THE LOCAL GOVERNMENT PENSION SCHEME A guide for employees eligible to participate in the Staffordshire Pension Fund

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1 THE LOCAL GOVERNMENT PENSION SCHEME 2014 A guide for employees eligible to participate in the Staffordshire Pension Fund 1

2 THE LOCAL GOVERNMENT PENSION SCHEME When people first take up employment, a pension is probably one of the last things they think about. But as they get older and take on more responsibilities they begin to wonder how they would survive financially in retirement. Or how, if anything were to happen to them, their family would manage. If left too late there may not be enough time to build up sufficient financial cover to meet retirement needs. It is never too early to start a pension. Your job allows you to be a member of the Local Government Pension Scheme. As a member, you are given access to an excellent range of benefits. The Local Government Pension Scheme currently provides the following a guaranteed, inflation-proofed pension building up at 1/49 th of your pay each year (this is known as Career Average); flexibility to pay less contributions (entering the 50/50 Section of the scheme) or to pay more (Additional Pension Contributions); the option to convert part of your pension to a tax-free lump sum; early payment of benefits, possibly enhanced, if you have to retire on grounds of permanent ill-health; a death grant of 3 times final pay if you die in service, or equal to ten years of pension instalments (less any already paid) if you die after retirement; a pension for your surviving spouse, civil partner or cohabiting partner and for any eligible children. This booklet is a brief guide to the Scheme. It summarises the main rules which apply at the date of issue (see page 3). 2

3 "THE LOCAL GOVERNMENT PENSION SCHEME" A guide for employees eligible to participate in the Staffordshire Pension Fund Online Version 5.0 July 2015 These notes are for guidance only and should not be taken as a complete statement of the law. Pension legislation is continually changing and these notes can offer guidance only on the rules as at the date of issue. Enquiries about the Local Government Pension Scheme are always welcome should you wish to check your entitlement contact details are given on page 27. 3

4 CONTENTS page Introduction 2 Background 6 Who can join? 7 What about other pension rights? 8 I don't want to be in the Local Government Pension Scheme 9 How much do I pay? 10 Main Section and 50/50 Section 10 Sick leave 11 Authorised Absence with reduced or no pay 11 Unauthorised absence 11 Trade dispute absence 11 Maternity, paternity, and adoption leave 11 Absence and the 50/50 Section 11 When can I retire? 12 How much will I get? 13 Re-joining the LGPS after 1 April Retirement pension examples 14 Additional protection if you are nearing retirement 15 Variations 15 Flexible retirement 16 Ill-health retirement 16 What if I choose to leave before I can get a pension? 17 Refund 17 Transfer of pension rights 17 Deferred benefits 17 Death benefits 18 Death Grant 18 Can I pay extra for more pension? 19 Additional pension in the LGPS 19 Additional Voluntary Contributions 19 Shared Cost Additional Voluntary Contributions 19 Free Standing Additional Voluntary Contributions 19 Employer's discretion to improve benefits 19 Stakeholder and Personal Pension Schemes 20 Financial advice 20 Will my pension increase at all? 21 Can I lose my pension? 22 Divorce, dissolution of civil partnership, annulment, judicial separation: effect on pension rights Earmarking Order 22 Pension Sharing Order 22 Pension credit rights 22 Further information about earmarking and pension sharing

5 CONTENTS (continued) page Help for members and rights of appeal 24 Internal Dispute Resolution Procedures 24 The Pensions Advisory Service 24 The Pensions Ombudsman 24 The Pensions Regulator 24 The Tracing Service 24 Explanation of certain expressions 25 Further information about the LGPS and contact details 27 5

6 BACKGROUND The rules of the Local Government Pension Scheme 2014 ("LGPS") are contained in the Local Government Pension Scheme Regulations 2013, and the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations These Regulations are made under the Superannuation Act The LGPS is a "statutory" public service scheme which applies to local government workers in England and Wales. Similar, but not identical, regulations apply in Scotland and Northern Ireland. Your contributions are paid into, and benefits paid out of, a pension fund. Pension funds for LGPS members are run by county councils, London boroughs and, in some areas affected by major local government reorganisation, by special fund authorities. Staffordshire County Council administer a pension fund for LGPS members who work (normally) within the geographical boundary of Staffordshire. This is the Staffordshire Pension Fund. An administering authority must run the Pension Fund completely separately from its other finances. The LGPS Regulations also say that the Fund must be valued every 3 years to make sure there is enough money to meet the pensions it has to guarantee. Each employer participating in the Fund pays a contribution rate assessed by the Fund Actuary to ensure the guarantee can be met. The LGPS is a "Career Average" pension scheme which means that your pension is calculated as a proportion of pay for each year of membership. The Scheme is also "contracted-out" of the State Second Pension arrangements and this means that many LGPS members pay the lower, contracted-out rate of National Insurance contributions. It is a "registered" public service pension scheme under Chapter 2 of Part 4 of the Finance Act 2004, i.e. it operates within requirements set by HM Revenue and Customs. You receive tax relief on the contributions you pay, and certain lump sum payments made by the Scheme are tax-free. HM Revenue and Customs set limits on the amount of pension that a person may accrue (from all sources) annually and over a lifetime. The annual allowance is based on a Pension Input Period. The Pension Input Period for the LGPS runs from 1 st April to 31 st March. A tax charge may be due if annual or lifetime allowances are exceeded. The Pension Services Section of Staffordshire County Council (see contact details on page 27 of this booklet) can advise you of current limits. Like other pension schemes, the LGPS must comply with Pensions Acts although, as a public service scheme, it is exempt from certain requirements (because it is not set up under a trust deed, for example, it does not have trustees). It is a qualifying scheme under the automatic enrolment provisions of the Pensions Act Some of the LGPS rules must apply to all members, some apply only to special categories. You will see from this booklet that you may have certain choices as to benefits and ways of improving them. The booklet also refers in places to discretions allowed to employers ask your employer if you need more information about how they exercise their discretionary powers. Your employer may also be able to help you if you need more information about the LGPS. Alternatively, contact Pension Services with your enquiry. Some pension terms may be unfamiliar to you or have a special meaning in the context of the LGPS. An explanation of certain terms and expressions is given at the end of the booklet on pages 25 to 26. The first time these expressions are used in the booklet they will be highlighted in bold text. The current LGPS, which came into effect on 1 April 2014, is the latest version of a Scheme which has been in existence for over a hundred years. Further information about the LGPS can be found on the Staffordshire Pension Fund website at and on the national LGPS website at 6

7 WHO CAN JOIN? To be able to join the LGPS, you have to work for a Scheme employer as listed in the Regulations. This could be, for example, a county council, district council, parish or town council, a fire and rescue authority, a chief constable, a police and crime commissioner, certain educational establishments or an "admission body". (An "admission body" is a body providing local government type services which has entered into an agreement with the administering authority of a LGPS Fund, in order to permit employees to be members.) More than 130 Scheme employers participate in the Staffordshire Pension Fund. You cannot join the LGPS if you are eligible to join some other public service pension scheme, e.g. those run for teachers, police officers or operational firefighters. There is no minimum age for joining but there is an upper age limit of 75. Membership is open to full-time and part-time employees. Most people are brought into the Scheme automatically on appointment. The exceptions are those whose contract of employment is for less than 3 months but they may still opt to join by completing an application form. If the contract is extended to a period of 3 months or more, they would be brought automatically into the Scheme on the extension of the contract. employees of admission bodies they must apply to join the Scheme and may only do so if covered by the terms of the admission agreement. Also, some bodies, e.g. town and parish councils, have to nominate employees if they are to be eligible for membership. Ask your employer for further details if you are not certain on what terms you would be allowed to join the Scheme. 7

8 WHAT ABOUT OTHER PENSION RIGHTS? On joining the LGPS you are asked to complete a form giving details about your membership of other pension schemes and previous LGPS membership. You will be asked to indicate whether you would like to consider a possible transfer of other pension rights to combine with your current period of LGPS membership. There is a time limit of 12 months from joining in which you may request a transfer and so you must act promptly. If you request the investigation of a transfer, Pension Services will write to the administrators of your other pension scheme(s), asking for details of a "transfer value", i.e. a sum of money representing the value of those other pension rights. When Pension Services receive the details, they will provide you with an illustration of the amount of pension which could be added to your pension account. You should compare the illustration with any pension options offered by the other pension scheme(s) and decide, within the time limits given, whether or not you wish the transfer to proceed. If you re-join the LGPS and you have deferred benefits in an LGPS fund your deferred benefits will normally be automatically joined with your new active pension account. If you want to retain separate deferred benefits then you must make an election within 12 months of re-joining the scheme. It should be noted that under the Public Service Pension Act 2013, there are now much closer links between your pension rights in all public service pension schemes (such as the LGPS, NHS Pension Scheme, Teachers Pension Scheme etc.). If you have any public sector pension benefits you must declare these on joining Staffordshire Pension Fund. Failure to do so may result in an overpayment of certain benefits, or an underpayment of pension. 8

9 I DON'T WANT TO BE IN THE LGPS Although membership of the LGPS is automatic for most employees, it is not compulsory. If you are brought into the Scheme you have a right to opt out. However your employer will have to comply with the automatic enrolment provisions of the Pensions Act 2008 which require that, subject to age and earnings, employees who have previously opted out are periodically brought back into the Scheme. (You would then have a further right to opt out.) If you do wish to opt out, an online form is available on the Staffordshire Pension Fund website, which can be submitted immediately. If you opt out of the Scheme within 3 months of joining, you will be treated as never having joined the Scheme. Your employer will refund the pension contributions you have paid through their payroll system If you have been a member for more than 3 months, but less than 2 years and opt out, you will receive a payment from Staffordshire Pension Fund representing a scheme refund. If you have been a member for more than 2 years and opt out, you will be treated as an early leaver. See page 17 for information about your pension options in these circumstances. If you are considering opting-out because you feel that the contributions in the Main Section of the Scheme are too expensive, you may wish to consider entering the 50/50 section of the Scheme. See page 10 for information about your pension options in these circumstances. The LGPS is a good pension scheme and you should think carefully before declining membership. If you do opt out and you change your mind, you can elect to opt back in again at any time before age 75. Please bear in mind, if you opt out of the scheme and are awarded a Deferred Benefit, if you re-join the scheme at a later date, you will not be able to combine your Deferred Benefit with the pension you build up in the future. 9

10 HOW MUCH DO I PAY? The LGPS has 2 Sections the Main Section and the 50/50 Section. The Main Section is the standard section and you will automatically be placed in this section when you join the LGPS. It is possible to elect to join the 50/50 section of the scheme. If you do so, you will pay half the contributions, but you will only receive half the benefit in respect of your own pension any benefits payable on death (death grant, survivor pension) will still be paid in full. Further information regarding the 50/50 Section of the scheme, together with an online election form can be found on the Staffordshire Pension Fund website at Scheme.aspx. As a member of the LGPS you will pay contributions which are a percentage of your actual pensionable pay. The percentage depends upon the level of pay as follows. These are the pay bands and rates for both the Main Section and the 50/50 Section that apply from 1 April 2015: Band Pensionable Pay Range Main Section Rate 50/50 Section Rate 1 Up to 13, % 2.75% 2 13,601-21, % 2.9% 3 21,201-34, % 3.25% 4 34,401-43, % 3.4% 5 43,501-60, % 4.25% 6 60,701-86, % 4.95% 7 86, , % 5.25% 8 101, , % 5.7% 9 151,801 or more 12.5% 6.25% For example, if your pensionable pay is 25,000 a year you would pay a contribution of 6.5%. If you are part-time, your contribution rate is based on the actual amount of your pay. For example, if you work halftime and your pay is 8,000 a year (the whole-time equivalent being 16,000 a year) you would pay a contribution rate of 5.5%. The figures in the table are applicable at the date of issue (see page 3) and are amended each April in line with inflation. Your Scheme employer will decide your contribution rate when you join the LGPS and will review it periodically thereafter in accordance with their policy statement. If the level of your earnings is such that you pay tax, you will get tax relief on contributions (pension contributions are deducted from pay before tax is assessed). Also, unless you have opted to pay the married woman s/widow s reduced rate of National Insurance, any National Insurance contributions will be at the lower "contracted out" rate (the LGPS is "contracted out" of the State Second Pension arrangements). 10

11 Sick leave If you are off sick and receiving sick pay, your LGPS benefits will continue to build up based on Assumed Pensionable Pay (APP). This rate of pay is the amount you would have received if you were not off sick. Your employer will deduct contributions from the pay that you receive (before any reduction on account of Statutory Sick Pay or Incapacity Benefits). If you are on sick leave without pay, you will not pay any contributions but will be treated as if you had; your benefits will continue to build up based on your APP. Authorised Absence with reduced or no pay If you receive pay during a period of Authorised Absence, you will pay contributions on that amount of pay and your pension for the period of absence will build up at that rate. If you take a period of unpaid Authorised Absence, you will not pay contributions and there will be no pension build up for that period. You do, however, have the option to pay Additional Pension Contributions (APCs) to buy back the pension loss for the absence. If you elect to pay APC s within 30 days of the end of your absence, you will be able to share the cost with your employer (you pay 1/3 rd of the cost, your employer pays 2/3 rd ). The pension loss will be assessed on your lost pay. Unauthorised absence If you are not paid for a period of unauthorised absence, this period will not count towards your benefits. Trade dispute absence If your absence is because of industrial action you will not pay contributions and there will be no pension build up for that period. You do, however, have the option to pay Additional Pension Contributions (APC s) to buy back the pension loss for the absence. It is not possible to share the cost with your employer and you will pay the full amount. The pension loss will be assessed on your lost pay. Maternity, paternity and adoption leave Child Related leave is split into two parts: Ordinary Leave (the first 26 weeks) and Additional Leave (the second 26 weeks). If you receive any pay during your Ordinary Leave, you will pay contributions (at your normal contribution rate) on the amount of pay you receive during this period. If you are unpaid during your Ordinary Leave, you will not be expected to pay contributions. Your pension will build up as if you had paid full rate contributions based on your APP. If you receive pay during your Additional Leave (Statutory Maternity or Adoption Pay is normally paid for 39 weeks) you will pay contributions (at your normal contribution rate) on the amount of pay you receive during this period. Your pension will build up as if you had paid full rate contributions based on your APP. If you do not receive pay during your Additional Leave, you will not pay contributions and there will be no pension build up for that period. You do, however, have the option to pay Additional Pension Contributions (APC s) to buy back the pension loss for the absence. If you elect to pay APCs within 30 days of the end of your absence, you will be able to share the cost with your employer (you pay 1/3 rd of the cost, your employer pays 2/3 rd ). The pension loss will be assessed on your APP. Absence and the 50/50 Section If you are part of the 50/50 Section and are on sick leave or Child Related Absence with no pay you will automatically be moved to the Main Section of the Scheme from the beginning of the next pay period if you are still on no pay at that time. This means that from that point you will build up full pension benefits even though you are not paying any pension contributions. Further information about the payment of contributions is available from your employer or from Pension Services. 11

12 WHEN CAN I RETIRE? The Normal Pension Age (NPA) for LGPS members is linked to your State Pension Age, although the minimum NPA is age 65. You will be entitled to immediate payment of benefits if you have reached this age when you leave your job. If you retire later, or ask for payment of benefits to be deferred beyond this age, your retirement benefits would be increased in accordance with guidance and factors issued by the Government Actuary. Benefits must be put into payment by age 75, at the latest, even if you are still in employment. If you are below NPA when you leave your employment, you may still be eligible to receive payment of benefits immediately upon leaving. To qualify you must have at least 2 years membership of the LGPS or have had pension rights transferred into the Scheme from some other pension arrangement, which bring the total length of your membership to 2 years. You must also satisfy one of the following conditions a) be required to retire on health grounds (see page 18); or b) be age 55 or over and have your employer s certification that you are leaving on grounds of redundancy or business efficiency; or c) be age 55 or over and elect to take immediate payment of pension; In the case of c), your benefits may be reduced to reflect early payment. Some longer-serving members may have the protection of the "Rule of 85" which allows the payment of retirement benefits before NPA without reduction. A set of notes regarding the Rule of 85 and Early Retirement is available on the Staffordshire Pension Fund website on the Pension Scheme Information page. Also, your employer has the discretion to waive any reduction. Contact your employer for information about how they would use this discretion if relevant. 12

13 HOW MUCH WILL I GET? For each scheme year (1 April to 31 March) your pension will build up at the rate of 1/49 of the pay (and any assumed pensionable pay) you receive in that year if you are in the Main Section of the scheme. 1/49 x actual pensionable pay = annual pension If you are in the 50/50 Section, your pension will build up at 1/98 of the pay you receive. 1/98 x actual pensionable pay = annual pension The amount of pension built up during the scheme year is then added to your pension account and revalued at the end of each scheme year so that your pension keeps up with the cost of living. Your pension account is revalued in line with HM Treasury Orders which currently use the rate of the Consumer Prices Index (CPI). If during the scheme year you have been on leave on reduced contractual pay or no pay due to sickness or injury, or have been on relevant paid child related leave or reserve forces leave then for that period, your pension is based on your assumed pensionable pay. An example of how your pension will build up in your Pension Account each year is shown below: Date from Date to Account Balance (starting) Actual Pay Build Up Rate Pension Build up in year Total Pension HM Treasury Order Rate* Account Balance (ceasing) 01/04/14 31/03/ ,000 1/ % /04/15 31/03/ ,000 1/ % /04/16 31/03/ ,000 1/ % As can be seen in the above example, each year your pension balance at the start of the year is added to the additional amount of pension you build up in that year and the full amount is then revalued by the HM Treasury Order rate, which gives you the amount of pension that becomes the starting balance for the next scheme year. The example overleaf shows the pension value for a member who was in the Main Section of the Scheme. If they had elected to be a member of the 50/50 Section, the pension build up would be as follows: Date from Date to Account Balance (starting) Actual Pay Build Up Rate Pension Build up in year Total Pension HM Treasury Order Rate* Account Balance (ceasing) 01/04/14 31/03/ ,000 1/ % /04/15 31/03/ ,000 1/ % /04/16 31/03/ ,000 1/ % You can elect to provide a lump sum in respect of a pension. To do this, you give up ("commute") part of your pension. For each 1 of pension you commute, you would receive 12 as a lump sum retirement grant. The total lump sum, however, would be subject to limits set by HM Revenue and Customs. *Please note the HM Treasury Orders used in the above examples are for information only and should not be treated as a guarantee of the increase that will be paid. 13

14 Re-joining LGPS after 1 April 2014 If you joined LGPS before 1 April 2014, your benefits for membership before 1 April 2014 built up in the final salary scheme under earlier scheme rules and are calculated differently see below. After 1 April 2014 your pension builds up under the new scheme as outlined above. If you retire at NPA: a period of membership between 1 April 2008 and 31 March 2014 would provide: - a retirement pension of 1/60 x period of membership x final pay a period of membership before 1 April 2008, would provide: - a retirement pension of 1/80 x period of membership x final pay and - a retirement grant of 3/80 x period of membership x final pay Retirement pension examples: Membership before 31 March 2014 As you will see from the formula overleaf, this will be a proportion of your final pay. For example, suppose you retire with 38 years of membership, 32 of them being before 1 April If your final pay is 24,000, your retirement pension will be calculated as: 1/80 x 32 x 24,000 = 9,600 plus 1/60 x 6 x 24,000 = 2,400 = 12,000 a year If you work part-time or term-time, the calculation is slightly different. Your period of membership is based on your part-time hours or paid weeks as a proportion of the full-time hours/weeks for the job. Suppose you have been employed for 6 years, all after 31 March 2008, and you have worked 18.5 hours a week where full-time hours would be 37. Your period of membership would be assessed as: 18.5/37 x 6 = 3 years The final pay used in the calculation of pension for a part-time member, however, is the pay a full-time employee would have received. If, in the above example, a full-time employee's final pay would have been 18,000, then the pension would be calculated as: 1/60 x 3 x 18,000 = a year Retirement grant This is a lump sum, normally tax-free. It is provided automatically as part of the benefits package in respect of membership before 1 April It is worked out in a similar way to the pre 1 April 2008 pension except that the fraction used in the formula is 3/80 rather than 1/80. For example, using the details in the first example of the calculation of a retirement pension shown above, the automatic retirement grant would be: 3/80 x 32 x 24,000 = 28,800 You can elect to provide a lump sum in respect of a pension which is based on membership after 31 March 2008, or increase the automatic lump sum provided on membership before 1 April To do this, you give up ("commute") part of your pension. For each 1 of pension you commute, you would receive 12 as a lump sum retirement grant. The total lump sum, however, would be subject to limits set by HM Revenue and Customs. 14

15 Additional Protection if you are nearing retirement If you were a member of the scheme before 1 April 2014 there are additional protections in place if you are nearing retirement. This is to ensure that you will get a pension at least equal to that which you would have received in the scheme had it not changed on 1 April This protection is known as the underpin. The underpin applies to you if you were: an active member on 31 March 2012, and you are within 10 years of your protected NPA on 1 April 2012, and you haven t had a continuous break in active membership of a public service pension scheme of more than 5 years (after 31 March 2012), you've not drawn any benefits in the LGPS before protected NPA, and you leave with an immediate entitlement to benefits. The underpin will not apply to you if you elect to opt out of the scheme before your protected NPA or you wish to draw benefits from an age where you would have required employer consent to do so under the pre 1 April 2014 scheme (normally before age 60). If you are covered by the underpin a calculation will be performed at the date you cease to contribute to the Scheme, or at your protected NPA if earlier, to check that the pension you have built up (or, if you have been in the 50/50 section of the scheme at any time, the pension you would have built up had you always been in the main section of the scheme) is at least equal to that which you would have received had the scheme not changed on 1 April If it isn t, the difference will be added into your pension account when you draw your benefits. Your Pension Fund administrator will carry out this underpin check if you meet the criteria above. Variations If you retire before NPA and do not have the "Rule of 85" protection (see the explanation on page 26 and the separate Rule of 85 Notes on the pension fund website at Members/Pension-Scheme-Information/Pension-Scheme-Information.aspx) your pension may be reduced. If, however, you retire after NPA, there may be an increase applied to your benefits to reflect late payment. But you must draw your benefits before you reach age 75. If your pension is a very small amount below limits set by HM Revenue and Customs Staffordshire County Council as the administering authority may decide to convert it into a one-off, lump sum payment. Certain court orders issued on divorce or the dissolution of a civil partnership may affect the amount of your pension see page 22. "Can I lose my pension" on page 22 explains other circumstances where retirement benefits may be withdrawn or reduced. 15

16 FLEXIBLE RETIREMENT Scheme employers have the discretion to allow flexible retirement for an employee aged 55 or over who, with the employer's consent, reduces hours or grade. If the employer chooses to exercise this discretion, all or part of the accrued benefits can be paid even though the person may remain in employment. The benefits would normally be subject to an actuarial reduction to reflect early payment although the employer has a further discretion to waive this reduction. ILL-HEALTH RETIREMENT The LGPS makes provision for those who have their employment terminated because they a) are permanently incapable of discharging efficiently the duties of their employment because of illhealth or infirmity of mind or body; and b) are not immediately capable of undertaking any gainful employment (in or outside, local government). There are three tiers of award depending upon when a member may be capable of gainful employment. In this context "gainful employment" means "paid employment for not less than 30 hours in each week for a period of not less than 12 months". A first tier ill-health award is paid if the employer determines that the Scheme member is unlikely to be capable of undertaking any gainful employment before NPA. The pension would be the amount built up to the last day of service plus an "enhancement" of the pension which would have been built up between that date and NPA. There would be no review of entitlement to this pension. A second tier ill-health award is paid if the employer determines that, although the Scheme member is unlikely to be capable of undertaking gainful employment within 3 years of leaving the employment, it is likely that he/she will be so before NPA. The pension would be the amount built up to the last day of service plus an "enhancement" of 25% of the pension which would have been built up between that date and NPA. There would be no review of entitlement to this pension. A third tier ill-health award would be paid if the employer determines that it is likely that the Scheme member will be capable of undertaking gainful employment within 3 years of leaving the employment. The pension would be the amount built up to the last day of service. There would be no "enhancement" as in the case of a first or second tier pension. Payment of the pension would cease (and benefits deferred) a) as soon as the member obtains gainful employment (there is an obligation on the member to keep the former employer informed of employment status), or b) following medical review after 18 months if the former employer considers that the member has become capable of undertaking gainful employment, or c) after 3 years if payment has not already been terminated under a) or b) and the member has not reached NPA. The employer can revise a third tier award to a second tier award within certain time limits. Benefits would be increased from the date of the subsequent determination. For a person who was a Scheme member before 1 April 2008 and who had attained age 45 before that date, the enhancement of a first or second tier award must not be less than he/she would have received under the LGPS Regulations Medical opinions for ill-health awards would be sought from an independent registered medical practitioner qualified in occupational health medicine, selected by the Scheme employer and approved by the administering authority. 16

17 WHAT IF I CHOOSE TO LEAVE BEFORE I CAN GET A PENSION? If you leave your employment and/or the LGPS before you can draw your pension, the options open to you will depend upon your length of membership, circumstances and choice. Refund If you have been a member of the LGPS for less than 2 years you can ask for a refund of your contributions provided you do not re-join the Scheme within one month and one day. A refund may not be payable if you have transferred in previous pension rights, or are continuing in a separate post held at the same time. Deductions for tax are made from the refund (this is a pension fund tax which is deductible even if you do not pay income tax). Deductions are also made in respect of any higher National Insurance contributions you would have paid, if you had not been a LGPS member. Even if you do not request a refund, your contributions may be refunded to you 5 years after leaving unless you have asked for a transfer of pension rights to another pension arrangement or have registered that your contributions should remain in the Fund pending your decision. Transfer of pension rights Regardless of length of membership you can ask for pension rights to be transferred and added to membership in another local government employment, or offered in the form of a "transfer value" to another pension arrangement. A transfer value is calculated by working out the value (or notional value) of deferred benefits and applying actuarial factors. In effect, it is the value of your pension rights expressed as a lump sum. Compare the offer of benefits the CETV would purchase in the new scheme with any alternative benefits in the LGPS before making your decision about transferring pension rights. Have regard to any time limits for decision and, if you feel it appropriate, you may be required to seek independent financial advice from a Pensions Transfer specialist (advisers may charge for this service) before deciding whether or not you wish the transfer to proceed. Deferred benefits If you have 2 years or more membership or, if less, have had a transfer of benefits from another pension scheme into the LGPS, you have entitlement to deferred benefits. This means that a retirement pension (and retirement grant if you have membership before 1 April 2008) is calculated by adding the value of your pension account at date of leaving to the pension calculated using your period of membership and final pay at date of leaving if you have membership before 31 March 2014 (see page 13 for the method of assessment). Your benefits are then held in the Pension Fund pending the earliest date at which they can be paid. While in the Fund are subject to Pensions Increase to keep up with inflation (see page 21). If, while your benefits are deferred, you are certified as having a medical condition which makes you permanently incapable of carrying out the duties of your former employment and which is likely to prevent you from undertaking any gainful employment before reaching NPA or for at least 3 years whichever is the sooner payment of the benefits can commence in full immediately if you so elect, regardless of age. If not paid earlier on health grounds, the benefits will be paid in full at NPA. You can, however, elect to take them earlier or later than this (but no later than age 75). If you are aged 55 or over but under NPA, you can apply to Pension Services for payment. However the benefits would normally be reduced unless you are a longer serving member who satisfies the "Rule of 85, or your (former) employer allows the reduction to be waived on compassionate grounds. Contact your employer for information about how they would use this discretion if relevant. Entitlement to deferred benefits is cancelled if you choose to transfer the benefits to another pension arrangement. (This option is not available if you are entitled to deferred benefits upon the termination of a third tier ill-health award see page 16.) 17

18 DEATH BENEFITS The benefits payable upon the death of a LGPS member will depend upon whether the person was still in employment and contributing to the Scheme, or had deferred benefits, or was a pensioner (i.e. receiving payment of benefits) at the date of death. The range of death benefits includes: a death grant a pension for a surviving spouse (widow(er)), civil partner or cohabiting partner pensions for eligible children. Further information on the level of death benefits that would be payable can be found in the information booklet What is payable in the event of my death which can be found on the Staffordshire Pension Fund website Death grant Staffordshire County Council as administering authority has total discretion as to the recipient of a death grant but can take your wishes into account if you have completed a "nomination" form. Ask your employer or Pension Services for a form if you have not already received one and wish to make a nomination. In the absence of a valid nomination (see the requirements on the nomination form), the County Council will usually pay the death grant to the legal personal representatives of the deceased on sight of Grant of Probate or Letters of Administration. The nomination form can be found at the website address above. 18

19 CAN I PAY EXTRA FOR MORE PENSION? If you would like to improve your pension income in retirement you could consider: buying additional pension in the LGPS, paying into an Additional Voluntary Contribution arrangement, paying into a Free Standing Additional Voluntary Contribution arrangement, or setting up a personal pension or stakeholder pension. Additional pension in the LGPS You can buy additional pension in the LGPS by the payment of Additional Pension Contributions ("APCs"). You can pay APCs to buy up to a maximum of 6,578* annual pension. The contributions would attract tax relief and you can pay as a one-off lump sum or choose to pay monthly contributions from your pay for a longer period (from 12 months up to the distance between the date you commence paying and Normal Pension Age in whole years). The same method can be used to buy additional pension or to buy back lost pension due to absence. If you are interested in this option, please visit both Staffordshire Pension Fund s website at the address below and the national LGPS website at where you can find an online calculator, which will allow you to assess the cost. Please note, if you wish to commence payment of APCs over an ongoing period of more than 12 months, you will have to take a medical at your own expense to certify that you will be medically capable of working for the length of the contract. A form for this is available on Staffordshire Pension Fund s website at * 6,578 is the limit for APCs at 1 April 2015 this value is increased each year in line with inflation. Details of the current APC limit can be found on the pension fund website at the above address. Additional Voluntary Contributions (AVCs) You can pay additional contributions into an AVC arrangement which the Staffordshire Pension Fund has with a life assurance company. You would have tax relief on the contributions and would build up your own account. A number of investment routes are offered. When you retire you use the money in your AVC account to buy an annuity (this need not be from the same company) and/or take a tax-free lump sum. In certain circumstances you can use the money in your AVC account to buy additional LGPS benefits. If you are interested in this option, please see the Staffordshire Pension Fund website for details on Improving your Benefits. Shared Cost Additional Voluntary Contributions ("SCAVCs") In an ordinary AVC arrangement you alone would pay contributions into your account. Under a Shared Cost Additional Voluntary Contribution Arrangement your employer, too, would pay contributions. The setting up of such an arrangement, however, is totally at the discretion of your Scheme employer who would give you details. Free Standing Additional Voluntary Contributions ("FSAVCs") If you are interested in paying AVCs you are not restricted to paying them into the Pension Fund's arrangement with a life assurance company; you can set up a Free Standing Additional Voluntary Contribution arrangement with any FSAVC provider, e.g. an insurance company, bank, etc. Because FSAVCs are not linked to the Staffordshire Pension Fund you should seek independent financial advice about the options available to you. Employer's discretion to improve benefits A Scheme employer has certain powers to improve the benefits of LGPS members which it may use, for example, as part of its recruitment or early retirement policies. The employer can resolve to award additional pension of up to 6,578 a year. 19

20 Stakeholder and Personal Pension Schemes Once, it was not possible to be a member of the LGPS and, in respect of the same employment, to contribute to a stakeholder pension scheme or a personal pension scheme. The tax rules that prevented this were gradually relaxed and from 6 April 2006 it became possible. If you choose to do this, however, you must make your own pension arrangements through a financial provider. Staffordshire County Council do not offer these products. Financial advice If you would like to improve your expectation of retirement benefits in some way, but are uncertain which option would be the right one for you, you may find it helpful to seek the assistance of a suitably qualified independent financial adviser (who may charge for this service). The Pension Services Section of the County Council can give you information about your options but cannot offer advice. Further information on all of the options available can be found on Staffordshire Pension Fund s website at 20

21 WILL MY PENSION INCREASE AT ALL? All LGPS pensions, whether in payment or deferred, your own or a dependant's, are normally increased each year in line with Pensions Increase Acts and Orders. Up to State Pension Age you will receive Pensions Increase with your instalments of LGPS pension. If, after reaching State Pension Age, you start to draw your Basic State Pension and you have entitlement to a Guaranteed Minimum Pension (GMP) the Department for Work and Pensions takes over partial responsibility. It will pay, as part of your State Scheme Pension, a sum equivalent to all Pensions Increase due on the GMP accrued between 6 April 1978 and 5 April 1988 and part of the Pensions Increase due on the GMP accrued between 6 April 1988 and 5 April 1997 (the balance is paid with your LGPS pension). While you are paying into your pension as an active member, the amount of pension in your pension account (after 1 April 2014) is increased in line with HM Treasury Orders. 21

22 CAN I LOSE MY PENSION? You could lose your rights under the LGPS if convicted of an offence in connection with your employment which harms the State or is liable to lead to serious loss of confidence in the public service. If your employer suffers financial loss in respect of your misconduct, steps can be taken to recover the loss from your benefits, subject to a court ruling in the event of a dispute over the sum to be recovered. Benefits cannot be assigned nor used as security for a loan. DIVORCE, DISSOLUTION OF CIVIL PARTNERSHIP, ANNULMENT, JUDICIAL SEPARATION: EFFECT ON PENSION RIGHTS In the event of divorce, dissolution of civil partnership, annulment, or judicial separation, a court may order a pension scheme to pay all or part of a member's benefits to his or her former spouse or civil partner under an "earmarking" order or a "pension sharing" order. The court will look for a fair apportionment of property and assets and the pension rights of both parties must be taken into account. To this end, pension scheme managers are asked to provide a valuation of benefits. Pension Services would provide the valuation in accordance with factors and guidance provided by the Government Actuary. They will also provide all the other information about pension rights as required under divorce/dissolution legislation and take appropriate administrative action if an order is made. A charge is made for certain aspects of this administration. Earmarking Order An earmarking order could apply to all or part of your retirement pension or retirement grant. If you have already retired, the order may require immediate payment of pension to your former spouse or civil partner. If you are an active or deferred member, the order would not have effect until such time as benefits become payable. The court could also, or instead, issue an earmarking order in respect of a death grant so that all or part would be paid to your former spouse or civil partner. Pension Sharing Order Unlike an earmarking order which does not take effect until benefits become due, a pension sharing order would have immediate effect. The court would instruct that a percentage of the value of your benefits should be deducted to provide "pension credit rights" for your former spouse or civil partner. The pension credit rights remain in the LGPS until your former spouse or civil partner is eligible to draw them, or until he/she requests them to be transferred to some other pension arrangement. Pension credit rights If the former spouse or civil partner (who becomes a "pension credit member" of the LGPS) does not request a transfer of pension credit rights to some other pension arrangement, entitlement under the LGPS is as follows. A pension credit member has entitlement to an annual pension. A lump sum may also be payable provided the Scheme member had not already received a retirement grant at the date the pension sharing order takes effect. The benefits will normally be paid from NPA. Or, at the pension credit member s request, they can be paid earlier, from age 55 or over. But benefits paid before NPA will be reduced to reflect early payment. If the pension credit member has already reached NPA at the date of the order, the benefits would be put into payment immediately. The benefits are increased each year in line with Pensions Increase Acts and Orders. If the pension credit is very small (as defined in tax rules) it can be commuted to a lump sum at State Pension Age. 22

23 If a pension credit member is below age 75 and dies before the benefits have become payable, there is a lump sum death grant equal to 3 times the annual rate of pension that would have been paid to that person. If a pension credit member is below age 75 and dies after the benefits coming into payment, there is a lump sum death grant equal to 5 years of the annual rate of pension less instalments already paid. Pension credit benefits cannot be combined with any other benefits payable under LGPS Regulations. Further information about earmarking and pension sharing More detailed notes (including the charging policy for pensions work undertaken in connection with earmarking and pension sharing) are available from Pension Services (see page 27 for contact details). 23

24 HELP FOR MEMBERS AND RIGHTS OF APPEAL Some decisions about your pension rights will be made by your employer and some by Staffordshire County Council as the fund administering authority. Initially if you are unhappy about something it would be helpful first to get in touch with your employer or with the Pension Services Section of Staffordshire County Council (see address on page 27). A problem may have arisen because of a misunderstanding or a simple error which is easy to correct without need to resort to formal appeal arrangements. If your problem cannot be resolved informally in this way, then there are various procedures and persons by which and to whom you can appeal. Full notes about all the appeal routes and time limits can be obtained from the Pension Services Section, but a brief outline is given below. Internal Dispute Resolution Procedures ("IDRPs") The Pensions Act 1995 requires all occupational pension schemes to have Internal Dispute Resolution Procedures. These procedures give scheme members and their dependants a right to have their grievance heard. The LGPS has a two stage process. Details and forms are available from Pension Services. The Pensions Advisory Service The Pensions Advisory Service is available at any time to assist pension scheme members and beneficiaries in connection with any pensions query they may have or any difficulty which they have failed to resolve with pension scheme administrators. The Service cannot enforce pensions action but, if felt appropriate, could recommend a person to put his/her case to the Pensions Ombudsman. They can be contacted at: 11, Belgrave Road, London, SW1V 1RB The Pensions Ombudsman The Pensions Ombudsman can investigate a pension scheme member's complaint of maladministration or a dispute of fact or law between a scheme member and the pension scheme managers or employer. However, the Ombudsman cannot help if court proceedings have begun in respect of the dispute and will expect the case first to have been put through IDRPs and, normally, investigated by the Pensions Advisory Service (see previous page). The Pensions Ombudsman can be contacted at: 11, Belgrave Road, London, SW1V 1RB The Pensions Regulator The Pensions Regulator is a regulatory body which came into existence on 6 April 2005 having been set up under the Pensions Act (It replaced the earlier Occupational Pensions Regulatory Authority.) It ensures that schemes comply with the law. It deals with issues about pension schemes as a whole. It does not deal with queries about individuals' pension benefits but recommends that a person seeking free information and advice on all types of pensions should approach The Pensions Advisory Service. The Tracing Service The Department for Work and Pensions (DWP) offers a Pensions Tracing Service. Someone who changes employment periodically could gain a number of small pensions but lose contact with the administrators of the scheme holding each pension, particularly if the company that provided the scheme goes out of business or is taken over by another. All pension schemes have to be registered and the Tracing Service can help former members and/or their dependants trace "lost" pension rights. The Tracing Service can be contacted online at the government website: 24

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