1 The Local Government Pension Scheme (Amendment) Regulations (Northern Ireland) 2007

The Department of Environment (DOE) made the above regulations on 9 March 2007. These regulations replicate the amendments made to the English regulations in March and July 2006. They remove the 85 year rule from the Scheme from 1 October 2006 and introduce retrospectively from 6 April 2006 Her Majesty’s Revenue and Customs (HMRC) amendments as a consequence of the Finance Act 2004. NILGOSC has had the powers to anticipate these amendments from 6 April 2006 (see Circular 03/2006). The regulations are available on http://www.opsi.gov.uk/sr/sr2007/20070152.htm.

2 The Changes

The Amendment Regulations provide that:

The 85- year rule will be removed from the Scheme

Ø for new members from 1 October 2006.

Ø for existing members in respect of benefits accruing after 31 March 2008

Protection is for all current members at 30 September 2006 who will satisfy the 85-year rule and will be aged 60 or over by 31 March 2016;

Those existing members at 30 September 2006 who will be 60 or over and meet the 85 year rule between 1 April 2016 and 31 March 2020 will have tapering reductions applied to their benefits i.e. zero reduction will apply at 31 March 2016 and full reduction will apply at 1 April 2020;

Members will be able to join and remain in the Scheme until the day before their 75^th birthday;

The current 15% contribution limit on employees’ contributions is removed and thus up to 100% of taxable pay can be paid into the Scheme with full tax relief (no restrictions on the amount payable to the AVC Fund has been made but a further amendment is expected in due course). This applies from 6 April 2006;

Benefits will have to be paid before a Scheme member’s 75^th birthday;

Where Scheme members defer drawing benefits beyond age 65 their benefits will be actuarially increased i.e. just as benefits drawn before age 65 will be subject to an actuarial reduction to reflect the fact that they will be paid for longer, benefits drawn after age 65 will be actuarially increased to reflect the fact that they will be paid for a lesser period of time;

Flexible retirement is now permitted at or after age 50 (55 from April 2010), linked to a reduction in hours or grade agreed by the employer, and the employer will (at its cost) be able to waive, in whole or in part, any actuarial reduction that will apply to the early payment of those benefits. The benefits paid will not be subject to any abatement policy that may apply to other re-employed pensioners. (The Committee has currently agreed to have a no abatement policy for the two years to 31 March 2008). Employers are required to formulate and keep under review their policy on exercising their discretion on flexible retirement. This regulation applies from 6 April 2006;

The option for members to take up to 25% of the capital value of their pension fund (including any AVC fund) as a tax-free lump sum is introduced. Any amount taken above the current three times the annual pension limit will be paid for by the Scheme member commuting part of his/her final pension at a commutation rate of £12 lump sum for £1 of pension.

In addition to commuting pension by the 12:1 factor, members are able to take up to 100% of the value of their accrued AVC / SCAVC fund as tax free cash, subject to this sum, when aggregated with the lump sum retirement grant payable under the LGPS, not exceeding 25% of the capital value of the member’s accrued rights;

The ability for retirees to convert some or all of their scheme lump sum into additional pension is removed;

The facility for employers to be able to reduce or waive the contributions of employees who have been in pensionable local government employment for at least 40 years is removed (Regulation 14) and so, as from 6 April 2006, any members who have had their contributions reduced or waived will pay full contributions again. The employer can, at its discretion, recoup the contributions that would otherwise have been paid by members had their contributions not been reduced or waived. Whether or not the employer seeks to recoup the relevant contributions, the period will count. The maximum service limit of 40 years (45 years, for those who joined the Scheme before 1 June 1989) is removed. Employers will need to delete this from their policy statement;

The ability for a member to provide a survivor benefit over and above the standard spouse’s, civil partner’s or children’s pensions by surrendering a part of his / her pension in favour of a spouse, civil partner or dependant (payable should they survive the member) is removed;

Children’s’ pensions coming into payment after 5 April 2006 will cease by age 23.

The maximum number of added years that a scheme member will be able to purchase is limited to 6 2/3^rd years;

The Earnings Cap of £105,600 for those members who joined the LGPS on or after 1 June 1989 is removed. From 6 April 2006 such members pay pension contributions on their uncapped pensionable pay. A service adjustment is performed in respect of their local government membership between 1 June 1989 and 5 April 2006.

The Committee is required to prepare, maintain and publish a statement, by 1 April 2008, setting out its policy on communicating with members, members' representatives, prospective members and employers participating in the Fund.

The Committee is required after consulting with such persons as it considers appropriate, to prepare, maintain and publish, by 1 April 2008, a governance policy setting out whether it delegates any of its function or part of its function in relation to the maintenance of the pension fund to a committee, sub-committee or an officer.

3 Statements of Policy concerning exercise of discretionary function

Regulation 108

Employers are reminded that they will need to update their policy statements to reflect the above amendments. The amendment to regulation 108 of the Principal regulations which requires employers to formulate and publish their policy on flexible retirement came into force retrospectively on 6 April 2006. Technically, therefore, employers should have had a policy from 4 months after the commencement date. There is no provision in the Amendment Regulations to allow a period of grace to determine and publish a policy. A copy of the employing authority’s policy should be sent to NILGOSC within one month of the date on which the policy is determined.

As a reminder you should have policy statements on the following regulations:

· Regulation 6(9)(a) – Re-entry to the scheme for members who have opted out

· Regulation 33 – Employees and former employees request to retire early

· Regulation 38 – Requirements as to time of payment (Flexible Retirement) (applies from 6 April 2006)

· Regulation 54 – To grant additional membership to members

· Regulation 69 – To introduce a Shared Cost AVC arrangement

Regulation 55 – Power of employing authority to increase total membership of new member was revoked in 2005.

Regulation 14 – Contribution waiver where scheme membership exceeds 40 years was deleted with effect from 6 April 2006.

4 Refunds through Payroll

If an employing authority is refunding contributions through Payroll to a member who has left/opted out inside 3 months of joining the scheme please ensure that you notify NILGOSC immediately. Form LGS 3 – Opting Out/Leaving the Scheme within 3 month of joining may be used. Recently 2 members have been refunded by employers but NILGOSC has already completed transfer ins of previous pension rights for each member. A transfer in renders a member ineligible for a refund.

5 LGS22 – Applications for ill-health retirement

Please ensure that all LGS22 forms are signed by both the member and the employer. A LGS22 form must be accompanied by the employing authority’s Medical Adviser’s report certifying that the employee is unfit to continue working because of his/her incapacity and the relevant job description.

6 Applications to purchase additional membership (years)

Please note that applications to purchase additional years must be received before the member’s birthday. Ideally these applications should be sent to NILGOSC two to three months in advance of a birthday as a Good Health medical is required prior to acceptance. Any applications which are received after the member’s birthday cannot commence until the next birthday as the regulations state that the additional contributions are payable from the member’s next birthday after his election (Regulation 57 (11)).

7 Annual Returns

Employers are reminded that annual returns must be submitted to NILGOSC no later than 31 May 2007. Thank you to all who have already submitted their annual returns. If you are unable to meet this deadline, please contact NILGOSC as soon as possible to explain why. Returns submitted after 31 May, without prior approval, will be subject to an administrative charge.

Yours sincerely

Zena Kee

Pensions Manager