Local Government Pensions), Kate Upcraft, Payroll update, HMRC, Steve Webb (former Pensions Minister) Join the Public Sector SIG to receive an invite and agenda in due course

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