Welcome to the Employer Forum May 14 2013 Oaklands Hotel, Norwich - - PowerPoint PPT Presentation

Welcome to the Employer Forum May 14 2013

Oaklands Hotel, Norwich

Agenda

Welcome and Introduction LGPS 2014 update Changes to Employer National Insurance 2013 Valuation Introduction Questions and A.O.B.

Nicola Mark, Head of the Norfolk Pension Fund Mark Alexander, Pensions Manager, Norfolk Pension Fund Alex Younger, Investment and Actuarial Services Manager, Norfolk Pension Fund Nicola Mark, Head of the Norfolk Pension Fund

Coffee will be a ‘moveable feast’!

Gemma Sefton, Hymans Robertson

The LGPS nationally

• National scheme, locally administered
• Local accountability
• Great diversity of membership
• Great diversity of employers
• The LGPS in England:
• 89 Funds
• £ 148 bn*^
• 4.3m Members*

1.6m Active Members 1.3m Deferred Members 1.4m receiving benefits

1 in 5 of the working population is in the public sector Quarter of largest 100 Pension Funds in UK are LGPS

*March 2012 SF3 data; ^ Increase of 52% from March 2009 NB, Wales, Scotland and Northern Ireland data not included here

The Norfolk Pension Fund

At March 2013:

• £2.5 billion
• 173 Employers (up from 117 in March 2011; +5

since March 2013)

+2980 70,540 67,560 Totals +1,047 19,843 18,796 Pensioners +1,587 24,360 22,773 Deferred +346 26,337 25,991 Active Movement 31 March 2013 31 March 2012 Membership

Norfolk Pension Fund membership equates to 1 in 10 of adult Norfolk population

The Norfolk Pension Fund

Membership

Average Pensions in payment:

5,000 10,000 15,000 20,000 25,000 30,000 31st Mar 2008 31st Mar 2009 31st Mar 2010 31st Mar 2011 31st Mar 2012 31st Mar 2013

Norfolk Pension Fund - Membership

Active Deferred Pensioners

• No. of Members

January 2013: average annual pensions in payment were: Pension in own right:

• £5,032 (£419 per month)

Dependants pension:

• £2,667 (£222 per month)

Average pension:

• £4,709 (£392 per month)

The Norfolk Pension Fund

• Own budget

No cross subsidy Savings remain in

Fund

• Cost per member (CIPFA

Benchmarking Club 2012)

£18.31 Norfolk

Pension Fund

• Administration overhead

0.086% of the value of

the Fund

1.45% of benefit

payments

Contributions and Benefits 2012-13 Income from contributions: £ 113 m (£86m employers / £27m employees) Investment income

• c. £100m

Benefits paid: £ 112 m Top quartile in all performance measures

Mark Alexander Pensions Manger Norfolk Pension Fund

LGPS2014 Update

May 2012 – LGA and Unions Proposals for New Benefit Structure

May 2012 – LGA and Unions Proposals for New Benefit Structure

May 2012 – LGA and Unions Proposals for New Benefit Structure

Pre 2014 – Final “Salary” (2008 definition)

Protections … Final Salary AND Career Average

Final Pay (

20 08 definition)

Actual pay

2014 Joining scheme Leaving/Retirement

Underpin – for those within10 years of Normal Pension Age at April 2012

The Long and Winding Road to Regulations

July/August 2012 Initial consultations with employers and unions receive

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support 2 7 M a r c h 2 1 3 D r a f t “ B e n e f i t ” a n d “ T r a n s i t i

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e s 3 / 2 4 M a y 2 1 3 21 December 2012 First Statutory Consultation Closed 8 February 2013 25 April 2013 Public Service Pensions Bill became an Act

What next?

Not necessarily in this order….

• Consultation on “Governance” Regulations
• Final issue of “Benefits” and “Transitional” Provisions legislation
• Issue of “Governance” Regulations
• Results of 31 March 2013 Valuation
• setting of Employer Contribution Rates from April 2014
• Communications with Scheme members and Employers
• Update systems and documentation
• 1 April 2014 !

What can Employers be doing now?

Watch out for news about the changes www.lgps2014.org www.norfolkpensionfund.org

What can Employers be doing now?

Talk to your Payroll/HR provider. Your systems will need to be able to:

• Account for each job an employee has separately
• Operate the scheme based on new definition of pensionable pay (e.g.

including overtime)

• Change contribution rates monthly
• Operate the 50/50 Scheme
• Provide “final pay” on the 2008 definition for leavers and at year end
• Provide “assumed” pay during periods of reduced pay due to sickness etc

LGPS2014

Just 321 days to go…. Mark Alexander 01603 495781 mark.r.alexander@norfolk.gov.uk

Changes to Employer National Insurance

Alex Younger Investment and Actuarial Services Manager, Norfolk Pension Fund

Changes to National Insurance and the Impact on Employer Costs

The introduction of the Single Tier

State Pension (STSP) will mean the end of “contracting out” for defined benefit pension schemes (including the LGPS)

The introduction of STSP has been

brought forward to 6 April 2016

Contracting Out arrangements will

therefore cease at 5 April 2016.

Additional cost pressure for employers

(and employees) from 2016-17 onwards.

What is (was) Contracting Out?

• Employers pay a lower net rate of national

insurance if their employees accrue benefit in the employers own scheme rather than the State Second Pension (S2P)

• Achieved through a rebate mechanism
• The employers rebate is 3.4% of “relevant

earnings” (RE)

• RE currently earnings between approximately

£5,500 and £40,000

• The employees rebate is currently 1.4% of RE
• Current rebate worth around £1,200 to employer

if employee earnings in excess of the upper limit

• n relevant earnings (around £500 to employee).

• Negative impact for employers and employees across all

final salary public sector schemes

• Private defined benefit schemes are able to flex benefits

to achieve cost neutrality to employer and reflect theoretical higher level of state scheme benefits.

• At the current time this option has not been given to any
• f the public sector schemes (including the LGPS)
• Very sensitive given the extended negotiations with public

sector unions over all the major schemes (not yet concluded outside LGPS)

• Employers need to budget for this change

from 2016-17 onwards.

• Increasing cost to employees may

lead to further opt out????

What is the impact?

Questions and ‘A.o.B.’

Thank you for coming Safe journey home

www.norfolkpensionfund.org