Administered by South Tyneside Council LGPS 2014 June 2014 Your new pension Scheme is here Your questions answered about the new pension Scheme. SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 1 26/06/2014 15:00
LGPS 2014 LGPS 2014 from 1 April 2014 YOUR NEW PENSION SCHEME BEGAN ON 1 APRIL 2014 AND YOU RE AUTOMATICALLY IN IT FROM THAT DATE, WITH PROTECTION FOR THE PENSION BENEFITS YOU HAVE BUILT UP SO FAR. The LGPS will remain a defined benefit scheme, which means that your pension will continue to be worked out using a set formula based on your pay. There are many changes, but what hasn t changed is that LGPS 2014 is still a good pension scheme that gives you and your family a wide range of benefits. Read on to find out about the new features that cover what you pay in, what pension you will get and when you can get it. The information in this newsletter relates to active members only and cannot be treated as a statement of law. 2 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 2 26/06/2014 15:00
HOW DOES THE NEW SCHEME WORK? From April 2014 the Local Government Pension Scheme is a Career Average Revalued Earnings Scheme, known as a CARE Scheme. 1 2 3 You pay contributions on what you earn See the table on page 6 to find out how much you will pay. You build up 1/49th of your pay as a pension every year Every 31 March a pension amount equal to 1/49th of the pay you paid contributions on in the past year is added to your pension account. Your pension is inflation proofed for life Once each year s pension is added to your pension account, it is inflation proofed for the rest of your life. Simple example Let s say you earn 12,000 in one year. What s your pension for that year? On 12,000 you would pay 5.5% contributions or 55 each month. If you pay tax, you will get tax relief on this amount. Your pension for that year will be 12,000 divided by 49 that s 244.90 each year for life once you have retired. This is inflation proofed for life. 3 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 3 26/06/2014 15:00
LGPS 2014 NOT EVERYTHING IS CHANGING Many of the features of the old Scheme have been carried forward into LGPS 2014. The LGPS will remain a guaranteed Scheme where benefits are defined and you build up a portion of your pay each year for when you retire You will still get life cover if you die in service or within a short time of retiring as well as pensions for your partner, young family and dependants Ill health cover is payable at any age should you be unable to work, as long as you meet the Scheme requirements You will continue to receive tax relief You can still give up some of your pension to get a tax free cash lump sum when you draw your benefits Members who leave on the grounds of redundancy or efficiency and are aged 55 or over will receive benefits immediately without any reduction for early payment. YOUR PENSION SO FAR IS PROTECTED The benefits that you have built up to 31 March 2014 are protected in the new Scheme. If you were aged 57 or over on 1 April 2014 and you were an active member on 31 March 2012, you will continue to have your pension worked out under the old Scheme rules unless the new rules give you a better pension. If you have protection under the 85 year rule under the old Scheme, this will continue in the new Scheme unless you choose to take your pension from age 55 up to age 60. The reason why this does not apply if you voluntarily take your pension before age 60 is that the right to take your pension from age 55 only became an option in the new Scheme. However, your employer could decide to let the 85 year rule protection apply. This is known as an employer discretion and your employer is required to publish their policy on this. You must have been a member of the Scheme on 30 September 2006 to have any rule of 85 protection. 4 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 4 26/06/2014 15:00
2008 AND 2014 LGPS SCHEME COMPARISONS OLD SCHEME LGPS 2008 1/60th Your pay excluding overtime and non-pensionable additional hours It s based on your final salary No Three months A lump sum of three times your pensionable pay 65 Trade 1 of pension and get 12 lump sum Enhancement to normal pension age, or 25% enhancement to normal pension age, or Temporary payment of pension for up to three years CPI (Retail Price Index for pre 2011 increases) 1/160th OLD AND NEW COMPARED How much of my yearly pay do I get as a pension? What pay counts towards my pension? How does my pension maintain its value over the years I m paying in? Can I reduce my contributions? How long do I have to be in the scheme before I m entitled to a pension? What death grant is paid if I die in service? What s my normal pension age? Can I trade pension for lump sum? How is my pension enhanced if I retire because of ill health? What s my pension increased by once in payment? How much of my yearly pay would my dependants get as a pension? NEW SCHEME LGPS 2014 1/49th Your pay including non contractual overtime and additional hours if you re part-time It s inflation proofed each year (using the Consumer Price Index CPI) Yes you can pay 50% contributions to get 50% pension Two years A lump sum of three times your pensionable pay Your state pension age (minimum 65) Trade 1 of pension and get 12 lump sum Enhancement to normal pension age, or 25% enhancement to normal pension age, or Temporary payment of pension for up to three years CPI 1/160th 5 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 5 26/06/2014 15:00
LGPS 2014 PENSIONABLE PAY AND CONTRIBUTIONS Pensionable pay is the amount of your pay on which you pay contributions. It is also used to calculate the amount that goes into your Pension Account each year. From 1 April 2014, pensionable pay includes taxable elements such as overtime and any additional hours worked in excess of your contractual hours. For part time members, the contribution rate will be based on your actual pay. This is a change because it used to be based on the pay you would have got if you worked full time. For example, if you currently earn 12,000 in a part time job and the full time equivalent is 24,000 you will now pay a contribution of 5.5%, instead of 6.5% under the old Scheme. NEW CONTRIBUTION RATES FOR 2014 These are the pay bands your employer will base your contribution rate on from 1 April 2014. Your Pensionable Pay You pay 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% The pay bands will be increased in April every year to keep pace with inflation. You have a right of appeal to your employer if you do not agree with the rate they set for you. 6 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 6 26/06/2014 15:00
OPTION TO PAY LESS New 50/50 option You can opt to pay lower contributions, but you would build up less pension, by opting for the 50/50 section of the Scheme. You would pay half your usual pension contributions and build up half your usual pension. However, you would still get the full ill health and death benefits. You would need to think carefully about this as you would only build up half the pension you would get if you remained in the main section. If you move to the 50/50 section, you can opt back in to the main section at any time. If you are in the 50/50 section, your employer has to move you back into the main section every three years. If you preferred, you could opt back into the 50/50 section. If you wish to move between sections, you must complete a form, CARE22c, that is available from your employer and from our website at www.twpf.info. Completed forms must be returned to your employer and not to the Fund. Main Section compared to the 50/50 Section for one year Example - Member with a pensionable pay of 24,500. Main Section Gross Contributions for 1 year 6.5% 1592.50 500 pension is built up before inflation for each year in retirement Lump Sum Life Assurance Cover 73,500 Full ill health cover 50/50 Section Gross Contributions for 1 year 3.25% 796.25 250 pension is built up before inflation for each year in retirement Lump Sum Life Assurance Cover 73,500 Full ill health cover Please remember that your actual position would be affected by your tax position. OPTION TO PAY MORE Whilst the Scheme provides a good benefits package, it is normally possible to increase benefits. The Scheme changed on 1 April 2014 and from this date members can: Pay into the Fund s in-house Additional Voluntary Contributions (AVC) plan. An AVC plan can provide extra life assurance as well as allowing members to increase their pension benefits up to the maximum allowable under Her Majesty s Revenue and Customs (HMRC) rules and the Scheme rules. Subject to the above rules for new AVC plans, it is intended that members can contribute up to 100% of their pay each month and take up to 25% of their in-house AVC fund as a tax-free lump sum at retirement. Contributions must be deducted from pay and tax relief may apply. Take out an Additional Pension Contract: Subject to limits, this can buy annual pension up to a maximum of 6,500. The contract can be taken with or without a contribution from the employer and can be used to buy extra pension or lost pension arising from authorised unpaid leave of absence. Depending on the Fund s policy, members may choose to make a one off payment or regular contributions and tax relief may apply. Further information on paying extra can be found our website at www.twpf.info. All contracts taken out for Added Years, AVCs or Additional Regular Contributions prior to 1 April 2014 are protected and fall under earlier rules. 7 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 7 26/06/2014 15:00
LGPS 2014 INFORMATION ON DISCRETIONS Most of the rules within the Scheme can only be changed by an Act of Parliament. However, there are some rules that have discretions that allow employers and pension funds to choose how they will apply these rules. Further information can be found in the Fund s Plans And Policies section on our website at www.twpf.info. YOUR ANNUAL BENEFIT STATEMENT In recent years, we have provided you with your annual benefit statement by our deadline of 30 September. The changes to the Scheme, as described in this document, mean that we have to update our systems. We did not receive all of the regulations for the Scheme changes until March 2014. This has caused difficulties for us, our software supplier and the employers in the Fund in providing information and updating systems. We will still be providing you with a statement and will do our best to provide it during September as before, but there is a possibility that we will be mailing the statements out a little later this year. Please check our website www.twpf.info for latest information on when they will be released. HMRC TAX CONTROLS ON PENSION SAVINGS Whilst you get tax relief on your pension contributions, there are two HMRC controls on the amount of pension you can build up. These are known as the Annual Allowance and the Lifetime Allowance. From April 2014: the Annual Allowance reduced from 50,000 to 40,000 the Lifetime Allowance reduced from 1.5m to 1.25m We include information on these Allowances in your annual benefit statement. If you require any further information, please see our website or contact our Pensions Helpline. WANT TO KNOW MORE ABOUT LGPS 2014? Visit: www.lgps2014.org www.twpf.info or you can call the Pensions Helpline. 8 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 8 26/06/2014 15:00
HOW A PENSION WILL BE WORKED OUT For example: Susan Susan is in the main section of the Scheme from 1 April 2014 to 31 March 2015 and earned 24,500 in that year. Scheme Year 2014/2015 Section of Scheme Rate of build up Main 1/49th of pensionable pay Pensionable Pay 24,500 Gross contributions of 6.5% 1,592.50 Amount of pension built up 500 (i.e. 24,500 divided by 49) So, at the end of the Scheme year, 500 is added to Susan s Pension Account. To make sure the amount keeps its value, the total in the Pension Account will be inflation proofed. If inflation was, say, 3% in that year, the 500 in Susan s account at the end of the Scheme year (31 March 2015) would be increased on 1 April 2015 to 515. Susan remains in the main section of the Scheme from 1 April 2015 to 31 March 2016 and earns 25,333 in that year. Scheme Year 2015/2016 Section of Scheme Rate of build up Main 1/49th of pensionable pay Pensionable Pay 25,333 Gross contributions of 6.5% 1,646.65 Amount of pension built up 517 (i.e. 25,333 divided by 49) Pension brought forward 515 Pension Account Total 1,032 So, at the end of the second Scheme year, Susan has 1,032 in her Pension Account. As before, to make sure the amount keeps its value, the total in the Pension Account will be inflation proofed. If inflation was, say, 3.1% in that year, the 1,032 in the account at 31 March 2016 would be increased on 1 April 2016 to 1,064. If Susan had been in the 50/50 section during those two Scheme years the amount in her Pension Account would be half the amounts shown above. 9 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 9 26/06/2014 15:00
LGPS 2014 WHAT IF YOU COULD GET YOUR PENSION SOONER? The new Scheme rules are more flexible on when you can take your pension. Before 1 April 2014, the earliest you could take your pension without your employer s consent was from age 60. From 1 April 2014, if you leave your job and you are over 55 years old you can take your pension immediately if you want to. You must give 3 months notice and if you do take your pension early, it will be reduced because it is being paid earlier than normal. The following table shows the reductions that could apply. However, the reductions could be lower if you have protections. No of years to Normal Pension Age 1 2 3 4 5 6 7 8 9 10 11 12 13 Male Permanent Reduction in pension % 6 11 16 20 25 29 32 36 39 42 45 48 52 Female Permanent Reduction in pension % 5 11 15 20 24 27 31 34 37 40 44 47 50 THREE MONTHS NOTICE REQUIRED TO RECEIVE YOUR BENEFITS If you are aged at least 55 and you are leaving your employment voluntarily and you want your Scheme benefits to be paid before your normal pension age, then you must apply to the Fund by submitting an application form CARE65 - Application for Early Payment of Benefits at least three months and one day in advance of the date you want your benefits to be paid from. Please note that the earliest date that the Scheme Regulations allow a CARE65 form to be submitted is your 55th birthday. We cannot pay your benefits within the three month notice period. If we were to make a payment that was not in strict accordance with the Scheme Regulations we would breach HMRC rules. This could result in your having to pay tax penalties of up to 55% of the value of some or all of the value of your benefits and the Fund also having to pay tax penalties. CARE65 - Application for Early Payment of Benefits forms are available from our website at www.twpf.info or by calling the Pensions Helpline. 10 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 10 26/06/2014 15:00
PARTNERS ARE NOW AUTOMATICALLY COVERED Whilst married partners and civil partners have been eligible for automatic survivor pensions for some time, these have only been available to cohabiting partners since 2008 and your partner would only have got a pension if you had nominated them first. The requirement to nominate has been removed. From 1 April 2014, a cohabiting partner s pension will be paid from the time of your death if the following conditions are met: For at least two continuous years: You have been free to marry each other or enter into a civil partnership You have lived together as if you were husband and wife or civil partners Neither of you have been living with someone else as if you were husband and wife or civil partners Your financial affairs have been interdependent or your partner has been financially dependent on you. At the time of your death, we would check that the above conditions are met before paying any pension. ONLINE ACCESS TO YOUR PENSION INFORMATION We are developing electronic communications to improve our service to you. You will be able to securely access your pension record, get your annual statement online instead of receiving a paper copy and update some of your personal details through the Fund s website at www.twpf.info If you do not want to use this useful, efficient and cost saving service you will need to write to us and let us know. 11 SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 11 26/06/2014 15:00
Administered by South Tyneside Council HOW TO CONTACT THE FUND Telephone the Pensions Helpline If you want to talk to us, please contact the Pensions Helpline on 0191 424 4141. You will need to provide three forms of identification before we can provide any personal details. We will not be able to discuss your position or provide your information to anyone else unless you are present during the call and you authorise us to speak to them. pensions@twpf.info please do not include any personal details in emails. www.twpf.info The postcode for sat nav systems is NE31 2SW. From August 2014, we will be based in South Shields so please check our website or call the Pensions Helpline to check our address. Postal address Tyne and Wear Pension Fund, PO Box 143, Hebburn, NE31 2WT. If you are sending us recorded mail, please use the full address shown below under our Walk in Service. Walk in service You can visit us on Monday to Thursday from 8.30am to 5.00pm, and on Friday from 8.30am to 4.30pm at the Civic Centre, Campbell Park Road, Hebburn, Tyne and Wear, NE31 2SW. You do not need an appointment. Please contact us if you would like this newsletter in large type, Braille, on tape or in another language. The information in this newsletter relates to active members only and cannot be treated as a statement of law. Data Protection - South Tyneside Council (as the administrator for the Tyne and Wear Pension Fund) is responsible for protecting the public funds it manages. To do this we may use the information you give us or the information we hold about you to detect and prevent crime or fraud. We may also share this information with other organisations that inspect and manage public funds. For the purposes of the Data Protection Act 1998, South Tyneside Council (as the administrator for the Tyne and Wear Pension Fund) is the data controller. We will ensure we keep all information safe and secure. If you would like to know more about what information we hold about you, or the way we use your information, please either view the Council s website at www.southtyneside.info contact The Pensions Helpline on 0191 424 4141 or write to the Tyne and Wear Pension Fund, PO Box 143, Hebburn, NE31 2WT SSD645 TWPF LGPS 2014 12pp A5 Booklet.FINAL.indd 12 26/06/2014 15:00