‘New Look’ Local Government Pension Scheme 2008

Human Resources ‘New Look’ Local Government Pension Scheme 2008 An overview of the changes

What are the key features of the new scheme? • Retirement age • Transitional regulations • How benefits are calculated • The % that employees pay • Additional contributions to boost your pension • Pensions for co-habiting partners • Flexible retirement arrangements • Ill-health retirement provisions Directorate of Human Resources

Retirement age • Normal pension age is 65 • Pension paid after 65 will be enhanced • Pension must be paid by age 75 • ‘85 year rule’ still applies for those who will be 60 by 31st March 2016 • Pension is payable from 60 but will be actuarially reduced • Pension may be payable from age 55 (by 2010 for current members) with employer permission but will be reduced Directorate of Human Resources

Transitional regulations • For members before 2008, two pension calculations carried out • The same final salary figure is used for both calculations • Best of: • Final 365 days’ salary • Either of the 2 years before that • Best average of 3 consecutive years in last 10 years of service • Service up to 31st March 2008 calculated under old scheme • Service from 1st April 2008 calculated under new scheme Directorate of Human Resources

How benefits are calculated • Pension based on 1/60th of final salary for every year of service • No automatic lump sum • Up to 25% of pension pot can be converted to tax free lump sum • Every £1 of pension converted results in £12 of lump sum Directorate of Human Resources

For example … • Individual retires at 65 with 10 years of membership up to March 2008 and 10 years from April 2008 and final salary of £20,000 • Pension from old scheme: • Annual pension – £20,000 x 10/80 = £2,500 • Lump sum - £2,500 x 3 = £7,500 • Pension from new scheme: • Annual pension - £20,000 x 10/60 = £3,333 • No automatic lump sum • Maximum lump sum = 25% of pension pot Pension pot = approximately 20 x annual pension I.e. (£2,500 + £3,333) x 20 = £116,660 • 25% = £29,165 maximum total lump sum (including £7,500 from old scheme) • Remaining total annual pension - £4,028 Directorate of Human Resources

Employee contribution rates • The % that is deducted from pay each month will depend on salary • Part-time staff pay contributions on the full-time equivalent salary • Semester-time only staff rate based on full-time equivalent for the number of weeks that they work • Manual staff who were paying 5% will be phased into line with other rates Directorate of Human Resources

Additional contributions to boost your pension • The provision to buy additional years has been removed • Existing contracts will be honoured • Replaced with a provision to buy additional pension • Purchased via additional monthly contribution • Increases the annual pension after retirement by minimum of £250 and maximum of £5,000 per year • The facility to pay AVCs (Additional Voluntary Contributions) is retained Directorate of Human Resources

Pensions for co-habiting partners • Receive the same long-term pension as a spouse or civil partner in the event of the member’s death • Must be living together as man and wife or civil partners • Must be free to marry or form a civil partnership • Must not be living with a third party as man and wife or civil partners! • Must be financially interdependent or nominee is dependent on scheme member • These conditions must have been satisfied for 2 years • Must make a nomination Directorate of Human Resources

Flexible retirement • The existing flexible retirement provision has been extended • Scheme members who are 50 or over (55 by 2010) can apply to reduce either hours or grade and take some or all of their pension benefits • Pension benefits will be reduced unless the 85 year rule is fulfilled • Previously scheme members have had to take all of their benefits, now they will have the option to take only part • Needs employer permission • That will depend on operational needs and cost • You will need to reduce your hours by at least 20% of your normal working hours Directorate of Human Resources

Ill-health retirement • Current ill-health retirement scheme is being extended • Those who are permanently unable to work due to ill-health will still be entitled to immediate, unreduced benefits • Pension will be enhanced so it is based on the total service that would have been accrued to age 65 • Those who are permanently unable to work in current role but may be able to do some work, but not within a reasonable period will also be entitled to immediate, unreduced benefits • Pension will be enhanced by 25% of the total prospective service to age 65 Directorate of Human Resources

Other changes • Death in service grant – 3 times annual salary • Death grant after retirement: • Pension will be guaranteed for 10 years • A partner’s pension of 1/160th for each year of service will also be payable Directorate of Human Resources

Further information • See our web pages: http://www.brookes.ac.uk/services/hr/reward/pensions/index.html • Contact your link Human Resources team or Laura Naunko, HR Adviser • E-mail pensions@brookes.ac.uk • See the scheme website www.lgps.org.uk Directorate of Human Resources

‘New Look’ Local Government Pension Scheme 2008