ENSIONS FOCU P AUTUMN 2007 – ISSUE 11 S

‘Scarborough Headland’ – David Appleby

New LGPS Special Issue

The Scheme changes WILL AFFECT YOU ! IN THIS FOREWORD

ISSUE… In the last issue of Pensions Focus we gave you the first available details of the new Local 2 Pensions Roadshows Government Pension Scheme which will go live on 1 April 2008. All current members of the scheme will be transferred to the new 3 New Look Local scheme on 1 April 2008. Government Pension Scheme from 1 April 2008 This issue of Pensions Focus is rightly dedicated to bringing you all the detail we know about the new 3 Cost of Pension scheme. The changes will affect everyone and most people will Benefits notice the change when their pension contribution either goes up or down in their April pay. 5 Building up Benefits

By now most of you will have received an Annual Benefit Statement. If you have not received a Statement please do contact the 6 What about the 85 Pensions Section to discuss further, contact details can be found on Year Rule? the back page of this issue.

7 Retirement Benefits As ever, I hope you find the content of Pensions Focus to be helpful

and easy to understand. Should you have any ideas for future articles please do not hesitate to contact the Operations Manager, 8 Death Benefits Karen Scott at [email protected]

9 Purchasing Additional Service

10 Quick Self Test Quiz

11 Increasing Your Benefits

John Moore 12 Retirement Quotations Treasurer to the North Yorkshire Pension Fund

13 Transfers and Nominations

14 When can you get your State Pension?

15 Contact Numbers

1 Pension Roadshows

NYCC

A 3 day Roadshow was held in May 2007 for North Yorkshire County Council staff. This was our biggest and most challenging Roadshow yet and saw approximately 400 staff attend for a one to one session with a member of the Pensions Team and also representatives from the Prudential. Despite the length and scale of the Roadshow it ran very smoothly and we received very posi- tive feedback from many of the attendees.

Hambleton District Council

A further Roadshow was held in September 2007 for Hambleton District Council staff. This was a one day Roadshow (as most of our Roadshows are) and approximately 40 staff took the opportunity to talk to the Pensions Team and the Prudential about their own personal circumstances. For those who could not attend the one to one sessions or who just wanted a general overview we delivered 2 presentations over the lunch period covering topics such as the New Look LGPS from 1 April 2008, calculation of retirement benefits and the Rule of 85. There were approximately 100 attendees.

Information Sessions

Since April 2007 we have also held ‘one to one’ sessions for a large number of pension scheme members. These are conducted in a similar vein to the Roadshows but tend to be on a smaller less formal basis. Since April 2007 we have visited the following sites:

North York Moors National Park Balfour Beatty Ashfield Residential Home North Yorkshire Fire & Rescue Larpool Lane in Whitby (NYCC Adult & Community Services) Tadcaster Grammar School (Non Teaching staff) Graham School (Non Teaching staff) Bilton Registration Service (NYCC) George Pindar School (Non Teaching staff) Yorkshire Coast Homes

If you would like to arrange for the Pensions Team to visit your workplace, please contact Karen Scott on (01609) 532340. Please note that there must be at least 10 attendees.

Overall, the information sessions have been very well received and have provided scheme members with an ideal opportunity to talk to the Pension Team about their own personal circumstances

Many thanks to NYCC and Hambleton District Council for hosting the events.

2 New Look Local Government Pension Scheme from 1 April 2008

The LGPS is changing from 1 April 2008. The good news is that the Scheme continues to be a final salary scheme with the calculation of benefits linked to pensionable pay and some improvements and flexibilities have been introduced. All existing members move to the new scheme from 1 April 2008. The main changes are summarised in the following sections.

Cost of Pension Benefits

How much will I pay?

The contributions which Scheme members pay into the LGPS have been fixed for many years and have not increased even though the amount which the Scheme employers have needed to pay has increased. You will have been paying either 6% or 5% (see separate information on page 4 if you are currently paying 5%) of your pensionable pay into the LGPS. From 1 April 2008 the amount you pay will be linked to the rate of pensionable pay which you receive and this will result in either a decrease or an increase in the amount you pay in pension contributions.

The table below details the range of pensionable pay and the bands of contributions.

Band Range* Contribution Rate

1 £0 - £12,000 5.5%

2 > £12,000 - £14,000 5.8%

3 > £14,000 - £18,000 5.9%

4 > £18,000 - £30,000 6.5%

5 > £30,000 - £40,000 6.8%

6 > £40,000 - £75,000 7.2%

7 > £75,000 7.5%

* The figures in the ‘Range’ column of the table will increase in April each year by the rise in the Retail Prices Index

cont /

3 New Look Local Government Pension Scheme from 1 April 2008 (cont)

Cost of Pension Benefits (cont)

Your employer will set the contribution rate you should pay based on the rate of pensionable pay you will be receiving on 1 April 2008. If you are part-time your rate of pay will be uprated to the amount you would be receiving if you were working full-time. Your employer will also decide whether there are any regular contractual extra payments which should be included in the rate of pensionable pay when setting the contribution rate.

The employer will decide how often the contribution rate is changed if your pensionable pay increases or decreases. For example, this could be done once a year at 1 April or could be done each time you have a contractual change in their employment.

Employees paying 5% in contributions

Employees who were in a ‘manual worker’ post on 31 March 1998 have continued to pay the 5% contribution rate from 1 April 1998 (when the rate became a standard 6% for all). It has been decided to increase the contribution rate for those existing manual workers who pay contributions at the protected 5% contribution rate on a phased basis, bringing their contribution rate into line with all other Scheme members from 1st April 2011. This will be done by increasing the rate for these members to 5.25% in 2008/09; 5.5% in 2009/10; 6.5% in 2010/11; and then move to the bands in the table from 2011/12 onwards

Therefore if you currently pay the 5% contribution rate you will pay the following rates:

From 1 April 2008 - 5.25% From 1 April 2009 - 5.5% From 1 April 2010 - 6.5% (unless the rate in the standard contribution rate table is lower)

Term-time workers

Scheme members who work fewer than 52 weeks per year and are categorised by their employer as term-time will have their pension contribution rate based on the pay they would be receiving if they were working full-time for the number of weeks per year in that post (not uprated to 52 weeks).

How much will my employer pay?

The amount which your employer pays will continue to be assessed every 3 years through calculations done by the Fund Actuary. This varies depending on the cost of providing pension benefits. The amount which the employers and employees will pay in pension contributions in future will continue to be looked at by a Policy Review Group which has been set up by the Central Government Department, Communities and Local Government. This Group will look at a number of factors which affect the cost of pension benefits and a decision will be made on whether employee pension contributions should increase. A system is to be agreed to review the cost of the Scheme by 31st March 2009 and this will be known as a ‘cost sharing mechanism’.

cont /

4 New Look Local Government Pension Scheme from 1 April 2008 (cont)

Building up Benefits

How will my benefits build up in the new Scheme?

New employees must have a contract of employment of more than 3 months duration in order to be entitled to join the Scheme. Existing employees will move to the new Scheme on 1 April 2008. All Scheme members will build up benefits in the same way from 1 April 2008.

Under the new scheme a pension of 1/60th of final pay is built up for each year of membership in the Scheme after 31st March 2008. There is no automatic lump sum. However, it will still be possible to take a tax free lump sum ‘retirement grant’ by giving up some of the annual pension. Each £1 of annual pension will provide £12 of lump sum retirement grant. It is possible to take a maximum lump sum which represents 25% of the capital value of benefits.

The calculation of benefits from the LGPS will therefore be split as follows:

Service up to 31 March 2008 Service from 1 April 2008

Annual Pension Annual Pension Service x 1/80 x Final Pay + Service x 1/60 x Final Pay and Lump Sum Retirement Grant Service x 3/80 x Final Pay

Final Pay

The pay figure used in the calculation of pension benefits is known as ‘final pay’. This is usually the pensionable pay in the last year of employment but one of the two previous year’s pensionable pay can be used if this is more beneficial. In addition, from 1 April 2008 members who downgrade in the last 10 years (other than as a result of flexible retirement) can, if they wish, choose to have benefits based on the average of any 3 consecutive years in the last 10 years (ending on a 31st March).

The final pay of part-timers is the pensionable pay if they were working full-time in their post.

LGPS Service

Employees who are full-time in their post build up service at the rate of 1 year for each year worked. Part-time employees build up service in relation to the part-time hours which they work e.g. an employee working half-time in their post will build up half a year of service for each year worked. There is no limit to the amount of service which can be built up in the Scheme. Employees can stay in the scheme beyond age 65 but benefits must be drawn by age 75. Benefits drawn after age 65 will be increased by a factor to account for late payment.

cont / 5 New Look Local Government Pension Scheme from 1 April 2008 (cont)

What about the 85 Year Rule ?

The 85 Year Rule allowed LGPS members to take benefits from the Scheme from age 60 onwards without any reduction providing they would have been a member of the Scheme for at least 25 years by 60 (or had sufficient transferred service in from another pension scheme). On 1 October 2006 the 85 Year Rule was removed from the Scheme.

If you joined the LGPS from 1 October 2006 onwards the 85 Year Rule doesn’t apply and benefits from all of your service will be reduced if you take your pension benefits before age 65. If you joined the LGPS on or before 30 September 2008 and you will have been in the LGPS for 25 years or more by age 60 you may be protected under the old 85 Year Rule.

The protections are as follows for those Scheme members who would have met the old 85 Year Rule:

If you joined the LGPS on or before 30 September 2006 your service to 31 March 2008 will receive full protection so benefits based on this service will not be reduced. However your benefits from service from 1 April 2008 onwards will be reduced if you take your benefits before age 65.

However extra protection has been given to Scheme members who are nearer to retirement.

If you reach age 60 on or before 31 March 2016 you will receive full protection for service from 01/04/2008 to 31/03/2016. This means the benefits calculated on your service from 01/04/2008 to 31/03/2016 will not be reduced.

If you reach age 60 between 01/04/2016 and 31/03/2020 you will receive tapered protection for service from 01/04/2008 to 31/03/2020. This will mean that the reductions to your benefits for service from 01/04/2008 to 31/03/2020 will be lower than the full reductions which apply to younger Scheme members.

Discussions are ongoing about these protections with a possibility of those who reach 60 between 01/04/2016 and 31/03/2020 being given full protection for their benefits calculated on service between 01/04/2008 to 31/03/2020.

cont /

6 New Look Local Government Pension Scheme from 1 April 2008 (cont)

Retirement Benefits

At what age will my benefits be paid out?

Retirement from age 60 Normal retirement age is age 65 for all members but with the right to take pension from age 60. If benefits are taken before age 65 they will be reduced to account for early payment but there are certain protections for members who joined the LGPS before 1 October 2006 (see additional information on page 6 regarding the ’85 year rule’).

Retirement after age 65 Benefits drawn after age 65 will be increased by a factor to account for late payment.

Retirement from age 50 Retirement before age 60 is not possible without the employer’s agreement (except in ill health cases) and from 1 April 2008 the earliest retirement age will increase from age 50 to age 55 for members who join on or after 1 April 2008. Scheme members who joined before 1 April 2008 will continue to have the right to retire from age 50 providing their employer agrees. However, from 1 April 2010 the earliest retirement age will increase to 55 for all Scheme members.

Flexible retirement It will continue to be possible to take flexible retirement with the employer’s consent from age 55 where the number of hours worked reduces or the employee moves into a lower graded post. Scheme members who joined before 1 April 2008 will continue to have the right to take flexible retirement from age 50 providing their employer agrees. However, from 1 April 2010 the earliest age for taking flexible retirement will increase to 55 for all Scheme members. From 1 April 2008 members will be able to choose whether to draw all or only part of their pension benefits.

Ill health retirement This will continue to be possible at any age and extra LGPS service will be awarded in certain cases as long as the Scheme member has been in the LGPS for at least 2 years. There will be two tiers of ill health benefits. It will still be necessary for an independent medical adviser to say that the employee will not be able to carry out the duties of their own job up to age 65. However from 1 April 2008 there will be a further assessment of whether the employee will be able to carry out any employment up to age 65. The two tiers will be as follows:

First tier If there is no reasonable prospect of obtaining gainful employment before age 65 the employee’s LGPS service is enhanced by 100% of potential service to age 65

Second tier If it is likely that the employee will be able to obtain gainful employment before age 65 the employee’s LGPS service is enhanced by 25% of potential service to age 65

Discussions are continuing on a possible third tier of ill health benefits, payable if the second tier requirements are not met. cont /

7 New Look Local Government Pension Scheme from 1 April 2008 (cont)

Death Benefits

Will I leave a lump sum tax free death grant when I die?

Death while still employed (death in service)

The lump sum death grant payable for a Scheme member who dies in service has been increased from 2 to 3 times the pensionable pay in the year up to the date of death. For part-time employees this is 3 times the actual pay they have received in the year up to the date of death.

Death of a member with preserved benefits (left before retirement)

The lump sum death grant payable increases from 3 to 5 times the preserved annual pension if a member with preserved pension benefits dies

Death of a member who has retired

The lump sum death grant payable to a pensioner increases from 5 to 10 times the annual pension less the pension already paid if a pensioner dies before age 75

Will I leave a pension for a loved one when I die?

Spouses’ and civil partners’ pensions are to be based, as now, on a fraction of 1/160th and children's pensions to be paid to eligible children will be a proportion of the spouse’s or civil partner’s pension depending on the number of eligible children and whether or not a spouse's or civil partner's is payable.

A new category of nominated co-habiting partners will be eligible for a dependant’s pension providing the following can be established :

Financially dependent or interdependent for a period of at least two years

Not already married or in civil partnership or living with third person and this has applied for a period of at least two years

Must have been cohabiting as husband and wife or as civil partnership for a period of at least two years

The pension available to civil partners and nominated co-habiting partners will be based on post 5th April 1988 membership only.

From 1 April 2008, a nomination declaration form will be available from either your employer, the North Yorkshire Pension Fund website or the Pensions Section.

cont /

8 New Look Local Government Pension Scheme from 1 April 2008 (cont)

Purchasing additional service

How can I increase my pension benefits under the new Scheme ?

From 1 April 2008 members will be able to buy extra scheme pension in multiples of £250 up to a maximum of £5,000 (to provide a pension for themselves only or to provide a pension for themselves and any survivor on their death). It will still be possible to pay Additional Voluntary Contributions (AVCs) with Prudential. Please see the article ’Increasing your Benefits’ on page 11.

Summary of main changes from 1 April 2008

The amount Scheme members pay in pension contributions will be linked to the amount they earn (for part-timers this is what they would earn if they were full-time)

th th The annual pension will be calculated on a fraction of 1/60 rather than 1/80

There will be no automatic 3/80th lump sum any longer but it will be possible to use some of the 1/60th pension to ‘buy’ a tax free lump sum

Normal retirement age for everyone will be age 65

Retirement from age 60 is still allowed but benefits will be reduced if taken before age 65 (but with some protections under the old ‘85 Year Rule’ for older members)

The tax free lump sum payable for death in service increases from 2 times to 3 times the pay in the year to date of death

An annual partner’s pension will be paid to ‘nominated’ partners who are not married or have not entered into a civil partnership

New rules on the amount of pension to be paid out on ill health grounds will be introduced

Retirement before age 55 will no longer be possible (except on ill health grounds) for new members. All members will have an earliest retirement age of 55 from 1 April 2010

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Quick Self Test Quiz –

Do I understand the basics of the New LGPS?

1. If I earn £18,500 what contribution rate will I pay?

2. If I earn £20,000 and have 30 years service (all post 1 April 2008) at retirement age how much will my pension be?

3. How much cash will I get in addition to my pension for service earned after 1 April 2008?

4. What is Normal Retirement Age?

5. At what age may I retire without needing my employers consent?

5. 60 60 5.

4. 65 65 4.

3. None, to be commuted at the rate of £1 of pension to get £12 cash cash £12 get to pension of £1 of rate the at commuted be to None, 3.

2. £10,000 per year year per £10,000 2.

1. 6.5% 6.5% 1.

Answers Answers

10 Increasing your

Benefits

Purchasing Added Years in the LGPS

Up to 6 years and 243 days of extra service or ‘added years’ can be purchased in the LGPS. The cost of purchasing this service will depend on your age when you start the contract to purchase the service. The contract will start at your next available birthday and will usually continue until age 65 or when you leave employment, if this is sooner. You can stop paying at any time but will only purchase a proportion of the additional service if you do so. The service purchased will increase both your annual pension and your tax free lump sum retirement grant and is paid for by extra deductions from your pay. If you would like to look into this option please contact the Pensions Section on (01609) 532564 or (01609) 532587 or email [email protected]

Please note that the option to purchase Added Years is only available until 31 March 2008 when it will be replaced by the opportunity to buy additional pension only. From 1 April 2008 it will be possible to buy additional annual pension of up to £5,000.

LOCAL GOVERNMENT PENSION SCHEME Great News for Additional Voluntary Contributions (AVC)

Changes to the rules concerning AVCs now mean that saving for retirement is more flexible than ever before. Even if you have previously discounted saving for retirement through an AVC, these changes are significant enough for you to consider it again.

Are you a taxpayer?

If you are, there is an immediate benefit from your pension contributions. You receive tax relief through your pay, which means the Government makes a contribution to your savings.

For example: If you pay tax at 22%, £100 of extra saving only costs you £78 If you pay tax at 40%, £100 of extra saving only costs you £60

Do you want to increase your tax-free lump sum on retirement? An AVC account can, subject to certain limits, be taken as 100% tax-free cash.

How much can you pay? The 15% maximum pension contribution has been removed. It is now possible to pay up to the equivalent of 50% of your earnings in any year up to a maximum, currently £225,000 per annum.

If you would like to consider any of the above or other situations in more detail, without financial advice, but with clear information to help you reach a balanced decision please telephone Prudential’s dedicated Public Sector support team, call Pension Connection on 0845 607 0077. Lines are open between 9am to 7pm, Monday to Friday and 9am to1pm Saturdays, calls may be monitored or recorded for quality and security purposes. Alternatively, visit the Local Government AVC web-site www.pru.co.uk/localgov

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All members receive a quotation of their benefits at age 65 once a year via their Annual Benefit Statement or can process a quotation at age 65 online at any time (see article below for access details)

We frequently receive requests from members for quotations when they are more than 10 years away from Normal Retirement Age (NRA). Producing a quotation for a member who is age 40 based on a retirement age of 60 does not produce reliable figures.

We would ask that members only request quotations in the future if they are over age 55 and the figures we provide can be accurate. Of course if there is a specific reason that someone under age 55 requires a specific quotation we will be happy to provide figures as a one-off.

Limiting the number of quotations we process should mean an efficient turnaround for those urgent quotations members and employers often require.

Your own personal information at your fingertips –

request a PIN now!

Did you know that you can access your membership details and estimate your own pension benefits on-line by visiting the North Yorkshire Pension Fund web pages at www.nynet.org.uk/pensionfund? By simply selecting the ‘Personal Membership Details on Line’ link you can request a Personal Identification Number which will be provided in a letter a short time later to your home address. On entering your PIN and one of two passwords you will be able to access the personal and scheme membership details that we hold about you. What could be simpler?

12 Interested in transferring previous benefits into the North Yorkshire Pension Fund?

We receive many requests asking for information about transferring previous pension benefits in to the NYPF and so we thought it might be useful to highlight the various types of transfer available.

Interfund Transfers – transfers from other local authorities where you are given the exact same service in the NYPF. If you tell us about this type of service we will contact your previous Pension Fund for your membership details and then write to you to ask if you wish the transfer to proceed. If you transfer this type of service into the NYPF, it is all linked to your current service record.

Club Transfers – transfers from other public sector bodies such as the NHS pension scheme. The administering authorities of the public sector schemes will use the same actuarial factors as the LGPS in calculating the transfer value. This means whilst you will not receive the exact amount of service you had as a transfer, the transfer-in will be higher than if you transferred it from a non-club scheme. We will calculate the amount your transfer will provide in the NYPF and ask you if you want to go ahead.

Other Transfers – relates to all other types of transfers which can be from any other type of employment or personal pension. We will calculate the amount your transfer will provide for you in the NYPF and ask you if you want to go ahead. Please note that the transfer must be completed within 12 months of joining the Fund unless your employer has already provided a discretion document to allow transfers after this date. Your employer should be able to confirm the current position for you.

Nominating someone for your death grant

If you should die while you are still paying into the NYPF, we will pay a Death Grant to those you leave behind. The Death Grant will be at least 2 years pay (increasing to 3 years pay from 1 April 2008).

You can tell us who you would like us to pay your Death Grant to by making a death grant nomination. If you haven’t made your nomination yet, or you’d like to update your nomination at any time, just ask us for a Death Grant Nomination Form, or download one from our website, www.nynet.org.uk/pensionfund/.

If we pay the Death Grant in accordance with your Nomination Form, the Death Grant will be excluded when the assessment for Inheritance Tax is carried out.

If you do not complete a Nomination Form the Death Grant will automatically be included in the Inheritance Tax assessment. The threshold for the tax year 2007/08 is £300,000. If the value of an estate exceeds the threshold the excess is taxed at 40%.

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State Pension age This is currently age 65 for men and 60 for women, but from 2010 will change for women as shown in the table below, so that by 2020 State pension age will have been equalised at age 65. From 2024 the State Pension age will increase to age 66 for both men and women with further increases phased in over the period to 2046 when State Pension age will be 68.

Date of Birth State pension age Before 6th April 1950 60 6th April 1950 - 5th April 1951 Between 60 & 61 6th April 1951 - 5th April 1952 Between 61 & 62 6th April 1952 - 5th April 1953 Between 62 & 63 6th April 1953 - 5th April 1954 Between 63 & 64 6th April 1954 - 5th April 1955 Between 64 & 65 After 5th April 1955 65

Further Information

Further information on State Pension benefits can be found on the Pensions Service website at http://www.thepensionservice.gov.uk/

Or

You can phone The Pension Service Monday to Friday from 8.00am to 8.00pm on 0845 60 60 265 (0845 60 60 275 for Welsh speaking customers living in Wales).

If you have speech or hearing difficulties, a textphone service is available on 0845 60 60 285 (0845 60 60 295 for Welsh language).

If English or Welsh is not your first language, you can use your own interpreter or the Pensions Service can provide one for you.

The Pensions Service state that their phone lines tend to be quieter in the afternoon and towards the end of the week if you prefer to call then. They record phone calls to help them provide an accurate and consistent service and for training and security purposes.

State Pension Age Calculator

You can find out your individual State Pension age by visiting the page below and just entering your date of birth http://www.thepensionservice.gov.uk/resourcecentre/statepensioncalc.asp

State Pension Forecast

You can request a State Pension Forecast by clicking the ‘State Pension Forecast’ link on the homepage of the Pensions Service website

14 Useful Telephone Numbers

Karen Scott—Operations Manager (01609) 532340

Retirements, Transfers & Additional Benefit enquiries Mike Barber (01609) 532564 Suzanne Berry 532567 Ashley Scutt 535881 Eric Gullon 535882 Julie Brown 532690 Peter Hymer 532691 Marion McKone 535880 Caroline Park 532698 Dorothy Wilson 532249 Ian Morton 535878 Gill Felton 533075 Andrea Thompson 533075

Annual Benefit Statements, Roadshows, Website & Communication enquiries Joanne Wade (01609) 532932 Jim Place 532949 Daniel O’Sullivan 532948 Amanda Jones 532824 Matt Sykes 532911 Stella Smethurst 532566 Bev Wilkinson 535876 Adam Harper 532565

LGPS Regulation enquiries Anna Binks (01609) 535879

Fax Number: (01609) 532850 Email: [email protected]

All Additional Voluntary Contributions queries for the Prudential should be directed to their Pension Connection Service on 0845 6070077.

Opening Times

The phone lines at County Hall are staffed from 8.30am to 5.00pm (4.30pm on Fridays) although working flexi time you may catch us outside of those hours.

Remember to have your National Insurance Number to hand for identification purposes

If you require this information in an alternative language or another format such as large type, audio cassette or Braille, please contact Jo Wade, Communications, Training and Support Team Leader: Tel 01609 532932 or by email at [email protected]

Visit the North Yorkshire Pension Fund website ...

www.nynet.org.uk/pensionfund/

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