URGENT UPDATE ON:- Local Government Pension Scheme (LGPS) 2014 England and Wales
The Regulations changing the LGPS England and Wales will come into force with effect from 1 April 2014 .
1. Below is an important update (that was on the UNISON website News section), covering where we are on the Transitional Regulations that will set out the protections on benefits earned before April
2. Last chance reminder that anyone who has currently opted out of the LGPS England and Wales MUST rejoin immediately if they want to ensure the earnings link protection on any final salary benefits they have earned up to April 2014 ( there may be some protection for those who opt back in within 5 years of opting out). If the cost of the contributions is the problem then they should be reminded that from April there is an option to pay half their normal contribution rate for half the pension. They should approach their employer pension department and ensure that the forms to rejoin has been returned and received before the end of this month. If they are not actively contributing to the scheme then any benefits they earned before they opted out, that fall outside the proposed five year window protection to opt back in, will go up in line with prices (currently Consumer Prices Index) not earnings
3. Anyone in the LGPS England and Wales thinking of paying Additional Voluntary Contributions to maximise tax free lump sum payment when they retire so they don’t have to exchange so much of their pension for cash at the relatively poor exchange rate of only £12 cash £1 pension should elect to start paying the contributions BEFORE April 2014 and ensure the election form is in the hands of their employer or their Pension Fund Administering Authority before 1 April 2014. If members elect to pay AVC’s is received after April then when they retire they are likely only to be able to take part of their AVC fund as a cash sum (currently 25% of the value) and the remainder they will have to buy extra pension from the LGPS, or at whatever the annuity rates will be in the future, from a pension provider like an insurance company. Members ,especially those near retirement , should consider paying AVC’s if they can afford it and approach their employer pensions department for details of the AVC arrangement operated by their employer/LGPS fund. They can as an alternative buy extra pension in the LGPS.
LGPS transitional regulations update
The government regulations covering transitional arrangements for the Local Government Pension Scheme are still delayed, because the government has yet to decide whether councillors should continue to be allowed to join the LGPS, following its consultation last year.
UNISON head of pensions Glyn Jenkins, who sits on the group that is checking the draft regulations, commented: “There are no plans to reduce the protections that have been agreed, which are in the current draft.”
“UNISON is pushing for the transitional regulations as drafted to be laid as soon as possible, to remove uncertainty,” said Mr Jenkins. “We are concerned that, because of the delay in bringing the transitional regulations into law, some members are considering leaving the scheme or even resigning their jobs – under the false impression that the protections will not be implemented and the equally false impression that leaving the scheme would somehow protect their past service rights in the LGPS. “In fact, all those who want to ensure the final earnings protection on their LGPS service to April 2014, should make sure they are contributing to the LGPS when the regulations change in April.”
The Scottish LGPS and Northern Ireland LGPS are separate.
LGPS 2014 – UPDATE ON WORKSTREAM 1 AND 2
This Campaign News contains two key items – an update on the Joint Statement made yesterday by the three LGPS unions and the LGA (attached) and the issue of use of LGPS funds to invest in local infrastructure projects.
- 1. Joint statement by UNISON, Unite, GMB and the Local Government Association (LGA)
On 1st November the three LGPS unions and the LGA issued a joint statement to update LGPS members and employers on the statutory consultation on the proposals already agreed by almost 91% of UNISON members in the ballot and negotiations on future governance and cost management of the scheme.
The joint statement is linked below and is on UNISON’s Pensions web site.
The statement points out that work by DCLG to translate the agreed proposals into draft regulations for consultation has taken longer than expected. Regulations are now expected by the end of the year.
Governance and cost management
The statement also restates the outline proposals made to the Treasury and Department for Communities and Local Government (DCLG) on governance and cost management to ensure the sustainability of LGPS 2014 – Workstream 2 of the negotiations.
It highlights the proposal for an LGPS Board for England and Wales, to include trade unions, employers, government and professional bodies and for local fund boards – which would also include trade unions.
Point 5 of the statement highlights the intention to create a higher degree of separation between the local funds and administering authorities to ensure that the best interests of LGPS members are paramount.
Point 8 of the statement highlights the agreed cost of the scheme. The total cost – as already agreed – is 19.5% of pensionable payroll – which is shared between employers and members on a 2:1 basis, with members’ share at 6.5%.
Points 9 -11 outline the broad mechanism for managing future costs. The clear intention is to prevent any future need to increase contributions or reduce benefits. The costs will be measured at each 3-year valuation using individual fund and actuarial data. Only if costs increase or decrease by more than 2% would action be required by the Secretary of State.
Point 12 refers to the identified need to ensure that past service deficits are dealt with effectively and not exacerbated at local fund level.
- 2. Use of LGPS funds in local infrastructure projects
There has been recent talk of LGPS funds being used in local infrastructure and housing projects. While UNISON and the other unions want to see investment in social housing and local infrastructure, we are very clear that LGPS funds must be invested in the best interests of LGPS members and on a legal, transparent and justifiable basis.
UNISON is seeking advice to feed into DCLG and inform any decisions taken at government or local fund level on this issue.
We understand that there may be a formal DCLG consultation at some point and we will ensure that the union responds to ensure that funds are protected in your best interests.
If you are aware of any proposals by your employers to use LGPS funds for local investment, please let us know.
- 3. Want to be an LGPS Pension Contact?
If you would like to be an LGPS contact or champion and keep members in your workplace informed about UNISON’s work on the LGPS and keep your members up-to-date on their pension scheme, please contact Indira Patel on email@example.com