Active Members' Homepage
  
 
 
   
Pensioners' Homepage
  
 
 
 

CHANGES TO THE LGPS FROM 1 APRIL 2008

 
As a result of a further review of the Scheme, which commenced in June 2006, the provisions of the LGPS in England and Wales were changed further. When considering the Scheme, account now needs to be taken of three separate sets of regulations. The main provisions of each are set out below.
 
 
Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007
 
As the title of the regulations suggests this set of regulations deals with the provisions of the scheme relating to the benefits, membership and contributions elements of the scheme. The main elements are:
  • the accrual rate to the scheme has been changed to a 1/60th basis with no automatic lump sum;
  • a minimum period of contractual employment of 3 months is required in order for an employee to join the scheme
  • the introduction of banded employee contributions, to be at a rate relative to pensionable earnings;
  • allowing members to now take all, or part, of their accrued benefit on flexible retirement;
  • removal of the facility to issues a certificate of protection of pay where a person’s pay is reduced or restricted at any time from 1 April 2008 due to circumstances out of their control;
  • the introduction of an alternative option to certificates of protection of pay, whereby any scheme member can opt to have retirement benefits calculated on the annual average of 3 consecutive years to 31 March where they have chosen to reduce the pay or grade of post at any time in the10 years prior to leaving/retirement.
  • raising the earliest age of entitlement to benefits from 50 to 55 (except on ill health) from 1 April 2010
  • the introduction of a three tiered ill health retirement provision that provides different levels of benefit depending on the degree of ill health;
  • improved death lump sums;
  • removal of the provision to pay additional contributions to purchase additional membership (‘added years’)
  • the introduction of an alternative facility, whereby the member can elect to purchase additional pension, to provide additional benefit for themselves and/or their dependents; and
  • introducing nominated cohabitee survivors benefits and other improvements.
The new regulations also extended the discretions that employers would need to make in some of the above changes. This set of regulations is generally referred to as ‘the Benefits Regulations’.
 
 
Local Government Pension Scheme (Administration) Regulations 2008
 
This second set of regulations from the latest LGPS review mainly mirror the administrative aspects of the old 1997 Regulations and complement the Benefits Regulations by defining and expanding on some of the provisions contained in the Benefits Regulations.
 
They change the way transfers are to be calculated between LGPS funds, give the detail on the new provision to pay Additional Regular Contributions (ARCs) and provisions around their discontinuance as well as providing details on new provisions such as the employer’s ability to award additional pension to scheme members.
 
This set of regulations is generally referred to as ‘the Administration Regulations.’
 
 
Local Government Pension Scheme (Transitional Provisions) Regulations 2008
 
These regulations complete the set of regulations required to move to the new scheme arrangements from 1 April 2008 and prescribe how active members on 31 March 2008 transfer into the new scheme on 1 April 2008.
 
They revoke the majority of the provisions of the 1997 Regulations, although maintain the relevant regulations pertaining to Councillors’ pensions and a number of consequential provisions required to protect certain entitlements that existed for scheme members prior to 1 April 2008, such as pension credit and pension debit provisions and a protection for members who had elected before 1 April to pay contributions to purchase additional membership but the payments commenced after 31 March 2008.
 
There was also a protection for members who had a reduction in pay before 1 April 2008 that was beyond their control to be awarded a certificate of protection of pay. The Transitional Regulations also include a phased revision of contributions for protected former manual workers paying 5%, to align them with the new banded contributions method introduced by the Benefits Regulations.
 
This set of regulations is generally referred to ‘the Transitional Regulations'.
 
 
The June 2010 Budget
 
Following the outcome of the General Election, the new Chancellor of the Exchequer presented his ‘emergency’ Budget announcing that:
 
  • Public service pensions would increase in line with the Consumer Price Index instead of the Retail Price Index from April 2011.
  • The Government would create an independent commission, headed by John Hutton, to undertake a “fundamental, structural review of public service pensions” and consider the case for short-term savings by September 2010 in time for the Spending Review.
  • The link to increases in average earnings would be restored to increases in the Basic State Pension from April 2011. The increase in Basic State Pension will be the highest of the increase in average earnings, the increase in RPI and 2.5%. In April 2011, the increase in the standard minimum income guarantee in the Pension Credit would equal the cash rise in the full Basic State Pension.
  • The Government would to review when the State Pension Age will increase to age 66. This will be no earlier than 2016 for men and 2020 for women.
  • The Government would to consult shortly on how quickly it will remove the default retirement age after April 2011.
  • The Government would consult on the details of the removal of the requirement for individuals to buy annuities by age 75. The Finance Bill after this Budget will contain transitional arrangements for those individuals who have yet to secure income and who will attain age 75 in the meantime. From 22 June 2010, individuals will have until age 77 to purchase an annuity. Until April 2011, there will be a 35% tax charge on lump sum death benefits paid out by a scheme for individuals who die on or after 22 June 2010 and who are over aged 75.
  • The restrictions on tax relief on pensions contributions by high earners introduced in Finance Act 2010 would be repealed.
  • The 2010 Finance Bill would include changes to pensions tax legislation to enable the National Employment Savings Trust (NEST) to register as a pension scheme for tax purposes. Further legislation will be introduced in the Finance Bill 2011 to remove tax charges on late contributions following auto-enrolment and to amend the tax rules on unauthorised borrowing by registered pension schemes.
  
Local Government Pension Scheme (Miscellaneous) Regulations 2010

 
These Regulations provided mostly technical clarifications, either correcting or amplifying regulations in order to make clear the original intention of the current 2007 and 2008 Regulations:
 
  • Changes that deal with the new 3 tiers of ill health retirement and related regulations such as permitting a 3rd tier member to access their ‘suspended’ benefits before age 65 with an actuarial reduction, and some clarifications to improve the overall ill health framework;
  • Scheme members’ spouses and civil partners who are awarded a share of LGPS retirement benefits in their divorce settlement, are now permitted to receive such benefits from age 60, rather than age 65, provided that appropriate actuarial reductions are made;
  • New rules about aggregating periods of membership when members are re-employed; and
  • Changes enabling certain educational establishments to be treated as Scheme Employers in the Fund – i.e. Academy Trusts and City Technology Colleges and dealing with the impact of the Academies Act 2010 to include new and converter academies;
  • In addition certain amendments have been made in response to requests made and issues which arose during the course of the consultation:
  • charging of pensions increase relative to 2008 LGPS membership;
  • restoration of necessary protections for Environment Agency employees who transferred from the Civil Service on 1 April 1996; and providing administration process to enable better handling of pensions for Incapacitated Pensioners unable to manage their affairs.