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					                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                                 www.gmb.org.uk/LGPSGuide


Transition: LGPS 1997 to LGPS 2008

The new LGPS starts on 1st April 2008 and all pensionable service built up after that point will
be in the new scheme and on the basis of the new scheme‟s rules. Any pensionable service
built up on or before 31st March 2008 is calculated on the basis of the old scheme, LGPS
1997 rules.

When you take your pension (either by retiring or transferring your benefits to another
pension scheme), if you have service in both the 1997 Scheme and the 2008 Scheme, these
will be calculated separately on the basis of your final pensionable pay at the point of taking
your pension (or leaving service). The two amounts will then be added together to form your
pension with the automatic lump sum from your 1997 Scheme service and any additional
lump sum resulting from trading pension.

Service in the LGPS is and will continue to be counted in days so even if you retired on the
2nd April 2008 your pension benefit would be calculated in this way.

Example:
    Tom retires aged 65 in 2017 with a total of 16 years‟ service. The first 7 years
    were under the 1997 Scheme rules and the second 9 years are in the new 2008
    Scheme. On the basis of a final pensionable pay figure of £15,320 his pension
    benefits will be:

         Pre 1st April 2008 service:
     Pension [7/80*15320] = £1,340.50
                Automatic Lump Sum [21/80*15320] = £4,021.50
         Post 1st April 2008 service:
     Pension [9/60*15320] = £2,298

     So Tom‟s total LGPS pension benefit is £3,638.50 plus an automatic lump sum of
     £4,021.50.

     Tom could increase the amount of benefit he takes as a lump sum to a maximum
     of £17,029.82 which would leave him with an annual pension of £2,554.47
     (assuming he has no other pension savings).

Rule Of 85 Transitional Protections
For those members covered by transitional protection following the removal of the Rule of 85
from the old LGPS, retiring early will entail a slightly more complicated calculation of benefits.




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                                www.gmb.org.uk/LGPSGuide


The relevant members are those members of the old scheme at 30 th September 2006 who, at
the time of retiring are at least 60 years of age and reach a total of 85 or more when their age
and length of service are added together. These members have different levels of protection
depending on when they retire.

    If these members retire before 1st April 2016 then all their service will be protected
   and their pension will be paid unreduced.

    If these members retire between 1st April 2016 and 1st April 2020 all their service up
   to 1st April 2008 is paid unreduced. Pension built up between 1 st April 2008 and
   retirement will be reduced for early payment but by less than the full reduction (which
   would be 24% for a man and 23% for a woman retiring at 60).

    If these members retire after 31st March 2020 then all their pension earned up to 1st
   April 2008 will be paid unreduced and all the pension earned on their service between 1st
   April 2008 and retirement will be reduced in line with the standard early retirement
   reduction factors (see the guide to early retirement for more details).

Examples:
    Maria reaches age 62 on 1st April 2015 at which time she will have 23 years
    service. As she meets the Rule of 85 before 1 st April 2016, her whole pension is
    protected and will not be reduced for early payment.

     Her pension may be calculated in two parts, firstly that in respect of the current
     scheme and secondly in respect of the new scheme.

     Current scheme pension based on her salary of £18,000pa is
     1/80*16*18,000=£3,600pa. In addition a tax free lump sum of £10,800 is
     payable.

     New scheme pension of 1/60*7*18,000=£2,100pa. No automatic lump sum is
     payable but Maria can give up some of this pension for lump sum.

     Her total pension is £5,700pa with an automatic lump sum of £10,800 (which can
     be increased by trading pension).


     Eric will reach age 60 on 1st April 2018 when he will have 30 years service. His
     pension built up before 1st April 2008 will be paid unreduced, whereas his
     pension built up after this date will be partially reduced. His salary on retirement
     is £30,000 pa.




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           LOCAL GOVERNMENT PENSION SCHEME 2008

           GMB Pensions Guide                                 www.gmb.org.uk/LGPSGuide


The full level of reduction that would be applied to the post 1 st April 2008 pension
is 24%. However as Eric‟s retirement date falls halfway into the period when
protection is tapered off, these reduction factors only apply to one half of his
benefits built up after 1st April 2008. So this part of his pension is reduced by
12%.

His pension will be calculated in two parts, firstly that in respect of the current
scheme and secondly in respect of the new scheme.

Current scheme pension based on his salary of £30,000pa is
1/80*20*30,000=£7,500pa. In addition a tax free lump sum of £22,500 is
payable.

New scheme pension of 1/60*10*30,000=£5,000pa. This is reduced for early
payment by 12% to give £4,400pa. No automatic lump sum is payable but Eric
can give up some of this pension for lump sum.

His total pension is £11,900pa with a lump sum of £22,500 (which can be
increased).

Melanie will reach age 63 on 1st April 2021 when she will have 22 years service.
Her pension built up before 1st April 2008 will be paid unreduced, whereas her
pension built up after this date will be fully reduced. Her salary on retirement is
£31,000 pa. The full level of reduction that would be applied is 10% to the
pension.

Her pension will be calculated in two parts, firstly that in respect of the current
scheme and secondly in respect of the new scheme.

Current scheme pension based on her salary of £31,000pa is
1/80*9*31,000=£3,488pa. In addition a tax free lump sum of £10,463 is payable.

New scheme pension of 1/60*13*31,000=£6,717pa. This is reduced for early
payment by 10% to give £6,045pa. No automatic lump sum is payable but
Melanie can give up some of this pension for lump sum.
Her total pension is £9,533pa with a lump sum of £10,463 (which can be
increased).




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                              www.gmb.org.uk/LGPSGuide


                        Scheme Structure

What is the LGPS?
The Local Government Pension Scheme is a statutory scheme. This means its existence
and benefits are guaranteed by law. The rules of the scheme, including the benefits it
provides and the way it is administered, are written as parliamentary legislation – primarily
the Local Government Pension Scheme (Benefits, Membership and Contributions)
Regulations 2007 (as amended) and the Local Government Pension Scheme
(Administration) Regulations 2008 as directed by the Superannuation Act 1972.

How is it Funded?
Unlike the other main public sector pension schemes (civil service, NHS etc), the LGPS‟
funding basis is broadly similar to private sector pension schemes. Other public sector
schemes are „unfunded‟ meaning that pensions are paid when needed direct from the public
purse. In contrast local government operates a funded scheme with thousands of
participating employers and nearly two million individuals directly contributing to the scheme
creating around 90 specific funds within the umbrella of the LGPS. Pension benefits are then
paid when needed by the local LGPS administering authority from the funds built up over
time. The statutory guarantee means that benefits are basically a legal requirement so even
if a particular authority has insufficient funds, your pension will still be paid.

Who Runs the LGPS?
At government level the scheme is run by the Department for Communities and Local
Government (DCLG) meaning the Secretary of State for this Department acts as the
Regulator of the scheme. On a day to day level, the scheme is run at a local level by county
or district councils and London boroughs. Administering authorities actually control the
individual funds which are, broadly speaking, separate from other local government finances.
It is the administrating authority that guarantees to pay your pension and to whom most
correspondence regarding your pension entitlement should be addressed.

How Do I Complain About a Pension Decision?
Complaints about the scheme generally or changes that are being made to its overall
benefits and provisions should be sent to the DCLG.

For complaints about individual case decisions or inaccuracies you should first approach you
administering authority. If this does not resolve the issue then you can have your complaint
independently reviewed under the scheme‟s Internal Dispute Resolution Procedure (IDRP).
(See http://www.xoq83.dial.pipex.com/empga.htm for more details)




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               LOCAL GOVERNMENT PENSION SCHEME 2008

               GMB Pensions Guide                              www.gmb.org.uk/LGPSGuide


GMB National Pensions Department has vast experience in assisting officers conducting the
dispute procedure and are happy to assist your organiser with these disputes.

How Does the Internal Dispute Resolution Procedure Work?
Within six months of the date you were notified of the decision you are challenging you must
write to the appointed person (who should be identified on the notification correspondence).
Your complaint should outline the reasons you believe the decision to be wrong and should
include all relevant documentation. This can also be applied if your complaint is about a
decision not being taken.

The appointed person will then consider your case and write to you with a decision or
deferment within two months of receiving your complaint. If this does not solve the dispute
you can, again within six months, apply to your administering authority to have your case
reviewed.

If your case still hasn‟t is resolved to your satisfaction you can apply to the Pensions
Ombudsman to review the case. Before applying to the Pensions Ombudsman you must
have exhausted the IDRP.

The Pensions Ombudsman can be contacted at:
11 Belgrave Road
London SW1V 1RB
Telephone: 020 7834 9144 Fax: 020 7821 0065
Email: enquiries@pensions-ombudsman.org.uk
http://www.pensions-ombudsman.org.uk/




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                               www.gmb.org.uk/LGPSGuide




                     Contributions & Pay
The LGPS is worth around 20% of the average local authority and related employer‟s
remuneration package for workers covered by the LGPS. As such it is a key benefit,
however in order to participate in the scheme it is necessary for members to contribute a
proportion of their gross pay (tax relief applies to pension contributions) to the scheme. In
common with most schemes, a percentage of pay is deducted by the LGPS employer and
put into the pension fund along with the employer contribution for that member. In the LGPS
however, the level of contribution depends on how much you earn. This was introduced in an
effort to make the scheme fairer to lower earners.

Cost Of LGPS Membership For Employees

The level of employee contribution is dependent on your pensionable pay at 1 st April (or start
date if later). There are seven bands and it is your whole time equivalent pay that is used to
determine which band applies. You then pay the relevant amount on all pensionable
earnings.

What Are The Contribution Bands?

                      New LGPS Contribution Bands April 2009 – 2010

                      Whole Time Earnings          Member Contribution Rate

                            < £12,600                          5.5%

                       £12,601 – £14,700                       5.8%

                       £14,701 – £18,900                       5.9%

                       £18,901 – £31,500                       6.5%

                       £31,501 – £42,000                       6.8%

                       £42,001 – £78,700                       7.2%

                            > £78,700                          7.5%




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                               www.gmb.org.uk/LGPSGuide


What Is Whole Time Equivalent Pay?

If you are contracted to work full time hours for your employer then this will generally be the
same as whole time equivalent. As a guide this usually equates to a 36 hour week over 52
weeks a year.

If you work on a term time or similar contract that does not cover the full 52 week year then
your whole time will be the full time weekly hours (e.g. 36 hours) that are worked but instead
of a 52 week year, the term time only 44 week year (or relevant period) will be used.

If you work less than the full weekly hours in either of the above situations then you are
considered part time and it‟s the pay you would be earning if you were whole time that is
used to determine your contribution band.

If you simultaneously have more than one job in Local Government, contributions must be
made on each income – if you want both to count towards your pension.

Calculation Of Benefits

A scheme member‟s „Pensionable Pay‟ forms the basis of the calculation of scheme benefits.
On retirement your pension is determined in part by the highest annual amount you earn in
the last three years before retiring (or the highest three year consecutive average pay in the
ten years before retiring if your grade/hours have reduced).

What Is Included In Pensionable Pay?

All wages and other payments an employee receives and any other benefits that are
specified in the contract of employment as being pensionable. This means that generally
speaking pensionable pay will equal regular gross pay although there are some notable
exceptions.

What Is Excluded From Pensionable Pay?

Potentially key features of a wage packet that are normally excluded from the definition of
pensionable pay are:

      Non-contractual overtime
      Expenses
      Payments for loss of holidays
      Provision of a car or payment given to replace the provision of a car (except in
     certain circumstances)
      Payment as a result of a School Achievement Award
      Payment in lieu of notice


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              LOCAL GOVERNMENT PENSION SCHEME 2008

              GMB Pensions Guide                          www.gmb.org.uk/LGPSGuide


                      Pension Benefit
For those members with pre April 2008 LGPS service please read in conjunction
with the section entitled ‘Transition From Old To New LGPS’.

How Is The Pension Calculated?
Your pension is worked out by multiplying a proportion (1/60 th) of your final
pensionable pay by the number of years you have worked and been a member of
the LGPS (length of pensionable service).

Example:
Ian has worked for 19 years in a local authority and will retire at 65. For the last
year he works Ian will earn £16,700. His pension calculation is:
19 years’ pensionable service
   Final pensionable pay=£16,700
   19/60*16700=5288.33
Therefore, Ian’s annual pension will be £5,288.33

Tax Free Cash Lump Sum
Members can trade some of their annual pension for a cash lump sum on
retirement. For every £1 of annual pension given up you will get £12 of cash.
Up to 25% of your total pension benefits (including any other pension saving)
can be traded in this way.

Example:
Ivy is about to retire from her part time (half time hours) job in a school aged 65
after 7 years. If she had been full time her final pensionable pay would have
been £13,950. This figure is used and her service halved to take account of her
part time employment.
Whole time equivalent final pensionable pay=£13,950
Service (allowing for half time hours)=3.5 years
So Ivy’s pension is £813.75 (3.5/60*13950). Presuming this is her only pension
saving (other than the state pension) she could take £3,487.50 as a lump sum
leaving her with an annual pension of £523.13

It is a legal requirement that part time workers are treated no less favourably
than their full time colleagues. This often means that slightly different practices
apply for part timers. In the LGPS, specific terms apply to the way member
contributions and benefits are calculated for part time workers.


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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                              www.gmb.org.uk/LGPSGuide


                                Part Timers

Definition Of Part Time
Part time is the term used to describe anyone who works less than full time hours. Full time
hours are normally considered to be in the region of 36 hours per week over a 52 week year.

Part time therefore incorporates term time workers, variable hours workers (in most
circumstances) and job sharers.

If you simultaneously have more than one job in Local Government, contributions must be
made on each income – if you want both to count towards your pension.

Service Calculations For LGPS Benefits
There are a number of features of the LGPS that are triggered by certain periods of
membership, for example to qualify for any pension benefit from the scheme you must have
at least three months‟ membership. For these purposes part timers‟ service is not pro rata,
so a member working half time hours needs to be a scheme member for three months to be
eligible for a pension just like a full time member.

Contributions
Whole time equivalent salary is used to determine which contribution band a member is in. If
you work on a term time or similar contract that does not cover the full 52 week year then
your whole time will be the full time weekly hours (e.g. 36 hours) that are worked but instead
of a 52 week year, the term time only 44 week year (or relevant period) will be used.

If you work less than the full weekly hours on either a term time or 52 week contract then you
are considered part time and it‟s the pay you would be earning if you were whole time that is
used to determine your contribution band.

Example:
    Michael is a lunchtime supervisor in a school and works for 10 hours per week
    during the school year. His annual salary is £3,010. He works on a term time only
    basis therefore his whole time equivalent is based on the number of hours worked
    by a full time worker on a term time contract. On the assumption of a 43 week
    school year, Michael‟s whole time equivalent salary is £10,836 so he will pay in to
    the LGPS at the 5.5% rate (for those earning less than £12,000pa).




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                              www.gmb.org.uk/LGPSGuide


Pension Calculation
When it comes to calculating pension benefits on retirement the full time equivalent salary is
used but your service is reduced in proportion with the number of hours worked.

Example:
    Ivy is about to retire from her part time (half time hours) job in a care home aged
    65 after 7 years. If she had been full time her final pensionable pay would have
    been £13,950. This figure is used and her service halved to take account of her
    part time employment.
    Full time equivalent final pensionable pay = £13,950
    Service (allowing for half time hours) = 3.5 years
    So Ivy‟s pension is £813.75 (3.5/60*13950). Presuming this is her only pension
    saving (other than the state pension) by commuting part of her pension she could
    take £4,069 as a lump sum leaving her with an annual pension of £474.69




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                               www.gmb.org.uk/LGPSGuide


     Making Up Service Lost Through
             Strike Action

Members will be aware that taking strike action means pay is given up. As pensions are
deferred pay, strike action also has an additional impact on LGPS members. This guide
explains how days lost through industrial action are treated in the LGPS. Further information
and any relevant discretionary policies will be available from your employer/administering
authority.

What Happens To Employees’ LGPS Pensions When They Take Industrial Action?
Under the rules of the LGPS, members only build up pension for periods when contributions
are paid (or for periods lost due to time away because of maternity, illness or similar
reasons). As strike days are unauthorised and unpaid, pensionable service is lost on these
days.

Does This Mean That Members’ Pensionable Service Is Broken?
No. A member‟s period of continuous pensionable service is still defined as lasting from the
day they join the LGPS to their date of leaving (either the scheme or LGPS covered
employment) or retirement. The period of membership is measured in days, and any days
lost through industrial action are excluded from a member‟s service. However the actual
period of service remains unbroken.

By keeping the service continuous (albeit reduced by the number of strike days), one pension
in the LGPS is retained which is based on the whole period of service and the pensionable
salary on retirement/leaving the scheme.

Do Members Have The Opportunity To Regain The Lost Days’ Service?
Yes. The rules of the LGPS allow members to buy back any days‟ pensionable service lost
through industrial action.

The cost of buying back the lost service is 16% of the lost pay for the strike period. Lost pay
is the difference between the pay actually received and the pay that would have been
received but for any trade dispute absence. Essentially this will amount to 16% of one day‟s
pensionable pay for one day‟s strike action.




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                                 www.gmb.org.uk/LGPSGuide


Why Is The Contribution Rate Set At 16% Of Salary?
This was calculated as the average cost of that day‟s service including both employee and
employer contributions.

In reality the value of benefits earned from a day of pensionable service is often much higher
than 16%. The Local Government employers have repeatedly tried to have the rules
changed so that the cost of buying service can be updated on a regular basis depending on
actuarial advice at the time. GMB argued against this, and for the foreseeable future the cost
of buying back service will remain at 16% of salary.

How Should A Member Apply To Make These Payments?
If a member decides to make up the pensionable service lost through industrial action, they
must apply to make such a contribution to buy back lost service within 30 days of their return
to work, or such longer period as the employer will allow. We would expect the employer to
notify employees of this and to give a reasonable period for the payment of such
contributions.

Does Industrial Action Affect Statutory Redundancy Payments?
Any days lost through industrial action are not counted in the service used in calculating
statutory redundancy pay. Unlike pensionable service, this service cannot be bought back.

However like pensionable service, there is no "break" in service before and after industrial
action. This means that the service built up before the industrial action would not be lost
when statutory redundancy payments are calculated.

I’m Close To Retirement – Is There Anything I Should Be Aware Of?
Through a quirk in the regulations, there is scope for a member in a very particular situation
to be better off by not electing to buy back days lost through industrial action. This is only the
case if the action occurs within the period of 12 months before your retirement date and you
receive a pay rise after this date. This arises as the higher salary (earned after the industrial
action) would count further towards the average salary in your last year of service prior to
retirement. This would however be offset to some degree by the reduction in the number of
days of service which are pensionable.

If you are in your last year of service when you take industrial action and believe you may be
due a pay rise prior to retirement, you should contact your GMB Regional Officer for further
information.




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                                www.gmb.org.uk/LGPSGuide


                                Outsourcing

This guidance relates to employees transferring under a best value outsourcing process
either from a local authority or as a result of a retender of such a contract. Some provisions
also extend to new employees who are employed to work on the relevant contract. Where
employees are subsequently transferred to a sub-contractor it remains the primary contractor
who is responsible for ensuring members‟ employment terms comply with these statutory
requirements. This guide is primarily focussed at organisers and reps and outlines the issues
that face GMB in these situations.

Consultation
GMB should be involved in:

        the option appraisal stage (whether to outsource),
        the selection process (the bidding stage),
        the transfer process (when members are to be outsourced/transferred between
       contractors).

Local authorities should involve recognised trade unions throughout the transfer process with
full disclosure of relevant information affecting the workforce. In addition, trade unions should
be consulted by the new employer on the terms and conditions to be offered to new starters.

The local authority should also monitor the compliance of the new service provider with the
“Code of Practice on Workforce Matters in Local Authority Service Contracts” which covers
these provisions.

Terms And Conditions (excluding pension provision)
The Code applies to all best value transfers whether or not TUPE strictly applies. This
ensures that terms and conditions of employment are protected and replicated when the
employer changes.

New starters on a transferred contract should be provided with terms and conditions that are
“overall, no less favourable than those of transferred employees”. Employers therefore do
have the opportunity to vary the employment terms they offer new employees but as a
package the terms should not be worse.




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                              www.gmb.org.uk/LGPSGuide

Pensions
When a local government service contract is outsourced, alongside protection for other
employment terms and conditions, there is a form of protection for pension rights. The new
employer must provide “broadly comparable” pension arrangements for transferring workers.

There are two main ways the new employer can comply with this. Either they can provide a
pension scheme for the transferring workers that roughly mirrors the Local Government
Pension Scheme, or they can apply for “admitted body status” to the LGPS. If they opt for
the former then they must secure a certificate or passport from the Government Actuary‟s
Department (GAD) who assess the quality of the pension arrangements proposed by the new
employer and confirm that they meet the “broad comparability” test.

Admitted Body Status (ABS)
Private companies that operate public services contracts can apply to become “admitted
body” employers to the LGPS. This basically means that for the purposes of pensions the
private company, like a local authority or the Environment Agency, is an employer under the
terms of the scheme. So the rules of the scheme laid down in the regulations apply and the
members should see comparatively little difference in their pension arrangements.

If an employer has ABS there are again two possibilities regarding those new workers
employed on the public service contract. If the employer has a closed admission agreement
with the LGPS administering authority then only the original workers that transferred with the
contract can be members of the LGPS. Better still of course is for the employer to have an
open admission agreement. This means that new employees on a relevant contract can also
become members of the LGPS. Should the contract subsequently be returned to local
authority control this is the easiest option for a trouble-free transfer.

New Starters
Unfortunately it is often the case that contractors do not apply for open admission
agreements. In the event new starters are not to be offered membership of the LGPS then
the new employer must provide them with access to “a good quality pension scheme”. This
is a broad term that can cover both final salary or money purchase schemes. In the worst
case scenario the minimum pension that has to be offered to new starters on an outsourced
contract is a defined contribution scheme where the employer matches whatever contribution
the member makes up to 6%.




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                                www.gmb.org.uk/LGPSGuide


GMB’s Role
Here are a few guidelines for those faced with outsourcing/retendering processes:

 As a recognised trade union with a local authority, GMB should be consulted at every
stage of the outsourcing or retendering process. As TUPE protects all the general terms and
conditions, the area in need of particular attention is pensions.

 GMB‟s aim is to have open admitted body status arrangements enabling new starters as
well as the transferring members to join the LGPS.

 GMB should aim to negotiate with the local authority before the bidding stage that ABS
is the preferred mechanism for pension provision. This means that contractors are aware
they are expected to offer ABS and can formulate their bid on that basis.

 By the time a contractor is selected and the transfer process has started it is generally
too late to start negotiating ABS.

 If an open admission agreement is not available then focus should be on the pension
provision being offered to new starters on the contract.

 The Code provides very minimal protection for new starters‟ pensions and GMB should
aim to negotiate provision as close to the LGPS as possible.

 If no form of ABS is agreed then the guarantee of “broad comparability” from the
Government Actuary‟s Department must be sought with regard to the pension being offered
to transferring employees. Often this is initially provided as an interim certificate, GMB needs
to maintain pressure on the local authority to see the full certificate is secured as early as
possible.

 It is the local authority‟s responsibility to ensure the Code is followed both at transfer
and afterwards while the contract continues. GMB also need to monitor this and raise
concerns when problems arise.

 When problem arises, in the first instance GMB should raise it with the service provider,
the second stage is to bring the issue to the local authority‟s attention. If this does not
satisfactorily a resolve the concern then there is an “Alternative Dispute Resolution” process
that should be employed, the detail of this is available from the LGPS Guide section of the
GMB website.




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                               www.gmb.org.uk/LGPSGuide


                         Early Retirement

The Normal Pension Age of the LGPS is 65, this is the age at which pension will be paid
unreduced. There are provisions to pay pension benefits early if a member leaves
employment on the grounds of redundancy, efficiency or ill health but separate rules and
regulations apply in these cases (see guide sections on redundancy and ill health for more
information). The LGPS also has specific provisions for flexible retirement and late
retirement, information on this is available from the guide section on flexible retirement.

Retiring Early
It is possible to retire early and get an LGPS pension before the Normal Pension Age of 65
but the pension (and where appropriate, as a result of pre 2008 service, the lump sum) will
be reduced by a set amount depending on how many years early you wish to retire.

Pension Reduction
The amount a pension will be reduced by for retiring early is laid out in the table below (part
years are calculated on a pro rata basis):

                     Age of            % Reduction in Pension
                   Retirement           Men           Women
                       65                0               0
                       64                6               5
                       63                11             10
                       62                16             15
                       61                20             19
                       60                24             23
                       59                28             27
                       58                32             30
                       57                35             33
                       56                38             36
                       55                41             39




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                LOCAL GOVERNMENT PENSION SCHEME 2008

                GMB Pensions Guide                               www.gmb.org.uk/LGPSGuide


Examples:
    If Ellen, who started working aged 44 wanted to retire at 62, her pension would be
    reduced by 15%. In cash terms this means that on the basis of her 18 years‟
    service and a final salary of £13,750 her total annual pension would be £4,125. As
    she is retiring before 65 these benefits are reduced to £3,506 annual pension.

     Steve works as a refuse operative and wants to retire at 61. By this point he will
     have 15 years service and his salary will be £20,052. So although his total
     pension would have been £5,013, retiring early will mean this is reduced to £4,010
     annual pension.

     Lewis and Wendy are both trading standards officers who coincidently share a
     birth date and want to retire at 60 when their salary will be £28,600. They have ten
     years service so would see their total pension of £4,767 reduced to a pension of
     £3,623 for Lewis and £3,671 pension for Wendy.

Lump Sum Reduction
Service before the introduction of the LGPS 2008 incorporated a lump sum. If a member with
pre 2008 service retires early their automatic lump sum will also be reduced for early payment at
the following rate (subject to the same exceptions as apply to reductions of pension for early
payment):
                                Age of          % Reduction in
                              Retirement         Lump Sum
                                  65                  0
                                  64                  2
                                  63                  5
                                  62                  7
                                  61                  9
                                  60                 12
                                  59                 14
                                  58                 16
                                  57                 18
                                  56                 20
                                  55                 22




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              LOCAL GOVERNMENT PENSION SCHEME 2008

              GMB Pensions Guide                         www.gmb.org.uk/LGPSGuide




               Redundancy/Efficiency

If an employer states in writing that you are leaving their employment on the
grounds of redundancy or efficiency, then you should be eligible for a
compensation lump sum and/or be able to access your pension before the
Normal Pension Age of 65.

Compensatory Lump Sum

In addition to statutory redundancy payments, employers can provide additional
compensation. To comply with age discrimination legislation, employers must
ensure that either their enhanced arrangement mirrors the statutory redundancy
system or does not include any age discriminatory element (such as an age or
length of service related formula). Having an age or length of service element to
a compensation formula does not contravene age discrimination law if it can be
objectively justified. Anyone faced with a potentially discriminatory provision in a
redundancy compensation formula should ask the reason for the objective
justification. It should be noted that cost alone is not sufficient for an objective
justification.

The statutory redundancy scheme, despite its blatant age and length of service
elements, is specifically exempt from age discrimination law. Similarly any
formula for enhanced redundancy payments can qualify for the same exemption
if it mirrors the statutory formula. Enhancement can be achieved by doing one
or more of the following in relation to the statutory arrangement:

       remove the cap on a week’s pay (from 1st Feb 2009 this is £350)
       increase the multiplier
       multiply the total amount

Any other amendments to the statutory arrangements are likely to be in breach
of the legislation. Features such as caps on the maximum number of weeks’ pay
after the statutory provisions have been enhanced, for example, are likely to be
age discriminatory unless they can be objectively justified. Having said this,
there is an overall cap on compensation lump sums set at 104 weeks that is laid
down by central government.



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             LOCAL GOVERNMENT PENSION SCHEME 2008

             GMB Pensions Guide                        www.gmb.org.uk/LGPSGuide


Access to LGPS Pension

If you are a member of the LGPS you have a right to immediate payment of your
pension providing are at least 55 years of age (50 years of age for some
members until April 2010). In this situation the pension will not be reduced for
early payment.


Enhancement

One of the many discretionary elements of the LGPS is the potential for
employers to artificially increase an employee’s scheme membership (their
pensionable service). Your employer should have a published policy on how they
use this discretion.

Your employer can decide when you leave on redundancy/efficiency grounds to
increase your length of scheme membership. This will mean that in terms of
calculating your pension and lump sum benefit from the LGPS, your pensionable
service will be greater than the period when you were actually paying in
contributions.    This would normally be done instead of a discretionary
enhancement to your severance lump sum.


Limits On Enhancement

Obviously this discretion only goes so far and there are limits to how much extra
service your employer can grant. They should however, publish a policy on how
they use this discretion which you can request. The maximum enhancement that
can be given is ten years’ additional service.

It is also possible for employers to enhance members’ pensions by actual
amounts so it would be possible for an employer to increase your pension by up
to £5,000 per year.


More Information

More on selection procedures and compensation arrangements that are compliant
with discrimination law can be found at www.gmb.org.uk/agediscrimination



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               LOCAL GOVERNMENT PENSION SCHEME 2008

               GMB Pensions Guide                             www.gmb.org.uk/LGPSGuide



                            Ill Health
The LGPS will pay a pension to members at any age if they qualify under the ill health
rules. The ill health provisions of the LGPS are divided up into several levels depending
on the severity of the illness. In all cases, to qualify for an ill health pension you must
be certified as being permanently incapable of doing your job on grounds of ill health
and have at least 3 months membership in the LGPS. The amount of enhanced pension
you receive is determined by the severity of the illness and specifically by whether and
when you are able to undertake gainful employment in the future.

Definitions
Permanently Incapable – not able before retirement age (65)
Gainful Employment – employment for 30 or more hours a week over 12 months
Reasonable Time – three years
Transitional Protection – for ill health retirements before 1st October 2008, members will
receive the better of ill health pension calculations under the old and new scheme rules

Tier 1
If your employer decides, on the basis of medical advice that you will not be able to
secure gainful employment again before your 65th birthday then your pensionable
service will be increased by the number of years you have left before reaching 65.

Example:
Alan becomes seriously ill aged 42 and qualifies for a Tier 1 ill health pension. His
pensionable salary is £26,000 and he has been a member of the LGPS for six years. So
his ill health enhancement increases the amount of service used to calculate his pension
by 23 years. Alan’s annual pension therefore is 29/60*26000 = £12,567.

Tier 2
If your employer decides, on the basis of medical advice that you will be able to
undertake gainful employment at some point before you reach 65 (although not within a
reasonable time) then your pensionable service will be increased by a quarter of the
number of years you have left before reaching 65. For members of the old scheme aged
over 45 there is an underpin which means if they would have been better off with the ill
health pension calculation from the 1997 Scheme, that figure will be used for their Tier 2
pension.

Example:
At 53 Nina becomes too ill to continue in her job but the medical advice is that she will
be able to undertake gainful employment in a few years’ time. She has three years’
service and earns £16,000 a year. Her ill health enhancement under Tier 2 increases



                                            - 20 -
               LOCAL GOVERNMENT PENSION SCHEME 2008

               GMB Pensions Guide                            www.gmb.org.uk/LGPSGuide

the amount of service used to calculate her pension by 3 years [65-53/4]. Nina’s annual
pension therefore is 6/60*16000 = £1,600.


Tier 3
If your employer decides, on the basis of medical advice, that although you are
permanently incapable of continuing to do your job, you could secure gainful
employment within a reasonable time (three years), you will receive an unreduced
pension. This means you would receive the amount of pension you had built up through
your membership of the LGPS up to the point of your ill health retirement.

Tier 3 incorporates a review process as it is viewed more as an interim payment than a
pension (despite coming from the pension scheme). A member with a Tier 3 pension
should inform their old employer if/when they have secured gainful employment. If
gainful employment has not been secured after 18 months, the old employer will have to
review the situation. This will involve a further medical assessment at which point the
employer will be advised whether the original view that the member could undertake
gainful employment within three years of the retirement still holds. If the assessment
has changed, the employer may stop the Tier 3 pension if advised that the member
could undertake gainful employment, or refer the member for a decision on a Tier 2
pension.

After three years your Tier 3 pension will be stopped. There is no obligation on the
employer to review the situation at this point. To secure any further ill health benefit
requires an appeal by the member through the internal disputes resolution procedure in
order to seek a Tier 2 pension.

Example:
Morgan becomes too ill to continue in her job but her employer, on advice from an
appropriate medical adviser, decides that she should be able to undertake gainful
employment within a couple of years. She has been a member of the LGPS part time for
6 years, working half time hours and earned £7,500 per year. Under Tier 3 provisions
she receives a pension of 3/60*15000 = £750 per year.

After 18 months her old employer checks whether she has secured gainful employment
since leaving. If doesn’t matter that her previous employment was for half time hours,
gainful employment is still a 30 hour a week job for 12 months. Her former employer is
satisfied that Morgan hasn’t been able to secure such a job since leaving and so refers
her to a medical adviser for a further assessment. The medical advice remains that she
will be able to undertake gainful employment within the reasonable time period since
she left but that it will take a further year. Her old employer then stops payment of her
pension at that point. Her pension would then be deferred until she reached normal
pension age.




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               LOCAL GOVERNMENT PENSION SCHEME 2008

               GMB Pensions Guide                              www.gmb.org.uk/LGPSGuide


Appeals
Members have the right to appeal any decision taken regarding the ill health process
through the internal dispute resolution procedure. These decisions might include: the
decision to grant/not to grant ill health retirement; the allocation to a particular tier of
benefit under the ill health rules; the termination of a Tier 3 payment; and the decision
not to grant Tier 2 benefits following the medical advice provided during a Tier 3 review.




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                GMB Pensions Guide                                www.gmb.org.uk/LGPSGuide



                       Survivors’ Benefits

The LGPS has provisions to pay benefits to your family in the event of your death. These
benefits are in the form of both a lump sum payment and ongoing survivor‟s pension
provision. In order to aid the smooth payment of these benefits you should make sure you
have filled in and returned an „Expression of Wish‟ form to your employer or pension fund.

Lump Sum Payments

           Death In Service
For anyone who dies while being a contributing member of the LGPS, a lump sum death
grant of three times the member‟s final pay should be paid to your beneficiary.

           Death In Deferment
If you leave the LGPS without transferring your benefits or receiving a refund of contributions,
you will retain a deferred pension with the scheme. In the event of your death this would
mean that a lump sum of five times your annual pension should be paid to your beneficiary.

           Death In Retirement
If you die while drawing your LGPS pension, your beneficiary should be paid a lump sum of
ten times your annual pension less any pension already paid.

Survivors’ Pensions
Survivors‟ pensions can be paid to spouses, civil partners or partners who have cohabited for
two or more years.

The amount of pension is equivalent to the members‟ final pay multiplied by their total
membership (service at death plus the amount of service they would have had if they had
worked on to 65) divided by 160.

Children’s Pensions
Children generally deemed eligible for these pensions are the deceased member‟s legitimate,
adopted or dependant children.

If a survivor‟s pension is being paid then the calculation of the child/children‟s pension is as
follows:




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               LOCAL GOVERNMENT PENSION SCHEME 2008

               GMB Pensions Guide                              www.gmb.org.uk/LGPSGuide



One Child – members‟ total membership enhanced by their prospective service to 65
multiplied by their final pay and divided by 320.

More Than One Child – members‟ total membership enhanced by their prospective service
to 65 multiplied by their final pay and divided by 160. This amount is then equally split
between the eligible children.

If no survivor‟s pension is being paid then more is provided for the surviving children. The
calculations in this situation are as follows:

One Child – members‟ total membership enhanced by their prospective service to 65
multiplied by their final pay and divided by 240.

More Than One Child – members‟ total membership enhanced by their prospective service
to 65 multiplied by their final pay and divided by 120. This amount is then equally split
between the eligible children.

Example:
    Patricia dies in service aged 47 after 11 years local government service. When
    she died her annual pensionable earnings were £14,200. She leaves a husband
    (John) and two children aged eight and twelve.

    Death in Service – John will receive a lump sum of £42,600 [3*14200]
    Survivor’s Pension – John will receive an annual pension of £2,573.75 [(Total
    service = 11+18)*14200/160]
    Children’s Pensions – As there are two children but a survivor‟s pension is being
    paid, then a further £2,573.75 [29*14200/160] will be equally shared between each
    child.




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             LOCAL GOVERNMENT PENSION SCHEME 2008

             GMB Pensions Guide                        www.gmb.org.uk/LGPSGuide



                       Other Elements


Trivial Commutation

If the total value of your pension saving in the LGPS is low, less than 1% of the
lifetime allowance, you may be permitted to commute it all for a cash lump sum.
It should be noted that the total value of benefits for this purpose is not the
same as the value of pension. If you think trivial commutation might be relevant
to you please consult your employer/administering authority. In 2008-9 the
trivial commutation limit on total pension benefit stands at £16,500.


Additional Pension

If you wish to increase your retirement income through the LGPS you can either
invest in AVCs or you (or your employer) can buy additional pension. Additional
pension replaces the added years provision that existed in the old LGPS.
Through this mechanism members can buy up to £5,000 of pension per year in
£250 blocks.      Contact your employer/administering authority if you are
interested in taking up this option. The price of buying additional pension will
vary depending, among other things, on whether you want any dependents’
benefits and over how long you wish to spread the payment.




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              LOCAL GOVERNMENT PENSION SCHEME 2008

              GMB Pensions Guide                         www.gmb.org.uk/LGPSGuide




                         Appendix

     New LGPS (Scotland)
The new LGPS (Scotland) differs from the scheme introduced in England and
Wales in a few ways. This guidance note highlights these areas and sets out what
provisions we expect to apply when the new LGPS (Scotland) is introduced on 1st
April 2009.

Main areas of difference are: member contribution structure and the third tier of
ill health pension. There are other minor differences in the definition of final
pensionable pay, transitional protection for Rule of 85 qualifiers and transitional
protection for ill health benefits. More information on these elements is available
on request.

Member Contributions
Member contributions for the LGPS (Scotland) are based on bands of earnings with
different contribution rates applying to different proportions of earnings on the
following basis:

               5.5% on earnings up to and including £18,000
               7.25% on earnings between £18,000 and £22,000
               8.5% on earnings between £22,000 and £30,000
               9.5% on earnings between £30,000 and £40,000
               12% on any earnings over £40,000

So someone earning a whole time equivalent of £25,000 will pay 5.5% on the first
£18,000 of earnings, 7.25% of the next £4,000 and 8.5% on the remaining
£3,000 meaning overall their actual contribution rate is 6.14%.

The calculation of earnings for contribution purposes is the same as outlined in the
LGPS (England & Wales) guide, including provisions for part timers and term time
only members.


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             GMB Pensions Guide                       www.gmb.org.uk/LGPSGuide

Ill Health – Tier 3
In the LGPS (Scotland) Tier 3 of the ill health provision is outside the pension
scheme. Instead employers have the discretion to give the member a one off
payment. The amount is based on length of service, one week’s pay per year of
service up to a maximum of 30 weeks’ pay.




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