There has never been a better time to be a member
Current Financial Situation and Your
Pension
The
current financial situation has led to a number of Scheme members asking how
secure their pension benefits are within the Local Government Pension Scheme.
ERPF
members can be assured that their pension entitlements are guaranteed by law
and are based on their membership and pay – they do not rely on the value of
the Fund or the investment returns achieved by the Fund.
The
East Riding Pension Fund (ERPF) is invested in a broad range of assets such as
equities, bonds and property, which are continually monitored and adjusted to
minimise risk. None of the Fund's assets
are invested in Icelandic banks.
How are my benefits worked out?
The LGPS is a final salary scheme - This means that your benefits are normally based on your final year’s pay and the number of years you have been a member of the Scheme.
How your benefits are worked out when you retire changes - Each year you have built up in the scheme to 31st March 2008, you will receive a pension of 1/80th of your final year’s pay plus an automatic tax-free lump sum of 3 times your pension.
For each year you build up from April 2008 your pension will be at the increased rate of 1/60th of your final year’s pay. There will be no automatic lump sum for membership built up after March 2008 but you do have the option to get a tax free lump sum in exchange for some of your pension.
Up to 25% of the overall value of the pension benefits can be taken as a lump sum, with £12 lump sum for each £1 of annual pension given up.
When can I retire?
The scheme’s normal pension age is age 65. If you continue working beyond age 65, you can stay in the scheme but you must draw your benefits by age 75. Benefits drawn after 65 will be increased.
To be entitled to retirement benefits you must have been a member of the LGPS for at least 3 months or have transferred in other pension rights.
Early Retirement
You can still choose to retire and draw your benefits from age 60, although they may be reduced for early payment.
The earliest age you can ask for early retirement, with your employer’s consent, is age 55 for new members after 1 April 2008. If you have been a member since before 1 April 2008 it is currently age 50 but will rise to age 55 on 1 April 2010.
Redundancy or Efficiency Retirement
If you’re made redundant or are retired on business efficiency grounds, the earliest age immediate benefits are paid are the same as for early retirement.
Flexible Retirement
If you reduce your hours or grade and your employer agrees, you can draw some or all of the benefits you have built up at that point in time. You can still draw your pay on the reduced hours or grade, and even continue paying into the scheme, building up further benefits.
If you take flexible retirement before 65 your benefits may be reduced for early payment.
The earliest age for flexible retirement is the same as for early retirement.
Ill health Retirement
The scheme provides targeted benefits if you are unable to work because of serious illness.
If you have to leave work at any age due to permanent ill-health the new scheme provides a tiered ill-health retirement package. This gives graded levels of benefit based on how likely you are to be capable of gainful employment after you leave.
Death benefits
The death in-service tax-free lump sum, known as a “death grant”, is 3 times your annual pensionable pay. I
f you’re part-time, the benefit is 3 times your actual part-time pay.
If you leave with deferred benefits and die before receiving them the death grant is 3 times your pension for service before 1 April 2008 and 5 times your pension for service from 1 April 2008.
If you are a pensioner who retired before 1 April 2008 and die within five years of retiring, the death grant is 5 times your annual pension less any pension you have received. If you retired after 1 April 2008 and die within 10 years of retiring the death grant is 10 times your annual pension less any pension you have received. Death Grants are not payable once you reach age 75.
Remember, you can say who you would like any death grant paid to by completing a form available from your Pension Fund. It’s important you keep this form up to date but, whilst taking your wishes into account, your Fund will make the final decision on who the death grant is paid to.
Survivors’ Pensions
The LGPS provides a pension for your husband, wife, registered civil partner or nominated cohabiting partner and for eligible children on your death.
To nominate a cohabiting partner your relationship has to meet certain conditions laid down by the LGPS. A form is available from your employer or the pension section.
The survivor’s pension for a Scheme member's husband or wife is based on 1/160th of the Scheme member’s final year’s pay for each year of membership. Survivor pensions for civil partners and nominated cohabiting partners are calculated on the same basis but on the Scheme member’s post 5th April 1988 membership only. If you die in service, the membership used in the calculation of all survivor benefits will be the membership you have in the Scheme, as described above, plus the prospective membership between the date of death and age 65.
The amount of pension to be paid to eligible children depends on the number of eligible children and whether or not a spouse's, civil partner's or nominated cohabiting partner's pension is payable.
Increasing your benefits
You can pay more in contributions to buy up to £5,000 of extra annual pension in multiples of £250. You can provide extra pension for yourself and, if you wish, for extra survivor’s pension on your death.
Buying extra years of membership is no longer available.
You can still pay additional voluntary contributions – AVCs – to increase your benefits.
If you would then like to consider AVCs in more detail, with a view to increasing tax free cash or pension at retirement, please e-mail eastriding@prudential.co.uk with your daytime phone number. You will then be contacted and offered an individual meeting at your place of work to discuss your retirement plans and how AVCs can help those plans.
Reductions in pay
Your benefits will normally be calculated on your final year’s pensionable pay, or on one of the two previous years’ pay if better. If you downgrade in your last 10 years or your pay is restricted in that period you have the option to have your benefits based on the average of any 3 consecutive years in the last 10 years (ending on a 31st March).
Contribution Rates
One of the main attractions of the LGPS is that your employer pays a large part of the cost of providing the benefits.
It is however important that overall the scheme remains affordable, so increases or decreases in the cost of providing the scheme may, in future, need to be shared between members and employers. This will be in accordance with government guidance.
The amount you pay will be between 5.5 and 7.5% of your pensionable pay. The rate you pay depends on which pay band you fall into.
If you work part-time, your rate will be based on the whole time pay rate for your job, although you will only pay contributions on the pay you actually earn.
Pay bands
| If your Whole Time Equivalent pay rate is: |
Your contribution rate will be: |
| Up to £12,000 |
5.5% |
| More than £12,000 and up to £14,000 |
5.8% |
| More than £14,000 and up to £18,000 |
5.9% |
| More than £18,000 and up to £30,000 |
6.5% |
| More than £30,000 and up to £40,000 |
6.8% |
| More than £40,000 and up to £75,000 |
7.2% |
| More than £75,000 |
7.5% |
The pay bands will be adjusted each April in line with the cost of living.
Let’s take a look at someone who works full time at a pay rate of £20,000. They’ll pay 6.5% of their pay - that’s around £108 a month - in contributions.
If they were working half time, they’d still pay the 6.5% rate. That’s because the whole-time rate for their job is still £20,000, but their contributions would be based on their part-time earnings, so they’d have £54 deducted.
If you pay tax and National Insurance, you’ll get tax relief on your contributions and pay a lower rate of National Insurance, so the actual cost to you is less.
If you were paying a protected rate of 5% before 1 April 2008, the rate you pay will be increased on a phased basis from 1st April 2008, bringing it into line with all other Scheme members by 1st April 2011.
If you were paying a protected rate of 5%
| From: |
Your contribution rate will be: |
|
1st April 2008 |
5.25% |
|
1st April 2009 |
5.5% |
|
1st April 2010 |
6.5% or (if lower) the relevant rate from the pay band table |
| 1st April 2011 |
the relevant rate from the pay band table |
LGPS video
Over the past few months the Fund has been working in association with the Local Government Employers organisation (LGE) to produce a video which covers the main details of how the Scheme will operate from 1 April 2008.
For further information since the changes and to view the video click here...
