Local government pensions: The seven main changes
New local government pension scheme details revealed
EMPLOYERS AND UNIONS have announced the details of a new local government pension scheme which will take effect from 1 April 2014, reports sister publication Professional Pensions. The scheme will have seven major features:
1. A Career Average Revalued Earnings (CARE) scheme using CPI as the revaluation factor (the current scheme is a final salary scheme).
2. The accrual rate would be 1/49th (the current scheme is 1/60th).
3. There would be no normal scheme pension age; instead each member’s Normal Pension Age (NPA) would be their State Pension Age (the current scheme has an NPA of 65).
4. Average member contributions to the scheme would be 6.5% (same as the current scheme) with the rate determined on actual pay (the current scheme determines part-time contribution rates on full-time equivalent pay). While there would be no change to average member contributions, the lowest paid would pay the same or less, and the highest paid would pay higher contributions on a more progressive scale after tax relief (see table below).
5. 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. This is known as the 50/50 option (the current scheme has no such flexible option).
6. For current scheme members, benefits for service prior to 1st April are protected, including remaining ‘Rule of 85′ protection. Protected past service continues to be based on final salary and current NPA.
7. Where scheme members are outsourced, they will be able to stay in the scheme on first and subsequent transfers (currently, this is a choice for the new employer).