Local Government Pension Scheme Developments

The Local Government Pension Scheme (LGPS) is a statutory scheme, the provisions of which are under constant review. This site aims to keep you informed of the most recent developments to the Scheme, and to advise you of any expected developments. For further information see the pensions section of the employers organisation site at www.lge.gov.uk or the national lgps site at www.lgps.org.uk or the Department for Communities and Local Government site at www.communities.gov.uk/lgps

A new-look LGPS scheme came into effect from 1 April 2008. It applies to individuals who are contributing members of the Local Government Pension Scheme on 1 April 2008 or who have since joined the Scheme. The rights of members who retired before that date with immediate payment of benefits or a preserved pension entitlement are those in force at their date of their retirement.  Information about the changes to the scheme and about the new scheme regulations is available in the sections ‘about the 2008 scheme', ‘guide to the lgps 2008' and in the ‘2008 scheme video'.

Latest developments

LGPS (Miscellaneous) Regulations 2009

The LGPS (Miscellaneous) Regulations 2009 came into force at 31st December 2009 and made a number of significant changes to the 2008 Scheme regulations, these key changes are explained below.

Revised Protected Pay Provisions
The Miscellaneous Regulations widen the conditions that allow a member to elect to have his "final pay" for retirement benefit purposes treated as the average of three recent consecutive years. The protection now applies where a member's pensionable pay in a continuous period of employment is reduced or restricted:

• Because the member chooses to be employed by the same employer at a lower grade or with less responsibility

• For the purposes of achieving equal pay in relation to other employees of that employer

• As a result of a job evaluation exercise

• Because of a change in the member's contract of employment resulting in the cessation or restriction of, or reduction in, payments or benefits specified in the member's contract of employment as being pensionable emoluments

• Because the rate at which the member's rate of pay may be increased is restricted in such a way that it is likely that the rate of the member's retirement pension will be adversely affected

Where any of the above applies, the member may choose to have his or her "final pay" calculated by dividing by three the member's total annual pensionable pay in any three consecutive years of the member's choice, ending with 31st March, within the period of thirteen years ending with the member's last day as an active member.

For the protection to apply the employment on reduced pay must fall within a period of ten years ending with the member's last day as an active member. The protection does not apply if the member's employment on reduced pensionable pay immediately follows a period in which the member occupies a post on a temporary basis at a higher rate of pay.

The relevant provision amends the Benefits Regulations with effect from 1 April 2008 and applies to reductions or restriction of pay effective from that date. Any members who have suffered a reduction or restriction to their pay and are now protected, but were not previously, should take note that they can elect to have their retirement benefits calculated by reference to the average of three recent consecutive year's pensionable pay, if they retire within ten years of the date of a qualifying reduction.

Under the current protection, employers are not required to issue a certificate of protection as formerly required under the 1997 Regulations. It is the member's responsibility to keep a record of the reduction and inform the Administering Authority (LPFA) at retirement.

Civil Partner's Survivor Benefit
The department for Communities and Local Government has decided to place civil partners on a level footing with spouses, so that membership prior to 6 April 1988 is now to be taken into account in the calculation of civil partner's survivor benefits, at no cost to members.

The relevant provision amends the Benefits Regulations with effect from 1 April 2008 and applies anyone who has been the registered civil partner of an active member since that date. As currently drafted the regulations provide for survivor benefits calculated by reference to all membership in the case of a post retirement Civil Partner registration; it is not known whether the intention is that this should be calculated using post 5 April 88 membership only, as for a post retirement widower's pension.

Nominated Partner Pension �Buy Back'
Members can now choose to pay Additional Survivor Benefit Contributions (ASBCs), so that any period of their active membership before 6th April 1988 can be taken into account in the calculation of the benefit to be paid to their surviving nominated cohabiting partner.

Members may buy back all their pre 6 April 1988 membership or a number of whole years, not to exceed that period. The buy back is paid for by additional pension contributions and the additional percentage payable for each year bought back depends on the gender of the member and their nominated partner, the member's age and the number of years over which they elect to pay. This option is time limited and an election must be made before 31st March 2011. Members interested in buying back should contact the LPFA.

Compensation Conversion to Funded Benefits
A new regulation allows employing authorities to convert "compensatory added years" and other forms of annual compensation awarded under former discretionary payment provisions and paid for by the member's former employer, into funded pension rights provided this is done by 31st March 2012. The amount of any member entitlements will not be affected; they will simply be paid for out of the pension fund in future following a one off payment by the employer to the fund.

CLG Consultation: LGPS Delivering Affordability, Viability and Fairness

The Department for Communities and Local Government (CLG) have recently circulated a discussion document, which sets out initial suggestions for stakeholders to consider as a feasible and balanced response to the issues relating to the current funding position of the scheme. CLG wish to see the full engagement of all stakeholders in this particular exercise, which naturally includes employers as well as members and administering authorities. Although set largely within the context of issues relating to Local Authorities as employers, the key purpose of stabilising future Scheme costs arising from the 2010 valuation exercise is a matter of concern to all scheme employers.

The consultation document sets out the broad issues, but liaison with stakeholders will continue over the coming months, particularly on the details of actual proposals and any necessary guidance. The proposals are largely concerned with a revised approach to fund solvency where 100% funding targets may result in heavy short to medium term costs to scheme employers. A proposition is also being considered to amend the existing LGPS tariff which sets the level of employee contributions linked to their pensionable pay, with new, higher tariffs for members who annually earn in excess of around £75,000, together with an extension of the lower rate of contributions for the lower paid. Consultees are invited to respond to this informal consultation exercise no later than 30 September 2009.

New Employee Contributions Table - 1 April 2010

The employee contribution rate bandings table has changed from 1st April 2010 to that listed below.

Pay Range	Contribution Rate
£0-12,600	5.5%
£12,601 - £14,700	5.8%
£14,701 - £18,900	5.9%
£18,901 - £31,500	6.5%
£31,501 – £42,000	6.8%
£42,001 - £78,700	7.2%
>£78,700	7.5%

Protected Manual workers

For protected manual workers the contribution rate in 2010/2011 will be the lesser of 6.5% or relevant figure from normal banding tables. From 1 April 2011 the contribution rate will be the relevant figure from normal banding tables

New ill health provisions

Members who find themselves permanently incapable of performing their current duties as a consequence of illness and injuries, and with a reduced prospect of obtaining further gainful employment, will become entitled to immediate benefits. However the level of benefits received is now dependent on the prospects of obtaining further gainful employment.

If the employing authority, following consultation with an independent registered medical practitioner, determines that the member will be capable of obtaining gainful employment within three years, they will be awarded an immediate pension and, where applicable, a lump sum. However the pension will cease as soon as the member achieves further gainful employment, and will only come back into payment at age 65. In any event, the pension would be reviewed after eighteen months, and will also cease if the member is deemed capable of obtaining gainful employment. The pension will automatically cease after three years unless a new determination is made that the member is not capable of obtaining gainful employment within three years.

If the employing authority, following consultation with a medical practitioner, determines that the member will not be capable of gainful employment within three years, the pension will be payable for the rest of your life. In these circumstances the pension will be based on enhanced membership, the level of enhancement depending on the likelihood of achieving gainful employment before age 65.

Nomination of Cohabiting Partners

The new Scheme introduces the provision for a dependant's pension to be paid to a nominated, co-habiting partner. This option applies only to those who are or were active members of the LGPS on or after 1 April 2008 and is not available to deferred or pensioner members who left before that date. Such a pension would be based on your membership after 05/04/1988 and would be payable following your death to someone that you have nominated. To create a nomination, a written declaration signed by both the nominator and the nominee must be sent to the Administering Authority which states that for a period of at least two years, the following criteria have been met:

• There is financial dependence by the nominee on the nominator, or interdependence between both parties
• Both parties have been free to marry or enter into a civil partnership with each other
• They have been co-habiting as husband and wife, or as civil partners

Removal of the 85 year rule

For all leavers between 1 April 1998 and 30 September 2006 reductions on account of all early payment of benefits were calculated according to the 85 year rule. The 85 year rule allowed members to take unreduced benefits before normal retirement date when their Age + Membership = 85. If the 85 year rule was not met reductions applied. The reductions were be based on the shortfall to when the member would have achieved the 85 year rule.

The 85 year rule has been removed with effect from October 2006. Active members on 30th September retained some protections against the removal of the 85 year rule. In their case;

Benefits in respect of membership before April 2008 will be calculated in accordance with the 85 year rule.

For members aged 60, and able to achieve the 85 year rule, before 1st April 2016, all benefits in respect of  membership before April 2016 will be calculated in accordance with the  85 year rule.

For members aged 60 before 1st April 2020 benefits in respect of membership between April 2008 and March 2020 will be tapered, with greater protection given to those who would achieve the 85 year rule earlier.