Employers news

.

Local Government Pension Scheme (LGPS) Regulations update and guidance

User AvatarPosted by Sam Topham at 02/04/2019 16:51:57

The Local Government Pension Scheme (LGPS) (Miscellaneous Amendment) Regulations 2018

These regulations came into force on 10 January 2019 and brought in two significant changes which have been back-dated.  The first change is a technical amendment to deliver the policy intent for deferred members of the 1995 scheme to be able to access their benefits without their employer’s consent from age 55 and this is effective from 17 April 2018.  The Fund will be notifying deferred members of the 1995 scheme accordingly.

The second regulatory amendment is to provide survivors of registered civil partnerships or same-sex marriages with benefits that replicate the benefits provided to widows.  The regulation has effect from:

  • 5 December 2005 in respect of a surviving civil partner of a member; and
  • 13 March 2014 in respect of a surviving spouse of a same sex marriage with a member

The regulations also introduced a new power for the Secretary of State to issue statutory guidance to administering authorities on the administration and management of the LGPS.  The purpose of this power is to deliver greater standardisation of approach so that LGPS funds do not take different approaches in relation to sensitive areas such as eligibility for survivor benefits.

LGPS Advisory Board (SAB) Cost Management

SAB has undertaken a cost management process of the LGPS and the outcome is that the total scheme future service cost is 19% compared to the target total cost of 19.5%.  To return the total cost to 19.5%, SAB have made recommendations consisting of benefit improvements and employee contribution reductions to the Secretary of State for Ministry of Housing Communities and Local Government (MHCLG) and HM Treasury. 

Of interest to employers will be the recommendations:

  • to remove Tier 3 of Ill Health;
  • to set a minimum lump sum death in service benefit of £75,000 per member; and
  • to amend the employee contribution bands for 2019-20.

There will be a consultation shortly on these proposals and it is hoped to have the changes implemented by 1 April 2019.  Due to the short timescales, SAB have issued advice to administering authorities to begin preparations for the above changes including taking a view on advising their employers of the proposed contribution rates and the proposed change to ill health from 1 April 2019 so employers can make decisions in light of the proposals.

SAB have suggested to MHCLG that the consultation should be as short as is possible and that a letter of comfort should be issued as soon as is legally possible to allow administering authorities and software providers to anticipate the changes to regulations and employers to implement new contribution rates. 

As a result of the above, the Fund is using this bulletin to notify employers, and without pre-empting regulatory changes, that it may be prudent to put in place the necessary preparations to avoid changing bands on 1st April under current regulations then retrospectively making further changes to bands and rates resulting in contribution overpayments.   Doing so could enable employers to take immediate and full advantage of any letter of comfort issued prior to regulations in this area.  

The proposed employee bands for 2019-20 are as follows:

Band

Pensionable Pay from £

Pensionable Pay to £

Contribution rate

1

0

12,850

2.75%

2

12,851

22,500

4.4%

3

22,501

36,500

6.5%

4

36,501

53,500

6.8%

5

53,501

64,600

8.5%

6

64,601

91,500

9.9%

7

91,501

107,700

10.5%

8

107,701

161,500

11.4%

9

161,501

 

12.5%


Please note that the impact of the above changes on a scheme employer’s contribution rate will depend on a scheme employer’s membership profile, for example, employers with higher paid full time staff possibly seeing a smaller upward pressure on employer contributions and conversely those with a very large proportion of staff earning less than £12,000 potentially seeing a much higher upward pressure.

Revised Factors

MHCLG have issued revised factors for:

  • Non-club in transfers
  • Early retirements
  • Trivial commutations
  • Pension credits (where the debited member left the LGPS prior to 1 April 2014 or the transfer date is prior to 1 April 2014)
  • Pension debits (pre and post 2014)

These factors are effective from 8 January 2019 with the revised early retirement factors being beneficial to members (although more beneficial to some members than others).

For information the table of the revised factors is provided below.  Please note that the factors are the same regardless of gender.

No. of years paid early

Pension reduction

Lump sum reduction

0

0%

0%

1

5.1%

2.3%

2

9.9%

4.6%

3

14.3%

6.9%

4

18.4%

9.1%

5

22.2%

11.2%

6

25.7%

13.3%

7

29.0%

15.3%

8

32.1%

17.3%

9

35.0%

19.2%

10

37.7%

21.1%

11

41.6%

N/A

12

44.0%

N/A

13

46.3%

N/A

New Fair Deal Consultation

MHCLG have issued a consultation on the proposed amendments to the LGPS that are intended to implement the New Fair Deal Policy protecting the pension position of local government workers who are compulsorily transferred as part of an outsourcing arrangement.

Employers are urged to provide their comments on the consultation which can be found at

https://www.gov.uk/government/consultations/local-government-pension-scheme-fair-deal-strengthening-pension-protection

Please send your comments on the proposals by 4 April 2019, to 

Lgpensions@communities.gov.uk


Triennial Valuation 2019

Posted by Sam Topham at 02/04/2019 16:43:09

The Fund’s actuary, Hymans Robertson, carries out a Fund valuation to review and amend employer contribution rates every 3 years.  The next valuation will be based on fund membership as at 31 March 2019 with new employer contribution rates coming into effect on 1 April 2020.

This is a statutory requirement and the valuation will look at the total liabilities of the Fund and the liability for individual employers at the valuation date, i.e. what money is needed to meet the projected cost of pension benefits for all active, deferred and pension members.  The result of the individual employer valuation will determine the employer contribution rate for the 3 year period from 1 April 2020.

East Riding Pension Fund have started to plan for the 2019 valuation and over the next few months we will be contacting our scheme employers to provide updates on the valuation process and more information about the valuation.

Member data

One of the key factors which can affect the outcome of the valuation is the quality of member data.  Membership data directly places values on liabilities; the impact of incorrect data can be significant when assessing individual employer liabilities.  The examples provided below show the impact incorrect member data can have on liabilities:

Example 1 - Impact of incorrect start date

Sex

DOB

Start date

Liability (for illustration purposes only)

M

01/12/1955

01/01/1998

£33,800

M

01/12/1955

01/01/1989

£76,000

Sex

DOB

Start date

FTE Salary

Liability (for illustration purposes only)

M

01/12/1955

01/01/1998

£10,500

£50,667

M

01/12/1955

01/01/1998

£15,000

£76,000

Example 2 - Impact of incorrect pensionable pay

With this in mind ERPF are carrying out early data cleansing of all our scheme members and we will contact scheme employers where ERPF identify a significant number of outstanding queries which will impact on the results of the valuation.

In the meantime if any scheme employers wish to review the member data held for their active scheme members they can contact Teresa Eaton-Watts by email at teresa.eaton-watts@eastriding.gov.ukto request an extract of the data ERPF hold for your active members.

Year End 31 March 2019

The data used in the valuation calculations will be taken as at 31 March 2019 and this will be based on the year end data submitted by scheme employers, including CARE earnings and FTE pay.  The 2018 year end exercise generated 1,729 queries against member records which specifically related to earnings and pay figures.  Scheme employers should ensure that earnings and pay figures submitted as at 31 March 2019 are accurate to avoid the wrong liability being assumed against members.

Employer database

Another factor which is used within the valuation calculation is information ERPF hold about scheme employers.  ERPF will be updating this database in preparation for the valuation and may contact individual employers to obtain and clarify information we hold.  Please ensure that the ERPF hold the correct contact details so that we can contact you when we need to.

Any questions regarding the 2019 valuation can be directed to Liz Vollans by email at liz.vollans@eastriding.gov.uk or by telephone on 01482 394175.