9 February 2007 Circular 02/2007
To: Salaries & Wages Officers
Human Resources
All employing authorities
Dear Colleagues
Contribution Rates, Discretionary Policies, AVCs, Actuarial Valuation and Annual Returns
1.
Employer’s Contribution Rate
The employer’s contribution rate will increase to 13% for all employing authorities from 1 April 2007. Those authorities already paying at 13% will continue to do so until April 2008. Please ensure that your payroll software is updated after the March payroll is run to reflect the new rates. A new rate will apply from April 2008 depending on the actuarial valuation at 31 March 2007.
2.
Discretionary Policies
NILGOSC has recently received a number of queries from employing authorities requesting information on flexible retirement policies. Flexible retirement is where a member who is aged 50 or over reduces, with his employer’s consent, his/her hours or grade. The member can then make an election to his employer for payment of his/her accrued pension while continuing to accrue further benefits in the continuing employment. If the employer agrees to the flexible retirement benefits are paid. However, if the payment of benefits under the employer’s flexible retirement policy occurs before age 65 the benefits may be reduced in accordance with guidance issued by the Government Actuary. The employer may choose to waive the actuarial reduction, in whole or in part, and must pay the actuarial cost of this to the fund.
The latest draft
amendment regulations, The Local Government Pension Scheme (Amendment) (No 3)
Regulations (
This is a
discretionary policy and Scheme Employers must formulate, publish and keep
under review their policy on flexible retirement. It is recommended that consideration is given
now to drafting this policy as it will apply retrospectively in
Employers are reminded again that their Discretionary Policies must be reviewed and that these should have been revised as per the NILGOSC Circular 02/2006 to reflect the amendments to regulation 54.
Copies of all NILGOSC circulars are available on our web-site at www.nilgosc.org.uk.
3.
Additional Voluntary Contributions
Since 6 April 2006 active members can pay the equivalent of their earnings in any tax year into pensions. Some members have already taken advantage of this new flexibility and have increased their contributions to the in-house AVC with Prudential. Please ensure that Salaries and Wages staff are aware of the changes as we have received several calls to check if someone can pay more than 15% into pensions.
The Department
for Communities and Local Government in
4.
Actuarial Valuation
An actuarial valuation of the fund is due at 31 March 2007 so it is essential that annual returns are submitted promptly and accurately this year (as always!). A Frequently Asked Questions (FAQ) document, prepared by our actuaries, Hymans Robertson, is attached.
FRS17 (Financial Reporting Standard 17) valuations are more approximate than the triennial actuarial valuation. However, the FRS17 figures are based on the results and membership data from the last triennial valuation and this is used as the starting point for an approximate roll forward calculation. The data which you return at 31 March 2007 will influence your FRS17 valuations in the future. Therefore we encourage all employing authorities to submit their annual returns as quickly as possible.
5.
Annual Returns
Employers are reminded that annual returns must be submitted to NILGOSC no later than 31 May 2007. This will allow our staff to process the annual return and resolve any queries before the information is forwarded to the actuaries. Late submission of annual returns will incur an administrative charge, unless a later submission date has been agreed with NILGOSC. Late, inaccurate or incomplete annual returns will result in delayed processing and any increased actuarial charges incurred will be re-charged to offending authorities.
Last year 94 employing authorities used a pre-populated spreadsheet. This was very successful and greatly improved the accuracy of the data which NILGOSC received. This year the spreadsheet has been updated and improved and will be issued to all employing authorities (except the Education & Library Boards or those who notify us to the contrary). These will be e-mailed to you during the last 2 weeks in March along with instructions for completion. A short description of this spreadsheet is attached but more detailed instructions will accompany the email. Please telephone Jim Robinson on 028 9076 8025 ext 224 or email jim.robinson@nilgosc.org.uk to advise him of the email address which you wish to use or, if you are unable to deal with the return in this type of electronic format and prefer to use an alternative method. I realise that some employing authorities may populate a previous type of spreadsheet from their payrolls. This will continue to be acceptable but please advise us before 12 March 2007 by either speaking to Jim Robinson or emailing him. Any other queries regarding the content of annual returns should either be emailed to annualreturns@nilgosc.org.uk or contact Colin Carlisle on 028 90768 025 ext 268. The format of this spreadsheet may be viewed on our website at http://www.nilgosc.org.uk/AnnualReturnForms.htm.
6.
Annual Return Queries
Please respond to these as quickly as possible this year as any queries concerning changes in hours, backdated pay awards, pensionable pay will have an impact on the actuarial valuation.
7.
Member addresses
Pension Benefit statements will be posted to all members at their home addresses once the annual returns have been processed. It would therefore be a great help to us if you could remind all members, perhaps by including a short message on their pay advice, to ensure that NILGOSC has been informed of any change of address in the past year. Undelivered pension benefit statements returned to NILGOSC by the Post Office will be forwarded to employers for distribution to the members concerned.
8.
Casual employees – recording of hours worked
An additional spreadsheet must be completed for all casual employees within your employing authority. These will be sent out separately to you and should be completed detailing the total hours worked in casual posts, and the hourly rate at 31 March 2007 for each employee.
9.
Finally
Thank you to all of you who submitted accurate and timely returns in 2006. We process information for 42,000 members and it is of enormous help when returns are accurate and queries are dealt with promptly. I would be grateful if you could ensure that the basic checks on the attached explanation of the Annual Return Spreadsheet are carried out prior to submission of your annual return.
Yours sincerely
Zena Kee (Mrs)
Pensions Manager
Annual
Return Pre-populated Spreadsheet
Data provided
All members who have been active in your authority during the year are listed alphabetically and the following information from our records is displayed:
- Job Description
- NI Number (read only)
- Surname (read only)
- Forename (read only)
- Date of birth (read only)
- Date joined scheme (read only)
- Dated Commenced with employer (read only)
- Employee’s contribution rate
- Employer’s Staff number
- Employer’s Dept Number/Location
- Employer’s contribution rate (read only)
- Date left
- Current status (e.g. active, deferred, pensioner) (read only)
- Current hours held for part-timers
- Previous year’s salary rate (read only)
- Previous year’s pensionable pay (read only)
You may update any of the details which are not marked ‘read only’. If any of the ‘read only’ details have changed, please enter the changes in the ‘Comments’ column.
Member Data to be completed
- Pensionable
Remuneration. This is the actual pensionable pay earned by the employee during the
financial year. It must not be
enhanced to the full time equivalent figure for part-time employees.
- Salary Rate. This is the
salary rate at the 31 March 2007 and must be equivalent to a full year’s
pay. It must not be enhanced to the
full-time equivalent figure for part-time employees. This figure is used for the Annual
Benefit Statements and is not used for any other purpose.
- Employee Contributions.
This is the amount of basic contributions deducted for the employee
during the financial year. It must
not include AVCs of Additional Contributions.
- Employer Contributions.
This is the amount of employer Local Government contributions paid
during the financial year.
- Additional contributions.
This must be the amount of additional LGPS(NI) contributions
deducted from pensionable pay during the
financial year. It does not include
AVCS.
- Contracted out NI earnings.
This is the earnings between the Lower Earnings limit (£4,368 p.a.
for the year 2006/07) and the Upper Earnings Limit (£33,540 p.a. for the
year 2006/07). Contracted out
earnings, therefore, cannot exceed £29,172 for the year. They should be rounded down to the
nearest whole pound).
- Additional voluntary contributions – Equitable Life. Any contributions paid to Equitable Life
during the financial year should be listed here.
- Additional voluntary contributions – Prudential. Any contributions paid to Prudential
during the financial year should be listed here.
New
Records
If any LGPS(NI) member is missing from your spreadsheet, please add their details on supplementary spreadsheet for new starts. Please complete and forward a LGS1 form for each of these entries.
Ceased
Membership
If any of your employees have left the
scheme and you have yet to inform NILGOSC please complete a Leavers Form LGS15
and input their leaving date in the Comments column.
Employer
Checks
Before submitting the spreadsheet to NILGOSC please carry out the following checks:
- CO Earnings Validation Column – are all entries ‘OK’? If not check data, correct, or add explanation in Comments Column.
- Employees’ Contributions validation column – are all entries ‘OK’? if not check data, correct, or add explanation in Comments column.
- Employers’ Validation Column – are all entries ‘OK’? If not check data, correct, or add explanation in Comments column.
- Full Time Equivalent Earnings – this is the pay that the employee would have earned if they were full time for the year. It is calculated by bringing the part-time pay up by the hours currently held on our system. Please check any whole time equivalent pays that are higher or lower than expected (i.e. higher or lower than whole time pay at the Spinal Point for that post). Either the pensionable pay is incorrect, the hours are incorrect, or arrears have been paid during the last financial year. Please correct the pay or hours and make a note in the Comments box. It is important that these full-time equivalent pays are checked as this pay will be used in the actuarial valuation and will be a factor in the determination of the employer’s future contribution rate.
Reconciliation
The reconciliation sheet must be completed and submitted with each annual return.