Employers Meeting 14 January 2015 01 Agenda for this morning - - PowerPoint PPT Presentation

Shropshire County Pension Fund Employers Meeting 14 January 2015

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Agenda for this morning

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Understanding Ill Health Retirements 09.30-10.15

Debbie Sharp, Pension Administration Manager

LGPS Data Requirements 10.15-11.00

Cheryl Morrell, Pension Systems & Support Lead Rebecca Purfit, Communications Officer

Break 11.00-11.15 The Pensions Regulator 11.15-12.15

Robert Plumb, Scheme Liaison Manager

Questions 12.15-12.30 Close 12.30

Understanding Ill Health Retirement Debbie Sharp Pension Administration Manager

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What is Ill Health Retirement?

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• Important protection for current and former (deferred) LGPS

members

• Early payment of pension (and lump sum if applicable)
• Enhancement in some cases (current members only)
• Three tier benefit structure for current members
• One tier benefit structure for deferred members
• Employers decision to terminate employment and award

benefit

What do the regulations say? Active Member

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Regulation 35. —(1) An active member who has qualifying service for a period of two years and whose employment is terminated by a Scheme employer on the grounds of ill-health or infirmity of mind or body before that member reaches normal pension age, is entitled to, and must take, early payment of a retirement pension if that member satisfies the conditions in paragraphs (3) and (4) of this regulation (3) The first condition is that the member is, as a result of ill-health or infirmity of mind or body, permanently incapable of discharging efficiently the duties of the employment the member was engaged in. (4) The second condition is that the member, as a result of ill-health or infirmity of mind or body, is not immediately capable of undertaking any gainful employment.

What do the regulations say? Deferred Member

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• Depends on the date the member left your

employment/scheme

• Determines certificate to be completed
• 1997
• 2008
• 2014

Employer Responsibilities Active Member

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• As the employer you must separately decide:

– Is the employee fit to continue in their current employment? – Are they entitled to an ill health pension? – What tier of benefits should they receive?

• Your pension decision must be informed by the
• pinion of an Independent Registered Medical

Practitioner (IRMP)

• But ultimately these are employer decisions
• Popular subject for creating appeals – Important to

get it right!

Decision 1: Is the employee fit to continue in their current employment?

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• Make this decision after receiving

employment advice from your OH advisor

• Examples:

– Temporary illness that is taking several months to treat – Potentially permanent condition for which normal medical treatment regimes have not yet been exhausted – Permanent condition where treatment has now finished

Decision 2: Is the employee entitled to an ill health pension?

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• To be entitled to an ill health pension the

employee must:

– be below NPA – be dismissed on grounds of ill health – have a least two years qualifying service* – be permanently incapable of discharging efficiently, the duties of their current employment – Not be immediately capable of undertaking gainful employment – have been certified by the IRMP as meeting the ill health pension criteria

*Not just 2 years in current employment, they may have other qualifying service.

What does Permanently Incapable mean?

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• The member will, more likely than not, be incapable

until, at the earliest, his/her Normal Pension Age

• Please note ‘normal pension age’ is now the

individual member’s State Pension Age, or age 65 if later.

• “More likely than not” is key
• Probability Test - If a member would, on the

balance of probabilities, recover sufficiently to be capable of undertaking their current/former employment before their normal pension age they cannot be said to be permanently incapable

What is ‘Gainful Employment’’?

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• Any paid employment of at least 30 hours in

each week for a minimum of 12 months

• A permanent variable hours contract only

becomes gainful employment when a pattern

• f 30 hours has been established
• A full-time fixed-term contract of less than 12

months is not gainful employment

• Could become gainful employment if

consecutive fixed term contracts extend to a year or more

Decision 3: What benefit is the employee entitled to?

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• Once you decide that someone is entitled to an ill

health pension, you will need to decide what level of benefits to award them

• The IRMP will indicate their medical opinion as to

which tier of benefits is appropriate but it is your decision not the IRMP’s

• This is an important decision as it will determine:
• whether or not the employee is entitled to any

enhancements

• whether the pension is permanent or temporary

Ill Health Tiers

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• There are three tiers of ill health

benefits….

Ill Health Tiers

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• There are three tiers of ill health benefits:

Maximum 3 years but will cease if members obtains,

• r becomes

capable of

• btaining gainful

employment

Ill Health Liability Insurance?

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Products are available but there has not been an appetite for them in Shropshire as yet…..

Ill Health Guidance

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On the secure area of our website you will find:

• Guidance
• Copies of certificates to be completed by IRMP

(different for each type of member)

• List of IRMP’s
• Leavers form

Is there anything else you would find helpful?

• Wording for letters?
• Flow charts?
• Ill Health pension checklist?

Employment vs Pension issues

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• Two separate processes that come together

towards the end

– Are you going to continue to employ this person? – Are they eligible for an ill health pension?

• For success you have to manage the

employees expectation

• Never promise a pension until the IRMP has

signed the certificate that in their opinion they meet the criteria and you agree

Preparing referral to the IRMP

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• Meet with employee to explain ill health process
• Ensure all relevant medical information included – audit before

referral and check with employee

• Provide copy of the relevant documents
• Be very clear about the duties of the job
• Focus on those duties the employee finds difficult with their

medical condition

• Be specific: “is expected to carry a 15Kg sack 100m at least

twice a day”

• Detail any adjustments made to help employee manage their

ill health

• Keep delays to a minimum

Preparing referral to the IRMP (cont)..

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• Are there any other questions you would

like a medical opinion on?

• Who's responsible for medical

information release?

• Ensure correct certificate is provided (all

certificates on our employer pages)

Why it matters – Mr Beckham

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• Is a groundsman
• He is suffering from a relatively minor but

permanent balance problem which means he can’t walk in a straight line

• OH doctor told: Job description = care of the school

playing fields including grass mowing, rolling, maintenance of pitches and associated equipment.

• Do you think he is permanently incapable?
• Does your opinion change if you’re told 50% of his time is

spent maintaining the pitch markings using a white line machine?

Timeliness is essential

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• Make the decision to refer as quickly as possible
• May not be in employees best interest to delay decision
• Keep the time between consultants reports being

received and referral to a minimum

• Once IRMP opinion received suggest

move to dismissal quickly

After Receiving Independent Registered Medical Practitioners (IRMP) Opinion

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There are a number of steps you will need to take once you receive a completed Ill Health Certificate

• Step 1: Make formal decision regarding pension entitlement
• Start with the Independent Doctors opinion related to decision
• n tier
• Consider any suggested alternative employment
• Capable of undertaking NOT capable of obtaining
• Look at things the Dr can’t – non-medical factors, e.g skills and

competencies

• Ensure how you made your decision is captured on file
• Step 2: Inform the employee of the outcome of the referral to the

IRMP and your decision and agree a dismissal date

• Step 3: Inform the Pensions Team

What does the pension team need from you?

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 Completed leavers form - PEN006  Copy of the certificate completed by IMRP  If decision is different to IRMP certificate – supporting documents and reason for your decision must be included  P45 (if available) – this should be sent in order for income tax deductions from the pension to be assessed  Notice letter to Employee Make sure you keep the originals on file!

Tier 3 Review

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• Tier 3 ill health pensions are a temporary award for a

maximum of three years

• There is a specific requirement that you review any Tier 3

pension cases in the following circumstances:

• after 18 months
• if the pensioner obtains employment
• is capable of obtaining employment
• if the pensioner asks
• at the end of the three year period when the

pension should cease unless you choose to upgrade to Tier 2

Ill Health Requests from Deferred Members

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• You may receive requests for deferred ill health

pension from:

• Former employees
• Active employees who have opted out of the

scheme

• Employees who are current members but also

have a deferred pension

• This is your decision - not a Fund decision
• Can only receive unenhanced benefits

Deferred ill health pension – Eligibility

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• Remember different regulations will apply depending
• n date of leaving relevant membership
• If the IRMP signs the certificate to say the person

meets the criteria, you will award the pension

• Different certificates for IRMP to complete depending
• n when membership occurred
• Referral process similar to active

No job Description Available?

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• A common problem for deferred into payment
• Don’t delay – do best guess
• Focus on the duties not the how
• Start by asking the ex-employee if they have a copy
• Use a current JD for an employee doing something

that sounds similar

• Get the ex-employee to agree the JD
• This doesn’t have to be something you’d use for a job

evaluation – it simply needs to list the key duties

LGPS Data Requirements Cheryl Morrell Pensions Systems & Support Lead Rebecca Purfit Pension Communications Officer

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Discussion points

• Why is data from employers needed?
• What is needed?
• How you tell us?
• Why it is so important?

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Legal requirements

• Local Government Pension Scheme (LGPS) Regulations

……..1992, 1997, 2008, 2014

• Public Service Pensions Act
• Disclosure Regulations
• Record Keeping Regulations
• The Pensions Regulator
• HMRC Regulations
• The Occupational Pension Schemes (Contracting-out) Regulations 1996
• The Occupational Pension Schemes (Transfer Values) Regulations 1996
• The Occupational Pension Schemes (Internal Dispute Resolution

Procedures Consequential and Miscellaneous Amendments) Regulations 2008

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Data provided by you is key

Data Requirements - ongoing Data Requirements - periodic/less regular New starts/opt ins Year end returns Leavers/retirements/opt outs Monthly contributions/lists Hours changes Any AVCs to Prudential Secondments IAS19/FRS17 requirements Changes in job Valuation requirements Paid/unpaid leave Discretionary policies Name Employer contact details Marital status Authorising signatories Move to 50:50 or back to full section Address changes Pensionable pay under 2008 and 2014 definitions!

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Employers role in the LGPS

• Membership of the LGPS is an important part of an

employment package

• Both employer and admin responsibilities in Shropshire

County Pension Fund is summarised in our:

• Administration Strategy Statement
• Governance Compliance Statement
• How to meet your responsibilities covered in Employers

Guide on our website

• Further guidance on www.lgpsregs.co.uk including HR,

Payroll Guides and Technical Guidance

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Some Administering Authority Responsibilities

• The appropriate administering authority must decide any

question concerning-

– A person’s previous service or employment; – The amount of any benefit, or return of contributions, a person is

• r may become entitled to out of a pension fund
• Notify the scheme member ‘as soon as is reasonably practical’
• An administering authority must issue an annual benefit

statement by 31st August 2015 (new deadline – previously October)

• Where all or part of a pension or lump sum payment due is not

paid (generally within 1 month) an administering authority must pay interest on the unpaid amount

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Some Employer Responsibilities

• Contribution payments (by 19th) must include a statement with:
• Pensionable pay and assumed pensionable pay (split if some

during a period of 50:50)

• Employees’ basic and additional contributions deducted
• Employers basic and additional contributions
• Also required at year end
• A scheme employer must –
• Inform the appropriate administering authority of all decisions (e.g

taking someone into the scheme); and

• Give that authority such other information as it requires for

discharging its functions

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How should data be provided?

• Interfaces – SC & T&W payroll services
• Monthly return spreadsheet – (ex SC & T&W payroll services)
• PEN Forms
• Email confirmation (if requested)
• iCONNECT

By who?

• PEN forms can only be signed by Authorising Signatory
• Ensure you let us know when your ‘Pension Person’ leaves
• The member can inform us of any changes of personal details but ‘key’ data

supplied by employer All guidance can be found on our website www.shropshirecountypensionfund.co.uk

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Data Requirements - New Starters

• All eligible members must be issued with a New Member Form and

a Brief Scheme Guide – within 6 weeks of starting in the LGPS

• Can be issued electronically if employee has access and you have

these details

• Must inform employee of contribution rate and right of appeal
• Can be included in contracts of employment
• Ensure employer and employee contributions are automatically

deducted from pay

• Include new member details on the monthly return spreadsheet or

alternative method

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Data Requirements - Contributions

• 9 contribution rates/ pay bands
• Rate is based on actual pensionable pay – and includes
• vertime/additional hours
• Have you made a policy on how often you will reband?
• Must reband each April but consider

throughout the year

• Contributions must be paid to Fund by 19th
• f following month – the total of employees

and employers contributions must be notified to the team at the time of payment.

Data Requirements - Changes to Circumstances

• Personal Details – Form PEN001/Interfaces/Monthly Return

Name changes Marital status Address Change in contribution rate, etc

• Hours Changes – Form PEN002/Interfaces/Monthly Return

Only required for anyone covered by the underpin i.e. anyone who was over 55 on 31 March 2012

• Absences –

Strikes (agreed template) Paid/Unpaid leave – PEN004 Parental Absences (maternity, adoption etc) – PEN005 Ensure you inform employees within 30 days

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Data Requirements - Extra Contributions

• Additional Pension Contributions (APCs)
• Members can buy extra pension
• Buy lost pension (Shared Cost Additional Pension Contribution

SCAPC)

• Additional Voluntary Contributions to the Prudential (AVCs)
• Additional Regular Contributions (ARCs)
• Extra contributions must be recorded separately

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Data Requirements - Leavers

• Must complete a leavers form for each member leaving the scheme
• Allows the Pensions Team to calculate benefits
• Flexible/Redundancy/Ill Health Retirements – extra information

required

• Deaths – including information on next of kin
• Opt Outs
• You must tell us who your opt outs are.
• Pensions Team must have a record of all opt outs

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Have employees who are thinking of retiring? Some general points to note:

• Early retirement before Normal Pension Age – employees advised to

check reductions

• Flexible, ill health, redundancy - employers consent required
• Until final pay is known - only provisional figures available
• Forms to complete – decisions to be made
• Can convert pension to lump sum
• EMPLOYEES SHOULD NOT EXPECT PAYMENT THE DAY THEY RETIRE
• Pensions are paid on the 29th of each month
• Lump sum ASAP
• Change to final pay will affect benefits

The Retirement Process

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Data Requirements - CARE Pay and 2008 Pay Definition

• Two definitions of pensionable pay – 2008 and 2014 definitions
• Very similar except for some key exclusions:
• 2014 definition does include overtime/additional hours
• 2014 definition uses ‘actual’ pay
• 2008 Full Time Equivalent for part time employee and only

includes contractual overtime

• Assumed Pensionable Pay:
• To be used in cases of reduced contractual pay or nil pay as a

result of sickness or during child related leave (e.g. ordinary maternity leave – paid)

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Lets take a look..

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What could happen if the wrong data is provided?

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Overpayment example

• Member has significant non contractual overtime (NCO)
• Employer should provide pensionable pay for both including (post

2014) and excluding NCO (for pre 2014) benefits

• Employer only provided figure including NCO

Date of Birth 1 April 1956 Joined the Scheme 1 April 1981 Salary including only contractual overtime £25,000 Non-Contractual overtime £5,000 Total Salary figure provided £30,000

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Impact on member and funding by not separating pre and post 2014 pensionable pay – overpayment

MEMBER Pre 2008 Pre 2014 Post 2014 CARE pension Total Pension Pre 2008 Lump Sum Based on data provided £30,000 x 27/80 = £10,125 £30,000 x 6/60 = £3,000 £30,000 x 1/49 = £612 £13,737 £30,375 ‘Correct’ £25,000 x 27/80 = £8,437 £25,000 x 6/60 = £2,500 £30,000 x 1/49 = £612 £11,550 £25,313 FUNDING Approximate Liabilities (using a factor of 20) Based on data provided (£13,737 x 20) + £30,375 = £305,115 ‘Correct’ (£11,550 x 20) + £25,313 = £256,313

+ £48,802 funding difference £2187 overpayment per year and £5062 lump sum

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Date of Birth 1 April 1969 Joined the Scheme 1 April 1989 Actual Salary earned £15,000 APP £30,000 Salary figure provided £15,000

Underpayment example

• Member off sick for long periods over a year
• Employer should provide Assumed Pensionable Pay (APP) to

compensate

• Actual pensionable pay figure provided instead

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MEMBER Pre 2008 Pre 2014 Post 2014 CARE pension Total Pension Pre 2008 Lump Sum Based on data provided £30,000 x 27/80 = £10,125 £30,000 x 6/60 = £3,000 £30,000 x 1/49 = £612 £13,737 £30,375 ‘Correct’ £25,000 x 27/80 = £8,437 £25,000 x 6/60 = £2,500 £30,000 x 1/49 = £612 £11,550 £25,313

Impact on member and funding by not providing Assumed Pensionable Pay (APP) – underpayment

MEMBER Pre 2008 Pre 2014 Post 2014 CARE pension Total Pension Pre 2008 Lump Sum Based on data provided £15,000x 19/80 =£3,562.5 £15,000x 6/60= £1,500 £15,000x 1/49= £306 £5,369 £10,688 ‘Correct’ £30,000x 19/80 =£7,125 £30,000x 6/60= £3,000 £30,000x 1/49= £612 £10,737 £21,375 FUNDING Approximate Liabilities (using a factor of 20) Based on data provided (£5,369 x 20) + £10,688 = £118,068 ‘Correct’ (£10,737 x 20) + £21,375 = £236,115

• £118,047 funding

difference £5,004 underpayment per year and £10,687 lump sum

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Extreme examples…

….but important to be aware of the implications of not providing the correct data! Other repercussions

• Valuation results / FRS17 / Reputational damage

For members:

• Slows down retirements, transfers, refunds etc.

For employers:

• Slows down providing estimates etc.

When it goes wrong….

• Internal Disputes Resolution Procedure
• Pensions Ombudsman
• The Pensions Regulator (oversight from April 2015)
• Fines for not meeting legal requirements

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Data Quality

What are we doing to improve Data Quality?

• Introduction of monthly returns for all employers
• Online guidance
• iCONNECT - 40+ employers using by 31 March 2015
• Automation and good controls reduces manual risk
• Aim is for real time data transfer
• Transfer data from Employer System to Pension

System

• Better for employer, pension fund and scheme

members

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Any questions? Further Information

Website: www.shropshirecountypensionfund.co.uk Dedicated employer area User name: Employer Password: Pensions1 Telephone: 01743 252130

Thank you for listening

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