Important Information For LGPS Employers From Prudential
Shared Cost AVCs / Salary Sacrifice
Earlier this year Prudential wrote to you regarding employers expressing an interest in setting up Shared Cost AVC arrangements so that they can offer their staff the opportunity to make AVCs on a salary sacrifice basis.
The letter stated that Prudential did not facilitate such salary sacrifice arrangements in respect of AVC contributions but that we were reviewing this position and would provide you with a further update once we had determined whether, and how, we could support such arrangements.
Prudential are now in a position to accept employer contributions to your members’ AVC plans and can support employers in offering Salary Sacrifice Shared Cost AVC (SS SC AVC) arrangements to their eligible staff. This letter may be considered as an agreement under your policy with Prudential that we will accept employer pension contributions.
Employers wishing to implement a SS SC AVC arrangement must agree to comply with Prudential’s terms of business, including the requirement that they must notify their Administering Authority of their intent to set up a SS SC AVC arrangement. This is to ensure that contributions are administered correctly and to ensure that the information we provide to their members is correct and compliant.
You may wish to inform your employers accordingly by sharing the attached letter. We do recommend that employers take specialist tax advice when setting up the arrangements in order that they meet all HMRC requirements.
Any employer wishing to implement a SS SC AVC arrangement should email email@example.com in the first instance. We will contact interested employers to discuss the process and timescales to implement their SS SC AVC arrangements.
National Account Manager, LGPS
Websites carrying anti-scam messaging could be fraudsters in disguise
Rogue pension websites are carrying anti-scam messages to try to trick consumers into believing that they are legitimate businesses, The Pensions Regulator (TPR) has warned.
The message comes as TPR welcomes new measures to ban pension cold calling that will help prevent potential victims from being stripped of their savings by fraudsters.
The Department for Work and Pensions (DWP) has announced that it will bring in legislation for a cold calling ban, tighter rules to prevent the opening of fraudulent pension schemes and restrictions to prevent transfers into scam schemes.
TPR remains concerned about the opportunity for scam websites to claim fresh victims by targeting the vulnerable or those with limited pensions knowledge.
The multi-agency Project Bloom taskforce – led by TPR and including the DWP, HM Treasury, the Financial Conduct Authority, HM Revenue and Customs, the Serious Fraud Office, City of London Police, the National Fraud Intelligence Bureau, The Pensions Advisory Service, and the National Crime Agency – was set up to tackle pension scams.
A number of suspected scam websites have been referred to TPR over the suspicion that they are being dressed up as legitimate investment vehicles – including carrying the Bloom campaign’s anti-scam material without TPR’s consent.
Some even imply they are regulated by carrying warning messages designed to prevent people falling victim to scams, such as making reference to the tax implications over accessing your pension before the age of 55 and the danger of cold callers.
TPR Chief Executive Lesley Titcomb said: “These sites are wolves in sheep’s clothing, lying in wait for unsuspecting victims by portraying themselves as being beyond reproach.
“The truth is that this next generation of scam sites poses a real threat to people’s financial futures and should be avoided.
“We welcome the Government’s tough new measures, which will strike a significant blow to pension scammers who devastate people’s lives by duping them out of their life savings.
“We are working closely with government, enforcement agencies and key financial service bodies to bring scammers to justice and, through our scorpion campaign, to help the public protect themselves from scams.”
Where TPR finds such websites, it will demand they immediately cease using material that TPR owns and will investigate with other agencies whether further action, such as legal proceedings, should be launched.
TPR is also updating its website to spell out even more clearly that just because websites talk about scams, this does not mean they are not scam vehicles themselves.
Anyone considering transferring their pension from their current provider should first visit pension-scams.com Here you can read tips on how to make sure you are not putting your financial future at risk by transferring your funds to a risky investment or scam.
New Prudential Additional Voluntary Contributions website for Local Government Pension Scheme members
Prudential have created a new, single site for you at www.pru.co.uk/localgov. This dedicated site was designed based on member feedback and Prudential’s research. It aims to educate and inform you with engaging and useful content about how you can improve your pension benefits by making additional voluntary contributions.
So what do you now have?
- Concise, easy to understand content – on one page.
- New, extended range of case studies – for both new members and those wishing to increase contributions.
- Two new calculators – one for new members, one for existing members.
- Guidance and clear signposting throughout the site – helping you find the most relevant information to you quickly.
- Improved online application forms.
Go online now at www.pru.co.uk/localgov and make the most of this new site!
Rise in State Pension Age
The DWP has published a report outlining the Government’s proposals for changing the state pension age from 2028. This follows an announcement by the Secretary of State for Work and Pensions, David Gauke, that the rise in State Pension Age (SPA) to 68 will now happen in 2039 rather than 2046, affecting those currently aged between 39 and 47. This is in line with the recommendation in John Cridland’s review.
Note that any changes to SPA still require primary legislation and will be subject to the full scrutiny of Parliament.
For further information please visit: https://www.gov.uk/government/news/new-timetable-for-state-pension-changes-to-maintain-fair-and-sustainable-pension
Administration Strategy 2017 (Under Consultation)
In the recent summer 2017 Employer Newsletter, we advised Employers that we have reviewed our Administration Strategy and we now offer this document to all scheme employers for consultation.
The revised strategy has been reviewed by both the Local Pension Board and Pension Fund Committees and approved for consultation. The aim of the Administration Strategy is to clearly set out what the expectations are from both the Administering Authority and Employers, in order to deliver a high quality, value for money service to Scheme members.
There have been a number of changes which include:
- Making the Strategy more concise and user friendly;
- Minor current Regulation updates;
- Separating the Communication Strategy from the Administration Strategy to ensure a more focused approach;
- Streamlining the approach to recovering costs incurred as a result of poor performance by an employer.
The Administration Strategy 2017 can be accessed by the following link below:
The Consultation will be open for 30 days. Should you wish to pass comment or discuss the Administration Strategy document further, please do not hesitate to contact the Employers Team at PenEmployers@northamptonshire.gov.uk
The consultation will close on Friday 11th August 2017.
LGPS 50/50 section survey
The Scheme Advisory Board of the LGPS is looking to ascertain the reason for the low take up of the 50/50 section of the scheme and have produced an online survey.
The survey can be found on the LGPS Member website below:
50/50 Scheme Member Survey
The survey will run until the end of July – please encourage your employees to complete the survey.
Lifetime Allowance and Individual Protection 2014 Reminder to Members
This is just a quick reminder that any of your members who wish to protect their Local Government pension benefits from the Lifetime Allowance under Individual Protection 2014 must do so by 5 April 2017 – you may wish to send a reminder to your relevant members.
Individual Protection 2014 was introduced when the Lifetime Allowance was reduced to £1.25m with effect from 6 April 2014 and allows individuals to maintain a Lifetime Allowance of the lower of £1.5 million OR the value of benefits at 5 April 2014. Individuals must have had pension savings of at least £1.25 million on 5 April 2014 to apply.
Members who want to apply for IP2014 protection must do this through the Lifetime Allowance online service, accessed through the guide Protect your lifetime allowance.
To apply, members will need an HMRC Online Services account. To create an account, or to login to an existing one, they should go to HMRC services: sign in or register.
Other members might be interested in applying for Individual Protection 2016 or Fixed Protection 2016. Individual Protection 2016 allows someone whose pension rights at 5 April 2016 were valued over £1 million (the Lifetime Allowance from 6 April 2016) to protect those rights, subject to an overall maximum of £1.25 million. There’s no deadline for applying for Individual Protection 2016.
Fixed Protection 2016 allows employees to maintain a Lifetime Allowance of £1.25m, although it places strict limits on how members build up future pension. There is also no deadline for applying for Fixed Protection 2016. For further information for your members please visit our member website page on Tax Allowances.
Additional Voluntary Contributions update
The Secretary of State for Communities and Local Government is required to issue actuarial guidance on the amount of service credit a member may be granted in respect of the accumulated value of additional voluntary contributions (‘AVCs’) in the LGPS. As part of this consultation the Department for Communities and Local Government (DCLG) have asked GAD to recommend actuarial guidance in respect of the regulations detailed below. The document below forms GAD’s recommendation for the actuarial guidance required by these regulations.
The guidance only covers the actuarial principles around the calculation of service credits in respect of AVCs for members who made an election to pay AVCs under regulation 60(1) of the 1997 Regulations prior to 13 November 2001. For further details please contact LGPensions@communities.gsi.gov.uk
IMPORTANT INFORMATION FOR LGPS EMPLOYERS FROM PRUDENTIAL
Shared Cost Additional Voluntary Contributions and Salary Sacrifice
A number of Prudential employers have expressed an interest in setting up a Shared Cost Additional Voluntary Contributions (AVCs) arrangement for their staff so that they can offer AVCs on a salary sacrifice basis.
Whilst Prudential is supportive of employers’ wishes to offer AVC contributions through salary sacrifice schemes, implementing this as a “Shared Cost” arrangement under The Local Government Pension Scheme Regulations 2013, means that any such arrangement is not solely a matter to be agreed under the individual’s Contract of Employment. It must also comply with Scheme Regulations and applicable pensions legislation. Prudential does not currently facilitate such salary sacrifice arrangements in respect of AVC contributions but they are reviewing this and will update Employers with further information in this regard as soon as they have determined whether and how they can support such arrangements.
The Scheme Regulations and pensions law requirements affect both the employer and the AVC provider. Before any such new salary sacrifice arrangements can be implemented in respect of AVC contributions, Prudential must agree to the new arrangements as the AVC provider. To the extent that Prudential discharges regulatory duties on behalf of LGPS pension funds, it is also essential that they are appropriately notified of and agree to any salary sacrifice arrangements so that they do not inadvertently cause them to be non-compliant with their legal duties.
Prudential regret to announce that they cannot be held responsible for any breaches, liabilities, errors, tax consequences or complaints if salary sacrifice arrangements have been implemented without their agreement.
If, as an employer you have already implemented a shared salary sacrifice shared cost AVC arrangement which Prudential may be unaware of, please email firstname.lastname@example.org who will ensure that your arrangement is brought in scope of the changes currently being considered.
Thank you for your patience and co-operation.
Consultation: Funding Strategy Statement
A 30 day consultation has been launched by both the Cambridgeshire and Northamptonshire Pension Funds to seek views on each Funds’ draft Funding Strategy Statement. The Funding Strategy Statement is an essential component of the valuation of the Pension Fund and acts as a summary of each Funds’ approach to funding their liabilities.
The aim of the Funding Strategy Statement is to provide transparency of and ensure equity within the process of setting employer contribution rates. Importantly, the statement details how contribution rates are set for each class of employer; including the Funds approach to:
- how an employer’s pension liabilities are measured
- the funding target for each class of employer
- the pace at which this target should be met
- the probability of achieving the target within the set time frame
- pooling arrangements for certain types of employer
- stabilisation of contribution rates for certain types of employer
The Funding Strategy Statement for each Fund can be found by following the links below. The consultation will close on Sunday 8 January 2017. Please send any comments of the draft Funding Strategy Statement to email@example.com
Changes to Late Retirement Pension Increases
The Department for Communities and Local Government (DCLG) have announced that the way pensions will be increased, for those retiring after their normal retirement age, will change for pension benefits that become payable from 4th January 2017 and will affect the whole of the increase they would be due.
This information is being released now so that those planning for retirement can see how they will be affected and make an informed decision.
We will be writing to all members who would be eligible for a late retirement increase, if they were to take payment of their benefits before 4th January 2017, to inform them of this impending change.
Further details of the changes to the Late Retirement increases can be found in the ‘Late Retirement Actuarial Guidance’ from the Government Actuarial Department.
Who will be effected and how?
- For Active members:
|Date Pension becomes payable (day after last day of employment)||Membership before 1 April 2014||Membership after 31 March 2014||Lump Sum in respect of pre 1 April 2008 membership|
|Pension payable before & including 3 January 2017||0.014% each day from
65 years to date of retirement
|0.014% each day from the later of either 65 yrs or SPA to date of retirement||0.007% each day from 65yrs to date of retirement|
|Pension payable 4 January or after||0.010% each day from 65 to date of retirement||0.010% each day from the later of either 65 yrs or SPA to date of retirement||0.001% each day from 65yrs to date of retirement|
- For Deferred members:
|Date Pension Payable from||Membership before 1 April 2014||Membership after 31 March 2014||Lump Sum in respect of pre 1 April 2008 membership|
|Pension payable before
& including 3 January 2017
|0.014% each day from 65 years to date of retirement||0.014% each day from the later of either 65 yrs or SPA to date of retirement||0.007% each day from 65yrs to date of retirement|
|Pension payable 4 January or after||0.010% each day from 65 to date of retirement||0.010% each day from the later of either 65 yrs or SPA to date of retirement||0.001% each day from 65yrs to date of retirement|
Cambridgeshire Local Pension Board Vacancy
The way in which Cambridgeshire County Council manages the Local Government Pension Scheme (LGPS) has changed. There is now a unique opportunity for scheme members and employers to become more involved with the management of the scheme and to help ensure that it is governed effectively and efficiently.
In accordance with new regulations, we have established a new Local Pension Board to ensure that the LGPS is well managed and representative at a local level. The Local Pension Board will not replace the Council’s existing Pensions Committee, but it will review the decisions they make and the policies they set in order to ensure that the governance and administration of the scheme is compliant with the relevant legislation.
The new Board consists of three scheme member representatives and three employer representatives. There is currently a vacancy for one employer representative who will be selected via an open appointment process. The Board will meet a minimum of four times a year. No prior knowledge of pensions management is necessary, but Board members should be objective, able to work in a team and able to analyse information effectively. Full training, as well as the information and support members need to undertake the role, will be provided.
Further details about the role are available on request. For further information or an informal discussion, please telephone Michelle Rowe on 01223 699180 or mail: firstname.lastname@example.org
- Cambridgeshire Local Pension Board Application Form
- Cambridgeshire Local Pension Board Applicant Pack
Applications must be received by 31st December 2016. Interviews will take place in January 2017.
Reform to Public Sector Exit Payments Consultation Update
You will be aware that the government has recently been consulting on reforms to Public Sector exit payments. The following is an update on the latest position.
There are 3 strands to the Government’s Exit Payment strategy:
- The £95k Exit Payment cap
- The Recovery upon return to the public sector within 12 months for those earning £80k or more
- The review of the basis of the various public sector exit package provisions.
Plans regarding the £95k cap and recovery of exit payments have been delayed and are now not likely to be in place until late 2016/early 2017. We will provide further updates, once we know more.
The Government response to the consultation on the various public sector exit packages has now been published (26 September 2016) and can be read on the gov.uk website:
The response requires that, within 3 months of publication, Government departments (e.g. Department of Communities and Local Government, Department for Education etc) propose changes to exit packages that fit within a general Government framework, and then consult on and implement the changes within a further 6 months.
Changes are, therefore, likely to be in place early Summer 2017
Negative Pensions Revaluation 2016 Update
At the time of sending the Deferred Annual Benefit Statements for 2015/2016, we had not received final confirmation on how the negative revaluation, in respect of the Consumer Price Index, would be applied to members who left between the dates 1 April 2015 to 31 March 2016. We have now received confirmation from Department for Communities and Local Government (DCLG) regarding how the revaluation will apply to members who left part way through the scheme year but did not take their pension (Deferred Members).
For these deferred benefit members the -0.1% revaluation of career average pension accounts will apply and attached to any affected members’ deferred pension account on a proportioned basis. Proportioning of pension accounts will be carried out in line with the dates of the Pensions Increase order as set out in the LGPC’s revaluation paper, which can be found here;
The Treasury order was pro rated for leavers during 2015/2016 as below:
12 April 2015 to 26 April 2015 -0.00%
27 April 2015 to 26 May 2015 -0.01%
27 May 2015 to 26 June 2015 -0.02%
27 June 2015 to 26 July 2015 -0.03%
27 July 2015 to 26 Aug 2015 -0.03%
27 Aug 2015 to 26 Sept 2015 -0.04%
27 Sept 2015 to 26 Oct 2015 -0.05%
27 Oct 2015 to 26 Nov 2015 -0.06%
27 Nov 2015 to 26 Dec 2015 -0.07%
27 Dec 2015 to 26 Jan 2016 -0.07%
27 Jan 2016 to 26 Feb 2016 -0.08%
27 Feb 2016 to 26 March 2016 -0.09%
27 March 2016 to 31 March 2016 -0.10%
This approach is being reviewed by the DCLG for 2016/2017 and beyond, and once we have guidance from them we will notify members accordingly.
Consultation on draft regulations
The Department for Communities and Local Government (DCLG) have completed a consultation on changes to the regulations for the LGPS in England and Wales. Section 21 of the public service Pensions Act 2013 requires consultation with parties that may be affected by the scheme regulations. The consultation sought responses from interested parties on amendments to Local Government Pension Scheme Regulations 2013 and the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 which came into force on 1 April 2014.
There were a number of key amendments to the regulations including:
- The Fair Deal for Staff Pensions for staff in the Local Government Pension Scheme who are compulsory transferred to another service provider. The Treasury ‘Fair Deal for Staff Pensions’ policy issued in October 2013 sets out new requirements for securing pension protection for staff transferring out of the public sector.
- Consultation on specific draft regulations that would provide members with more options for using their Additional Voluntary Contributions in the scheme following the introduction of ‘Freedom and Choice’ in Pensions.
For more information or to view the full draft proposal documents please visit https://www.gov.uk/government/consultations/local-government-pension-scheme-regulations. The consultation closed at 12.00am on 20 August 2016.
Version 6.1 Automatic Enrolment Full and Brief guides
Revised versions of the Automatic Enrolment and Brief guides can be found. The guides cover the release of the following:
- Occupational and Personal Pension Schemes (Automatic Enrolment)(Miscellaneous Amendments) Regulations 2016 [SI 2016/311], and
- Automatic Enrolment (Earnings, Trigger and Qualifying Earnings Band) Order 2016 [SI2016/435] which revoked the 2015 Order [SI 2015/468], though continued the application of the earnings trigger from 2015, and
- Draft Finance Bill 2016 containing proposals covering Fixed Protection 2016 and Individual Protection 2016
Latest full and brief guides on Automatic Enrolment have been issued by the Local Government Pensions Committee (LGPC) Secretariat.
LGPS member website
The Local Government Association (LGA) has produced a new website for members of the Local Government Pension Scheme (LGPS) in England and Wales at www.lgpsmember.org
This new national website replaces both the previous LGPS and LGPS2014 websites.
New State Pension Resource Pack
The Department for Work and Pensions have provided a resource pack regarding the new State Pension.
The new State Pension is being introduced for people reaching State Pension age on or after 6th April 2016. If your staff members have questions about what these changes mean for them the resource pack below should help you answer those questions.
The resource pack will provide information on the following:
- the link between National Insurance payments and your State Pension;
- what contracting-out means for your pension and what will change when contracting-out ends;
- how Starting Amounts in the new State Pension system are calculated, what that means for your pension and ways you can increase your State Pension;
- deferral (some people choose not to claim their State Pension at their State Pension age. This factsheet explains how you can do this and what effect that will have).
Changes to Annual and Lifetime Allowance
The Lifetime Allowance is the total value of all pension benefits you can have without triggering an excess benefits tax charge. From 6 April 2016 the Lifetime Allowance limit will be reduced from £1.25 million to £1 million.
The reduced Lifetime Allowance of £1 million will not impact on the majority of LGPS members as their pension benefits will be well within the limit; for Lifetime Allowance purposes a pension taken from the LGPS now is valued at 20 times its annual value and a pension lump sum at the value paid, so an annual pension of £50,000 with no lump sum would have a value of £1 million as would an annual pension of £37,500 taken with a lump sum of £250,000.
Given this reduction two new protections will be introduced from 6 April and will be known as Fixed Protection 2016 and Individual Protection 2016.
Please note – you will lose Fixed Protection 2016 if you are an active member of the LGPS or contribute to any other registered pension scheme on or after 6 April 2016. Therefore, members wishing to apply for, and keep, Fixed Protection 2016 will need to opt out of the LGPS and cease membership before that date and make no further pension savings to any registered pension scheme.
HMRC have introduced a new online self-service for you to apply for protection, the new online system went live in July 2016. You will need to make a full online application so that your pension savings can continue to be protected against the Lifetime Allowance tax charge.
The Local Government Association fact sheet below gives you more information on Lifetime Allowance and how it may affect you:
Annual Allowance is the amount by which the value of your pension benefits may increase in any one year without you having to pay a tax charge.
The Annual Allowance limit is currently £40,000. Most people will not be affected by the Annual Allowance tax charge because the value of their pension saving will not increase in a year by more than £40,000, or, if it does they are likely to have unused allowance from previous years that can be carried forward.
For the tax year 2016/17 the Annual Allowance will be tapered for members who have a ‘Threshold Income’ in excess of £110,000 and ‘Adjusted Income’ in excess of £150,000. For every £2 that your ‘Adjusted Income’ exceeds £150,000 your Annual Allowance limit will be tapered down by £1 (to a minimum of £10,000).
From 6 April 2016, Pension Input Periods for all pension schemes will be aligned with the tax year – 6 April to 5 April. The Pension Input Period is the period over which your pension growth is measured. Up until 2014/15 the Pension Input Period in the LGPS ran from 1 April to 31 March. As a result special transitional arrangements apply for 2015/16 meaning there are two Pension Input Periods in place with different amounts of Annual Allowance.
For a full definition of ‘Threshold Income’ and ‘Adjusted Income’ and more information on Annual Allowance, the two Pension Input Periods and how they may affect you please see the Local Government Association fact sheet below:
Consultation on reforms to public sector exit payments
HM Treasury has released a consultation on public sector exit payments following the Spending Review 2015.
The government is consulting on options to reform public sector exit payment terms to ensure greater consistency, fairness and sustainability in the provision of public sector compensation. Consultation closed on 3 May 2016.
Update to the End of Contracting Out
The following documents have been added to our End of Contracting Out page:
- Public Sector letter 7 – Increase in National Insurance
- Public Sector factsheet 8 – Changes to the State Pension from April 2016 for Public Service Employees
- State Pension toolkit
- Q & A for LGPS Members
LGPS National Insurance Database
All administering authorities are to provide their members with clear instructions regarding data protection and how we share our data. Please find attached the principles and how we work when sharing data through the documents attached below:
- Cambridgeshire Pension Fund: privacy notice for NI Database
- Northamptonshire Pension Fund: privacy notice for NI Database
The New State Pension and National Insurance changes.
Please find Questions and Answers concerning the new State Pension and National Insurance changes for LGPS members.
Changes to the State Pension
Membership of the Local Government, Fire fighters’ or Police pension schemes meant members were automatically contracted-out of the State Earnings Related Pension Scheme (SERPS) when this was introduced on 6 April 1978 and from the State Second Pension (S2P) when this followed on from SERPS.
Contracting-out for salary related pension schemes will cease after 5 April 2016 as a result of the Pensions Act 2014 and the introduction of the new State Pension.
It is understood that, in the same way that a member of the Local Government, Fire fighters’ and Police pension schemes who was contracted-out of SERPS/S2P would not build up the SERPS/S2P ‘Additional Pension’ element of their old state pension whilst contracted-out, there will be an adjustment made to their new State Pension in respect of such contracted-out periods.
Please be aware that the LGSS Pensions Service are not able to advise on the potential effects of such an adjustment since this will be applied by the Department for Work and Pensions. There is an overview of the new State Pension here https://www.gov.uk/new-state-pension/overview and a State Pension calculator here https://www.gov.uk/calculate-state-pension
From 6 April 2016 when active members of the Local Government, Fire fighters’ and Police pension schemes will no longer be contracted-out, both their and their employers National Insurance contributions will increase as the contracted-out rebates will no longer apply. Whilst the Pensions Act 2014 allows pension schemes to increase employee pension contributions or to reduce future benefit accrual, to cover the additional cost of the abolition of contracting-out, these are not options that are open to any of the Public Service Pension Schemes such as the Local Government, Fire fighters’ and Police pension schemes.
DWP Updates Pension Guidance
The DWP has published a revised version of its guidance “Your new State Pension explained” for those reaching state pension age on or after 6 April 2016.
The updated guidance will be available on Perspective shortly.
The DWP has also updated the following guidance on saving and planning for retirement:
• Saving for retirement if you’re aged 16 to 50;
• Retirement planning for current pensioners; and
• Planning for retirement if you’re aged 50 or over
To view the guidance on GOV.UK follow the links below.
- GOV.UK 9 April 2017 – Your new State Pension explained
- GOV.UK 9 April 2017 – Saving for retirement if you’re aged 16 to 50
- GOV.UK 9 April 2017 – Retirement planning for current pensioners
- GOV.UK 9 April 2017 – Planning for retirement if you’re aged 50 or over