What's New

The Pensions Act receives Royal Assent

The Pensions Act 2011 received Royal Assent on Thursday 3 November 2011.

The Pensions Act 2011 introduced changes to the State Pension age timetable. As a result important changes have been made to the DWP State Pension forecasting services. These changes affect women born on or after 6 April 1953 and men born on or after 6 April 1951. Women and men born before these dates are not affected by the changes.

A summary of the changes are detailed below:

• Accelerates the existing timetable for increasing the State Pension age to 66
• Amends the legislative framework requiring employers to automatically enrol employees into a qualifying pension system and to make contributions to that scheme
• Amends legislation providing for the indexation and revaluation of occupational pensions and payments from the Pension Protection Fund
• Allows contributions to be taken towards the cost of providing personal pension benefits to members of Judicial Pension Schemes.

Unfortunatrly we were unable to include your state pension forecast with your annual benefit statement this year due to the Pensions Act awaiting Royal Assent. We will hopefully be able to issue combined pension forecasts to our members in the future.

If you would like a State Pension forecast please visit the link below:

www.direct.gov.uk/pensionforecast

Government sets out its offer on Public Service Pensions

2.11.2011 - The Government set out its offer to Union representatives regarding Public Sector Pensions Reform. Read the press release in full here.

You can also download the full statement made by Danny Alexander, Chief Sectretary to the Treasury.

Employers submit proposals to Secretary of State

The Chancellor's response to Lord Hutton's initial report that reviewed public sector pensions was to seek an increase in employee contributions of 3.2% of pay. This was to be phased in over 3 years, commencing 1st April 2012.

On 20th July, Eric Pickles, the Secretary of State for Communities and Local Government asked the Local Government Group (the employers) and trade unions to have discussions and come forward with proposals to deliver short term savings equivalent to a 3.2% increase in employee contributions. The fact that the LGPS is a funded scheme (it has assets to pay its pensions) gives it scope to consider a wider range of measures to deliver the required savings than other public sector schemes that are not funded.

Constructive discussions have been held between the employers and unions but it has not so far been possible to reach agreement.

Local Government Proposals

The LG Group wrote to the Secretary of State on 21st September setting out their proposals to achieve the required savings. A copy of the letter can be found on their website.

In developing their proposals, they flag the importance of trying to balance fairness and affordability to employees and affordability for the tax payer. The changes are recommended to take effect from April 2014 and the main elements are:

• No increase in employee contributions for scheme members whose full-time equivalent earnings are less than £15,000.
• An increase of 1.5% for those earning between £15,000 and £21,000.
• An increase of 2% to 2.5% for those earning over £21,000.
• Recognising that some employees may not be able to afford an increase in their contributions, an alternative choice for employees would be to maintain contributions at existing levels and have a lower rate of build up of pension from April 2014.
• Increase the normal age of retirement from 65 to 66 for benefits earned after April 2014 with benefits earned before then retaining a normal pension age of 65.

It is the funded nature of the LGPS that has helped the LG Group come forward with these proposals.

What happens next?

The Department for Communities and Local Government are considering the proposals submitted to them. It is expected that they will publish details of proposed changes at the end of September. A 12 week consultation exercise will follow enabling employers, trade unions, administering authorities and others to comment, during which time the LG Group and the unions intend to continue their discussions. We expect amending regulations early in 2012 that will set out the changes that are to take place over the period to 2014/15..

Any changes will only apply after the date of change

Any changes will only apply to future membership of the Scheme. Benefits that scheme members have already built up prior to the date any changes take effect will be protected. The changes will not affect deferred and pensioner members of the Fund.

Statement regarding Greece Financial Crisis.

"In view of the uncertainty concerning Greece and the various possible consequences this coming weekend if the EU and IMF cannot hold the situation you may wish to know the possible consequences for the investment portfolio of the Berkshire Pension Fund.

Our assets amount to about £1,500,000,000 and our direct Greek exposure via our external investment managers is about £1,000,000 i.e. 0.07% of the portfolio (half our 0.15% BP exposure at the worst point).

Inevitably there will be an indirect exposure (by organisations like German Banks in whom we have invested) and we estimate this to be about an additional £4,000,000.

A default or equivalent (i.e. "haircut") would be unlikely to exceed 30% of the £1m direct exposure and 10% of the £4m indirect exposure."

John Lenton
Chairman Royal Berkshire Pension Fund Panel
Chairman Royal Berkshire Pension Fund Advisory Panel

Changes to Pension Tax relief from 6 April 2011

The Government has announced significant changes to the way in which tax relief is given to pension savings that could potentially affect anyone who contributes to a pension scheme regardless of their age, their expected retirement date or, to some extent, the amount that they earn.

Whilst it is ultimately a scheme member's responsibility to work out whether or not they are liable for an annual allowance tax charge, we have produced a brief guide to the changes which can be downloaded here.

The Spring edition of The Quill published

The 2010 Valuation

Every three years the Royal County of Berkshire Pension Fund is required to appoint an independent actuary to carry out a valuation of the Fund. The valuation is a health check to ensure that the fund's assets are sufficient to meet it's liabilities. Employer contribution rates for the forthcoming three year period are set as part of the valuation process. The last valuation took place on 31 March 2010 with employer rates being set for the period 1 April 2011 to 31 March 2014.

The final 2010 valuation report has been released and can be downloaded here.

The Hutton Report is Published

Lord Hutton of Furness has published his final report on public service pension provision in which he set out his recommendations to the Government on pension arrangements. The full report can be viewed here. A Frequently Asked Questions page has also been produced via the HM Treasury website and is available to view here.

New Contribution Bandings for 2011/2012

The new employee contribution bandings have been released and will apply from 1st April 2011 to 31st March 2012. The full table of rates can be viewed here

Combining Previous Scheme Membership

The LGPS (Miscellaneous) Regulations 2010 were laid before parliament on 25 August 2010 and have come into force from 30 September 2010. The most notable amendment within these Miscellaneous Regulations relate to the combining of previous LGPS membership with the membership currently building up within the Royal County of Berkshire Pension Fund.

Combining LGPS benefits - new rules

Regulation 16 of the LGPS (Administration Regulations 2007 (as amended) has now been amended under the Miscellaneous regulations regarding combining periods of LGPS membership.

If a member leaves the LGPS they are entitled to leave your benefits in the Scheme (known as deferred benefits). If they later re-join the LGPS with another Local Government employer, they may add their previous deferred benefits to the benefits building up in their new employment. This is known as combining benefits.

What are the current rules?

Before 1 October 2010, the ability to combine benefits was restricted in two ways:

• A decision to combine benefits had to be made within the first 12 months of returning to Local Government employment (or such longer period as the employing authority allowed); and

• If you had a deferred benefit held with more than one previous LGPS employer, you could only combine the most recent period of membership with your current membership.

What has changed?

• Under the revised regulations, existing active members will have until 30 September 2011 to combine any period of former Local Government membership with their current membership; and

• Members are now permitted provided that they elect to do so in the first 12 months of their new period of membership. Current active members have, until 30 September 2011 to aggregate membership.

A Frequently Asked Questions leaflet has been produced which contains further information regarding combining previous Local Government membership which can be downloaded here. Members to investgate a transfer of previous Local Government membership before 30th September 2011 must complete form LGS13A and return this to the Berkshire Pensions team.

Annual Benefit Statements 2009/2010

Annual benefit statements for 2009/2010 have now been issud to all active and deferred scheme members. If you have any queries concerning your statement please contact the Pension Team on 0845 602 7237 or e-mail info@berkshirepensions.org.uk

Annual Report and Accounts 2009/10

The Annual Report and Accounts for 2009/2010 has been produced and is available to download here. If you would like a hard copy of this document please contact Joanne Brazier on 01628 796754.

The Hutton Report

The Independent Public Service Pensions Commission has issued its interim report on potential reform of the public service pension schemes. The final report is due to be released in Spring 2011. The Independent Public Service Pensions Commission's press release and the full interim report are available on the HM Treasury website.

State Pension Age Calculator

Click here to access the online calculator produced by the Pension Service and calculate the date you will be entitled to claim your State Pension.