Dear Brother/Sister,
Following the conclusion of negotiations between GMB, Unison, Unite and the Local Government Association (LGA), the FBU were presented with the proposals for the new Local Government Pension Scheme for England and Wales.
These proposals, including the benefit and contribution structure for the LGPS, will need to be discussed with members involved before the union can give its position to a Trade Union side meeting.
The proposals contained in this document replace the previous government proposals and outline a new scheme, LGPS 2014. This is due to start on 1st April 2014 and apply to all service that is accrued from that point.
Unlike the position proposed in other public sector schemes, including the firefighters' schemes, there will not be any changes to benefits or contribution rates before that date.
The key points of the proposal are highlighted below:
a) The LGPS 2014 will be a defined benefit career average scheme with a 1/49th accrual.
b) Previous service earnings will be revalued by CPI.
c) All accrued pension (pension built up before and up to 1st April 2014) will retain the link to final salary and current normal pension age.
d) Most members will pay the same contributions in the new scheme as they do now. This is covered in more detail later in this document.
e) The normal pension age will reflect the state pension age and an individual member will have an individual normal pension age in the LGPS 2014 that matches their individual state pension age.
f) Any future outsourced members who are outsourced from direct local government employment will be able to stay in the LGPS.
g) Members who cannot afford to participate in the main scheme can opt for a 50/50 option. This would mean paying half their contribution rate and building up half as much pension as in the main LGPS 2014 while still being covered by full death in service, ill health cover and survivor benefits.
h) All other benefits stay the same as now.
Member Contributions
In LGPS 2014, contributions will be set on the basis of actual pensionable pay which, for the first time, will include non-contractual overtime.
This is different to earlier proposals and means that part timers will not have to work out their full or whole time equivalent earnings, both contributions and benefits will be based on actual pay.
The proposed changes to the contribution bands are shown in the table below.
| Actual Annual Pay | Gross Contribution (2014 scheme ) | Contribution After Tax Relief (2014 scheme) |
| Less than £13,501 | 5.5% | 4.40% |
| £13,501 ' £21,000 | 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% |
| Current LGPS | Gross Contribution |
| Up to £13,500 | 5.5% |
| £13,501 - £15,800 | 5.8% |
| £15,801 - £20,400 | 5.9% |
| £20,401 - £34,000 | 6.5% |
| £34,001 - £45,500 | 6.8% |
| £45,501 - £85,300 | 7.2% |
| Over £85,300 | 7.5% |
Scheme Benefits in brief
There are a number of changes to the proposed benefit structure in the LGPS 2014.
The accrual rate is 1/49th compared to the 1/60th in the current LGPS. This has been achieved by reducing the revaluation rate for previous earnings to flat rate CPI.
The pension age for service in the LGPS 2014 (excluding any past service before 2014) will be linked to the state pension at that time.
This will mean that older members may still have an NPA of 65 while for younger members it could be 66, 67 or 68.
In the event that state pension age increases further, the LGPS 2014 pension age will also increase for all service after 1st April 2012.
A more detailed report on the proposal can be found on the LGPS 2014 website at www.lgps.org.uk
The table below outlines a comparison of the current 2008 scheme and the proposed 2014 scheme.
| Element | LGPS 2008 | LGPS 2014 |
| Structure | Defined benefit | Defined benefit |
| Basis of Pension | Final Salary | Career average revalued by inflation |
| Accrual Rate | 1/60th | 1/49th |
| Revaluation Rate | Not applicable, pension linked to salary on retirement | CPI |
| Contribution Flexibility | No | Yes, members can pay 50% contributions for 50% of the pension benefit |
| Pension Age | 65 | Equal to the member's individual state pension age (minimum 65) |
| Lump Sum Trade Off | £1 of pension for £12 lump sum | £1 of pension for £12 lump sum |
| Death in Service | 3 x pay | 3 x pay |
| Survivor Benefits | 1/160th accrual based on Tier 1 ill health pension enhancement | 1/160th accrual based on Tier 1 ill health pension enhancement |
| Ill Health Provision | Tier 1 - immediate payment with service enhanced to 65 Tier 2 - immediate payment of pension with 25% service enhancement to 65 Tier 3 - temporary payment of pension for up to 3 years |
Tier 1 - immediate payment with service enhanced to pension age Tier 2 - immediate payment of pension with 25% service enhancement to pension age Tier 3 - temporary payment of pension for up to 3 years |
| Indexation of Pension in Payment | CPI | CPI |
| Vesting Period* | 3 months | 2 years |
*Vesting period - is the timeframe in which members can get a refund on their contributions if they leave instead of having a very small pension tied up in the scheme until their retirement.
Protection arrangements
There are several different elements of protections that will apply; some affect all members while others are targeted at specific groups.
Accrued service ' all pension built up before 1st April 2014 will be calculated on the basis of your final pay on retirement and will be accessible at your current normal pension age
Rule of 85 ' members who currently qualify for Rule of 85 protections will continue to have that protection in the LGPS 2014.
If you are aged 57-59 when the new scheme starts, your pension on retirement will be calculated using both LGPS 2008 and LGPS 2014 scheme rules and you will get whichever calculation is better. This is to reflect protection for those closest to retirement that would otherwise be affected by a new pension age and is a general feature of the new public sector pension schemes.
If any members are compulsorily transferred out of LGPS employment they will be able to stay in the LGPS instead of being transferred to a new employer's broadly comparable pension scheme (currently this is up to the new employer).
Next Steps
There will now be a full consultation of affected members to determine their views. Please ensure you attend your meeting and have your say.
Members will receive more information on the proposals as it become available and we will be discussing this further with the CSNC and other affected unions, who will also be consulting their LGPS members.
Yours fraternally,
Matt Wrack
General Secretary
2012HOC0348MW
