LOCAL GOVERNMENT PENSION SCHEME by Ku7Ven4j

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									ARE YOU CONSIDERING OPTING OUT OF THE
LOCAL GOVERNMENT PENSION SCHEME?
BEFORE DOING SO TAKE A MINUTE TO UNDERSTAND
THE MAIN BENEFITS OF BEING A SCHEME MEMBER
THIS SHORT GUIDE HAS BEEN PREPARED FOR SCHEME MEMBERS
WITH AN ENTITLEMENT TO A REFUND OF CONTRIBUTIONS

The Local Government Pension Scheme (LGPS) is a very important benefit. Not only will it provide you with
an inflation-proofed income in retirement, payable for life, but it also gives your loved ones financial security in
the event of your death or long-term ill-health.

The LGPS is currently a final-salary scheme (also known as a defined benefit scheme) which means that your
benefits are based on the length of your scheme membership and your final pay and not on the contributions
you pay as with defined contribution ‘money-purchase’ pension schemes. The level of benefits received from
‘money purchase’ schemes is dependent upon the level of contribution paid, investment performance and
annuity rates at retirement. It is much easier to predict the pension that will be paid from a defined benefit
scheme than it is from a defined contribution scheme.

Whilst you can elect to opt out of the Scheme at any time you may wish to seek independent financial advice
before doing so. You should also be aware that as you have less than 3 months membership of the scheme
and have not transferred pension rights into the LGPS from a previous pension scheme, you will only be
entitled to claim a refund of the contributions you have paid less a deduction for income tax and an adjustment
to your National Insurance contributions in order to buy you back into the State Pension Scheme.

The amount you pay into the LGPS is                    Band          Salary Range            Contribution Rate
assessed by your employer in line with the              1             £0 - £13,500                 5.5%
table to the right and in accordance with how           2       Over £13,500 to £15,800            5.8%
much you earn (on a full-time equivalent basis          3       Over £15,800 to £20,400            5.9%
if you are part-time). These salary bands are           4       Over £20,400 to £34,000            6.5%
updated each April in line with inflation but the       5       Over £34,000 to £45,500            6.8%
rates shown here will be valid between                  6       Over £45,500 to £85,300            7.2%
1 April 2012 and 31 March 2013.                         7            Over £85,300                  7.5%
The contributions that you pay are only part of the cost of the benefits to which you will ultimately become
entitled to receive from the scheme. Your employer has to pay a percentage of your salary or wages into the
pension fund as well. Typically, your employer pays contributions of around twice as much as you do to make
sure that your pension will be paid at the level required by scheme regulations. By opting out of the scheme
you could currently be giving up in the region of 15% to 18% of your salary as employer contributions.

In addition, by contributing to the pension scheme you will pay less income tax and pay a lower rate of National
Insurance contributions, assuming of course you earn enough to pay tax and national insurance.

Pension contributions are deducted from your pay before income tax so you if you contribute to the pension
scheme you will pay tax on less of your pay. Also, because the LGPS is a contracted-out pension scheme,
you will pay a lower rate of National Insurance. This means that you will make a further saving of around 1.6%
on your earnings above the Lower Earnings Limit (LEL).

This sounds quite complicated so it is probably easier to show some examples of what this means for scheme
members whose earnings fall into each of the five most common salary ranges – bands 2 to 6 in the above
   Salary       Pension         Annual           Tax       National   Net Pension     table.
                                                                                            NOTE: If you are of State
              Contribution        Pension           Saving    Insurance   Contribution      Pension Age and do not
                 Rate           Contribution                    Saving       Paid           pay National Insurance
                                    Paid                                                    Contributions there will be
  £15,000          5.8%             £870             £174       £151           £545         no National Insurance
                                                                                            Contribution saving to be
  £18,000          5.9%            £1,062            £212       £199           £651         made. Tax is saved at
  £27,000          6.5%            £1,755            £351       £343          £1,061        your marginal rate i.e. the
  £40,000          6.8%            £2,720           £1,088      £551          £1,081        highest tax rate that you
  £60,000          7.2%            £4,320           £1,728      £871          £1,721        pay.
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Whilst it may appear to you that the pension contributions you pay are a lot of money, if you take the example
of the member in the above table who earns £18,000, the cost to the member is £647 per annum whereas the
overall cost of providing that member’s benefits is in the region of £3,500 per annum. The additional cost is
paid for by the employer’s contribution and the taxman through the tax and National Insurance savings made.

Other benefits of being a member of the LGPS

Have you considered what other benefits you will be giving up by electing to opt out of the pension scheme?

         A death grant equal to 3 times your annual pensionable pay, payable to your nominated beneficiary in
          the event of your death in service;

         Pension benefits payable to your dependants in the event of your death which include:

                o    Your Husband or Wife; or
                o    Your Civil Partner; or
                o    Your Nominated Co-habiting Partner, and
                o    Your eligible Children

NOTE: Your husband or wife, civil partner or nominated co-habiting partner will receive an enhanced pension for the rest
of their lives if you die whilst a contributing member of the pension scheme. Children’s pensions will also be paid at an
enhanced rate to the age of 18 and can be paid up to the age of 23 if remaining in full time education or training.

         Early release of pension benefits, normally enhanced, if you have to retire due to permanent ill health;

         Early release of benefits from the age of 55 if you are made redundant, retired early due to business
          efficiency or allowed to retire early with the consent of your employer;

         You have a right to convert some of your annual pension into tax-free cash at retirement;

         You have an option to pay additional contributions to further enhance your pension and gain further tax
          and National Insurance savings.

If you have any queries about being a member of the Local Government Pension Scheme you can contact the
Pension Team at the following address:

                                                  Royal County of Berkshire Pension Fund
                                                              Minster Court
                                                            22-30 York Road
                                                               Maidenhead
                                                                Berkshire
                                                                 SL6 1SF
                                                              Tel: 0845 602 7237
                                                              Fax: 01628 796 700
                                                    Email: info@berkshirepensions.org.uk

For further information you can also visit the Royal County of Berkshire Pension Fund website at
www.berkshirepensions.org.uk or the national LGPS website at www.lgps.org.uk.

This short guide provides a brief summary to the LGPS for employees in Berkshire who are considering opting
out of the LGPS. It is intended to assist you in deciding whether or not you wish to become or remain a
member of the Scheme. Should you still consider opting-out of the Scheme you need to notify your employer
immediately and it may be worth seeking independent financial advice before doing so.
The administering authority to the Royal County of Berkshire Pension Fund is the Royal Borough of Windsor & Maidenhead
Nothing contained within this leaflet confers any contractual or statutory rights and in the event of any dispute the appropriate legislation will prevail.




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LOCAL GOVERNMENT PENSION SCHEME 2008

APPLICATION TO OPT OUT OF THE LOCAL GOVERNMENT
PENSION SCHEME WHERE AN ENTITLEMENT TO A REFUND
OF CONTRIBUTIONS EXISTS
This application form should only be completed by:

        i)         an employee who is a member of the Local Government Pension Scheme (LGPS), has had
                   pension contributions deducted from pay but has less than three months of scheme
                   membership (and has not transferred in a former pension rights from another pension
                   scheme); or
        ii)        an employee who very recently commenced employment and has yet to have contributions
                   deducted from their pay.

                                                   PERSONAL DETAILS

Surname:                                                 Forenames:

Date of Birth:                                           Employer:

Pay Reference:                                           NI Number:

Address:



Post Code:                                               Email Address:

Partnership Status: Married / Cohabiting Partner (Unmarried) / Civil Partner / Single / Divorced / Widow (er) /
Separated (please delete or circle as appropriate)

If you do NOT wish to remain a member of the Local Government Pension Scheme in your current
employment please complete the declaration below and return the completed form to your PAYROLL
DEPARTMENT.
   DECLARATION

   I DO NOT wish to remain a member of the Local Government Pension Scheme (LGPS). I CONFIRM THAT
   I have less than 3 months membership of the scheme and have not transferred previous pension rights into
   the Scheme. I HAVE / HAVE NOT (please delete) had pension contributions deducted from my pay.

   Where I have had pension contributions deducted from my pay I UNDERSTAND THAT those contributions
   will be refunded to me through my payroll on the next available pay date.

   I FURTHER UNDERSTAND THAT by opting out of the LGPS neither I nor my dependants have any rights
   to a death in service grant under the Scheme. I ALSO CONFIRM THAT I have read the leaflet “Are you
   Considering Opting Out of the Local Government Pension Scheme?” and I am happy that the Berkshire
   Pension Fund has exercised its duty of care in providing me with sufficient information to make my decision.

   Signed:                                                                Date:

Please note you will be taken out of the Scheme from the next available pay date and that your employer will
notify the pension scheme administrators that you have opted out.
The Royal Borough of Windsor & Maidenhead (RBWM) is a data controller under the Data Protection Act 1998 (“The Act”). This
statement confirms RBWM’s commitment to protect your privacy and to process your personal information in a manner which meets the
requirements of the Act.
LGS1D(0212)

								
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