The New Look Local Government Pension Scheme

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On 1 April 2008 the Governement introduced a new look Local Governmenet Pension Scheme for England and Wales.

The main features of the new look scheme are:

All active members moved to the new scheme from 1 April 2008.
New employees must have a contract of employment of more than three months to be entitled to join the scheme.
The new scheme provides a pension of 1/60th of final pay for each year of membership in the scheme from 1 April 2008. Membership to 31 March 2008 will be calculated as 1/80th pension plus 3/80ths lump sum.
Scheme members have the flexible option to take a bigger lump sump (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 by giving up some of the pension - for each £1 of pension given up a lump sum of £12 will be paid.
Benefits are calculated on the best one of the last three years' whole time equivalent pay, but scheme members who down-grade (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 31 March).
Normal retirement age is 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 31 March 2010).
Employees can be in the scheme beyond age 65 but benefits must be drawn before age 75. Benefits drawn after age 65 are actually increased to reflect the fact that they are being paid after the normal retirement age of 65.
Immediate benefits are paid on redundancy / efficiency from age 55 (or from age 50 for existing members leaving before 31 March 2010).
There is a three-tier ill health retirement package where employment is terminated because of permanent ill-health and there is reduced likelihood of obtaining gainful employment.
Flexible retirement with employer consent is 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 31 March 2010).
The death in service tax free lump sum has been increased from two to three times pay.
The post retirement lump sum paid on death before age 75 has increased from five to 10 times pension less pension already paid.
Survivor benefits are 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 based on post 5 April 1988 membership only).
Survivor benefits are 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 are tiered according to their whole-time equivalent pensionable pay.
Scheme members can buy additional pension in steps of £250 up to a maximum of £5,000 (to provide a pension for themselves only or to provide a pension for themselves and any survivor on their death) and/or pay Additional Voluntary Contributions (AVCs).
Employers can award up to 10 years extra membership and/or grant extra pension up to a maximum of £5,000.

More Information

Please look around our website for more detailed information about the new look Scheme
You can download our comparison table to see the differences between the old and new Schemes.
Read and download the latest copy of the Pension Changes newsletter. It is produced by Communities and Local Government and aims to keep you up to date with the most recent news about the Local Government Pension Scheme.
You can watch the Local Government Employers (LGE) video which covers the main details of how the new Scheme operates from 1 April 2008.

www.wiltshirepensionfund.org.uk

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The New Look Local Government Pension Scheme

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