NILGOSC

TEMPLETON HOUSE, 411 HOLYWOOD ROAD, BELFAST, BT4 2LP

Telephone: 028 9076 8025 Website: www.nilgosc.org.uk

2 July 2007 Circular 05/2007

To: Chief Executives

Salaries & Wages Officers

Human Resources

All Employing Authorities

Dear Colleagues

Re: Advance notice of retrospective amendments to LGPS (NI)

Ill health enhancement not limited to 40 years

Annual Returns

Service Level Agreements – update

Summary of 2008 Local Government Pension Scheme (England and

Wales)

1. Advance Notice – ill health enhancement no longer limited to 40 years

The amount of ill-health enhancement that can be awarded following ill-health retirement is no longer restricted by an overall maximum membership period of 40 years. This change applies retrospectively to 6^th April 2006.

The removal of the 40 year limit means that an ill-health benefit will now be calculated based on the following:

Accrued membership Total membership after ill-health

increase awarded

Less than 5 years Actual membership

5 but less than 10 years Membership doubled

10 years to 13 years 122 days Membership increased to 20 years

13 years 123 days or more Membership increase by 6 years 243

days

The increased membership cannot exceed the total membership the person could have accrued had they continued in employment until age 65.

NILGOSC will recalculate the retirement benefits for any member who retired from 6^th April 2006 with an ill-health pension and who either:

a) already had 40 years membership (and so received no ill-health enhancement), or

b) had more than 33 years 122 days but less than 40 years membership and whose enhanced benefit was limited to 40 years membership.

2. Annual Returns

Thank you to all 190 employing authorities that submitted annual returns by 31 May 2007. We are now processing the annual returns and will be writing to you with queries over the next few months. Again, due to the actuarial valuation, I would appreciate if you could reply to these queries as soon as possible.

Those 17 employing authorities that have not submitted annual returns have incurred an administrative charge and will be notified of this shortly.

3. Service Level Agreements

All employers were sent Service Level Agreements in October 2005, to be signed and returned to NILGOSC. At today’s date, 38 of these are still outstanding despite several reminders. If your authority has not returned its Service Level Agreement or mislaid the copy originally sent, please go to:

www.nilgosc.org.uk/SLAmenu.htm

and download a copy which must be returned to NILGOSC. Please contact either myself or Trevor Davidson (Pensions Development Manager) if you are having difficulty completing the Service Level Agreement.

The Committee has reviewed the service standards for NILGOSC and these are listed below for your information:

Task	Standard
Lump sum retirement payments	5 days
Death grant payments	5 days
Leaver options notifications	20 days
Refund payments	10 days
Provisional transfer out quotations	20 days
Transfer out payments	10 days
Inward transfer quotation requests	10 days
Inward transfer credit notifications	20 days
New entrants certificates	20 days
Letters answered or acknowledged	10 days
Issue members’ annual report	by 30 November
Issue members’ annual benefit statement	by 31 October
Benefit quotation requests	10 days
Pension paid each month	Last banking day of month
P60s issued to all pensioners	By 31 May

4. The New-Look Local Government Pension Scheme in England and

Wales 2008

The first Piece of legislation for the new Scheme has now been issued in England and Wales – The Local Government Pensions Scheme (Benefits, Membership and Contributions) Regulations 2007 (Si 2007/1166). This sets out the benefits package for the new-look LGPS in England and Wales. Needless to say these regulations have been already amended and more amendments are expected!

It is expected that a similar scheme will be introduced in Northern Ireland from April 2009. However, the department has yet to issue draft regulations on the new-look Scheme. Therefore the following details are for information only at this stage and apply to the scheme in England and Wales.

The main feature of the new 2008 LGPS for England and Wales are as follows:

• new employees must have a contract of employment of more than 3 months duration in order to be entitled to join the scheme

• all existing members move to the new scheme from 1^st April 2008

• the new scheme provides a pension of 1/60^th of final pay for each year of membership in the scheme after 31^st March 2008 (membership to 31^st March 2008 will still be calculated as 1/80^th pension plus 3/80^ths lump sum)

• up to 25% of the capital value of benefits can be taken as a lump sum by commutation using the 12:1 commutation rate i.e. for every pound of pension given up the member gets £12 lump sum

• employees will pay contributions according to the following table based on their whole-time equivalent pensionable pay at the beginning of April. The figures in the table will increase on 1^st April each year by the rise in the Retail Price Index. This system of calculation contribution rates will result in significant payroll reprogramming. This aspect of the new scheme continues to be discussed due to the difficulties calculating a whole-time equivalent pensionable pay each year for every member.

Band	Range	Contribution Rate
1	£0 - £12,000	5.5%
2	£12,001 - £14,000	5.8%
3	£14,001 - £18,000	5.9%
4	£18,001 - £30,000	6.5%
5	£30,001 - £40,000	6.8%
6	£40,001 - £75,000	7.2%
7	£75,001 +	7.5%

Note: The Government is proposing to increase the contribution rate for those existing manual workers who pay contributions at the protected 5% contribution rate on a phased basis, bringing their contribution rate into line with all other Scheme members from 1^st April 2011. To achieve this it is proposed that the contribution bands should range from 5% to 6.5% in 2008/09; 5% to 7.5% in 2009/10; 5.25% to 7.5% in 2010/11; and 5.5% to 7.5% from 2011/12 onwards. Separate regulations to cover this are to be issued.

• apart from benefits payable on death in service, members must have a minimum of 3 months membership or have had a transfer of pension rights from another scheme into the LGPS in order to be entitled to benefits

• benefits are to be calculated on the best one of the last 3 years pay plus the average of any fees received in the last three years. Whole-time members who downgrade (other than as a result of flexible retirement) can, if they wish, choose to have benefits based on the average of any 3 consecutive years in the last 10 years (ending on a 31^st March). This option also applies to part-time members who downgrade

• normal retirement age will be age 65, but with the right to take pension from age 60 or, with employer consent, from age 55 (or from age 50 for existing members opting to draw benefits with employer consent before 31^st March 2010)

• employees can stay in the scheme beyond age 65 but benefits must be drawn by age 75. Benefits drawn after age 65 will be actuarially increased

• flexible retirement with employer consent will be permitted from age 55, with member’s being able to draw all or part of their benefits (or from age 50 for existing members opting to draw all or part of their benefits with employer consent before 31^st March 2010)

• immediate payment of pension benefits following redundancy / efficiency retirement on or after age 55 (or from age 50 for existing members leaving before 31^st March 2010)

• a two tier ill-health benefits system. If the member’s employment is terminated because of permanent ill-health and they have 2 years membership in the scheme

· the pension payable is based on accrued membership + 25% of prospective membership between leaving and age 65 where the member is unlikely to obtain gainful employment within a reasonable period of time but is likely to be able to obtain gainful employment before age 65

· the pension payable will be based on accrued membership + 100% of prospective membership between leaving and age 65 where the member has no reasonable prospect of obtaining gainful employment before age 65

Gainful employment is defined as “paid employment for not less than 30 hours per week for a period of not less than 12 months”.

There is to be an underpin for certain existing older members (aged 45 or over on 31^st March 2008) so that they receive no less than they would have done under the current Scheme.

Note that for members whose employment is terminated on the grounds of permanent ill-health but who are likely to be able to obtain gainful employment within a reasonable period of time it is proposed that employers will be provided with powers to pay a reviewable benefit from their revenue account (not from the Pension Fun) which could not continue if alternative employment is gained.

• an increase in the death grant from 2 to 3 times pay for death in service; an increase from 3 to 5 times pension if a deferred beneficiary dies; and an increase from 5 to 10 times pension less pension already paid if a pensioner dies before age 75

• spouses pensions to be based, as now, on 1/160^th accrual rate; civil partners and nominated co-habiting partners pensions to be based on a 1/160^th accrual rate (but we expect this to be based on post 5^th April 1988 membership only); children’s pension to be paid to eligible children, the amount depending on the number of eligible children and whether or not a spouse’s, civil partner’s or nominated co-habiting partner’s pension is payable

• members can buy extra scheme pension in multiples of £250 up to a maximum of £5,000 (to provide a pension for themselves only or to provide a pension for themselves and any survivor on their death) and/or they can pay Additional Voluntary Contributions (AVCs)

• employers can augment membership by up to 10 years; and/or grant extra pension of up to £5,000; and/or contribute, with the scheme member, to a Shared Cost AVC

• trivial pensions may be commuted into a single lump sum payment in accordance with HMRC rules

• a cost sharing mechanism is to be established by 31^st March 2009 (looking at such matters as commutation take up, longevity, actuarial reduction factors, etc). A Policy Review Group has been convened by CLG to consider these matters. Employing authorities and the scheme administering authorities must have regard to guidance to be issued by the Secretary of State before 31^st March 2009 as to the manner in which the costs of the Scheme will be met after 31^st March 2010.

Draft Administration Regulations were issued on 14 February 2007 and the final piece of the jigsaw, the Transitional Regulations, detailing how the pre and post April 2008 benefit structures will interact, have just been issued.

I realise that there are significant changes proposed which, if implemented in Northern Ireland, will impact on both Payroll and Human Resource Departments. We will update you as soon as more information becomes available on the new scheme for Northern Ireland.

In the meantime, please do not hesitate to contact NILGOSC if you have any queries regarding any of the above.

Yours sincerely,

Zena Kee (Mrs)

Pensions Manager