Local Government Pension Scheme: update
06 June 2012
Proposals for the new-look scheme from April 2014 have been agreed by the trade unions and the Local Government Association (LGA). Although members and employer groups still need to be consulted on the proposals, the unions and the LGA appear satisfied that the proposals are fair and flexible.
The key changes are a move to a Career Average Revalued Earnings (CARE) scheme for all members from April 2014. The accrual rate (the rate at which the pension builds up) would be 1/49th of pensionable earnings (better than the current 1/60th rate). Each year of pension would then be increased in line with inflation (CPI) for each year until retirement rather than a member’s final salary being used. Each member's normal pension age would be the same as their State Pension Age.
The average member contribution rate would be 6.5% (as at present) but with higher earners paying higher contributions than currently, per the table below:
|Actual pensionable pay (£)||Gross contribution (%)||Contribution after tax relief (%)|
|Up to 13,500||5.5||4.40|
|13,501 - 22,000||5.8||4.64
|21,001 - 34,000||6.5||5.20|
|34,001 - 43,000||6.8||5.44|
|43,001 - 60,000||8.5||5.10|
|60,001 - 85,000||9.9||5.94|
|85,001 - 100,000||10.5||6.30
|100,001 - 150,000||11.4||6.84|
|More than 150,000||12.5||6.88|
However, whereas the contribution rate for part-time members is currently based on their full-time equivalent salary, the rate from 2014 would be based on their actual pay (as would the calculation of pension for post 2014 service).
Members who have already or are considering opting out of the scheme could instead elect to pay half contributions for half the pension, while still retaining the full value of other benefits, such as death in service. This is known as the 50/50 option.
For current scheme members, benefits for service prior to 1 April 2014 are protected. Protected past service continues to be based on final salary and the scheme's current normal pension age.
For further information on the proposals please visit the Merseyside Pension Fund's website at www.mpfmembers.org.uk and click on lgps2014
For other pension queries please contact Jayne Brown (Pensions Manager) on ext: 8756 or email: email@example.com