The Government has issued regulations on the new look benefit package which will become effective from the 1st April 2008.

Contents

Main features of new scheme
Comparison of current scheme to new scheme

Main features of the new scheme

The main features of the new look scheme are:

• All existing members move to the new scheme from 1st April 2008. Some casual employees will not be eligible to remain in the scheme or those members with a contract of 3 months or less.

• The new scheme provides a pension of 1/60th of final pay for each year of membership in the scheme from 1st April 2008. Membership to 31st March 2008 will, as now, be calculated as 1/80th pension plus 3/80ths lump sum.

• Scheme members will have the flexible option to take a bigger lump sum (up to a maximum tax free lump sum of 25% of the capital value of accrued benefit rights at the date of retirement). This is achieved by commuting some of the pension. For each £1 of pension given up a lump sum of £12 will be paid.

• Benefits will be calculated on the best one of the last three years' whole time equivalent pay, but scheme members who downgrade (other than as a result of flexible retirement) can choose to have benefits calculated on the average of the best three consecutive years' pay in the last ten years of service (ending on a 31st March).

• There will be a normal retirement age of 65 for the release of unreduced benefits, but with the right to take pension from age 60 or, with employer's consent, from age 55 (or from age 50 for existing members opting to draw benefits with employer consent before 31st March 2010).

• Employees can be in the Scheme beyond age 65 but benefits must be drawn before age 75. Benefits drawn after age 65 will be actuarially increased to reflect the fact that they are being paid after the normal retirement age of 65.

• Immediate benefits will be paid on redundancy / efficiency from age 55 (or from age 50 for existing members leaving before 31 March 2010).

• There will be a two tier ill health retirement package where employment is terminated because of permanent ill health and there is reduced likelihood of obtaining gainful employment, providing a higher enhancement of benefits where the member has no reasonable prospect of obtaining gainful employment before age 65, and a lower enhancement of benefits where the member is unlikely to obtain gainful employment in a reasonable time but is likely to do so before age 65.

• Flexible retirement with employer consent, under specific circumstances, will be permitted from age 55, allowing scheme members to draw some or all of their benefits while still continuing to work (or from age 50 for existing members opting to draw benefits on flexible retirement with employer consent before 31st March 2010).

• The death in service tax free lump sum will be increased from 2 to 3 times pay.

• The post retirement lump sum paid on death before age 75 will be increased from 5 to 10 times pension less pension already paid.

• Survivor benefits will be payable for life to spouses, civil partners and nominated co-habiting partners at a 1/160th accrual rate i.e. 1/160th of the deceased scheme member's final pay for each year of membership in the scheme (although civil partners and nominated co-habiting partners pensions are expected to be based on post 5th April 1988 membership only).

• Survivor benefits will be payable to children with the amount depending on the number of children and whether or not a spouse’s, civil partner’s or nominated co-habiting partner’s pension is payable.

• Employee contribution rates for existing members who are currently paying 6% and for all new members will be tiered according to the following table based on whole time equivalent pay in the previous year.

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	> £75,001	7.5%

The band ranges will be increased each April in line with the rise in the Retail Prices Index (RPI).

• It is proposed that the contribution rate for those existing members who are currently paying 5% will be increased on a phased basis, bringing their rate into line with all other Scheme members from 1st April 2011.

• Scheme members will be able to buy extra scheme pension in steps of £250 up to a maximum of £5,000 or pay Additional Voluntary Contributions (AVCs).

• Employers will be able to award up to 10 years extra membership and / or grant extra pension up to a maximum of £5,000.

• The new look scheme will operate from April 2008.

Comparision of current scheme to new scheme

The table below compares the current scheme with the new scheme from 1st April 2008, based on the information we know at the 22nd June 2007:

	Current scheme	New Scheme*
Pension Accrual rate	1/80th (1/64th taking lump sum into consideration)	1/60th
Lump Sum	Automatic 3/80ths plus ability for more by commuting up to 25% of pension value at a rate of £12 cash lump sum for every £1 given up.	No automatic lump sum, but an option to commute pension at a rate of £12 cash lump sum for every £1 pension given up, subject to maximum tax free lump sum of 25% of capital value of accrued benefit at retirement.
Normal Retirement Age (Unreduced benefits payable)	65 (with transitional protections for some Rule of 85 qualifiers)	65 (with transitional protections for some Rule of 85 qualifiers already in Scheme before 1/10/2006).
Earliest Retirement Age (except ill health)	Currently 50 (55 from 2010)	For existing members, currently from age 50, age 55 from 2010. For new starters after 31/3/2008, age 55.
Pensionable Pay used in Pension Calculation	Best of: Final year’s pay, best of last 3 years pay (re-valued) or Certificate of Protection Pay	Best of: Final year’s pay, best of last 3 years; average of any 3 consecutive years in the last ten ending on 31st March where there has been a reduction in pay.
Survivor Benefits	Spouse/Civil Partner’s Pension – 1/160th accrual	Spouse/Civil Partner/’Nominated’ Dependent Partner’s Pension – 1/160th accrual.
Children’s Pensions	25% x Notional pension* for maximum of 2 children. Orphans 33% x Notional pension* per child for maximum of 2 children. * For death in service the notional pension is the ill health pension or a pension based on the lesser of 10 years and full service to 65, where this is higher. For deaths after leaving or retirement % based on the member's entitlement at death	If dependant pension is payable: 1 child - 50% x dependant's pension > 1 child - (100% x dependant's pension / No of children) to each child. If no dependant pension is payable: 1 child - 66% x dependants pension > 1 child - (33% x dependants pension / No of children) to each child NB for death in service, full prospective service is taken into account in calculating dependant's pension.
Death in Service	2 times salary tax free	3 times salary tax free.
Ill Health	Immediate benefits payable at any age for those members certified as permanently incapable of continuing their own or a comparable Local Government employment until age 65. Enhanced membership of up to 10 years (depending on age and length of accrued membership)	To qualify for ill health benefits, members must be certified as permanently incapable of their current Local Government job. The level of benefits is dependent upon the ability to perform other gainful employment. Tier 1: Where a member is incapable of any other gainful employment before age 65, pension benefits are payable based on accrued rights plus 100% of their prospective membership to age 65. Tier 2: Where a member is unlikely to be able to obtain gainful employment within a reasonable period of time but likely to be able to do so before age 65, pension benefits are payable based on accrued rights plus 25% of their prospective membership to age 65 (guarantee of old scheme entitlement if greater, for certain existing members as at 1 April 2008, details to be confirmed) Where a member is capable of alternative gainful employment within a reasonable period, ill health benefits will not be payable from the Scheme It is proposed that Employers will be given powers under separate compensation regulations to pay a benefit at its discretion, equivalent to the accrued pension earned, until alternative employment is obtained.
Employees’ Contribution	6% of Pensionable Pay (5% of protected manual workers)	Pensionable ........... Rate (%) Pay (pa) £0 - £12,000 ...................... 5.5 >£12,000 - £14,000 ........... 5.8 >£14,000 - £18,000 ........... 5.9 >£18,000 - £30,000 ........... 6.5 >£30,000 - £40,000 ........... 6.8 >£40,000 - £75,000 ........... 7.2 >£75,000 ........................... 7.5 (transitional provisions for protected manual workers)
Death in Retirement Lump Sum	Pension Guarantee: 5 years less pension already paid	Pension Guarantee: 10 years less pension already paid
Improving Benefits	Option to buy added years and/or pay in-house/free standing AVCs	Option to buy up to £5,000 additional annual pension and/or pay in-house/free standing AVCs

* When the new scheme is introduced, all membership built up before 1st April 2008 will, as now, be calculated as 1/80th pension plus 3/80th lump sum, using final pay at actual date of leaving/retirement

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