The Local Government Pension Scheme is preparing for its next raft of changes, following from the introduction of tiered contributions in 2011 which saw members move away from a flat 5 or 6% contribution rate.
Currently a defined final salary pension scheme which sees members pension based on 1/60th of their final salary for each year of membership, the new CARE scheme from 2014 will see a separate ‘pot’ built up each year revalued annual by inflation, and then added together upon retirement to arrive at the total pension payable.
The Local Government Pension Scheme is preparing for its next raft of changes, following from the introduction of tiered contributions in 2011 which saw members move away from a flat 5 or 6% contribution rate.
Currently a defined final salary pension scheme which sees members pension based on 1/60th of their final salary for each year of membership, the new CARE scheme from 2014 will see a separate ‘pot’ built up each year revalued annual by inflation, and then added together upon retirement to arrive at the total pension payable.
Under the new scheme, all benefits prior to 1st April 2014 will be protected and based upon your final salary and current normal retirement age. Additional protection is being granted to those members who were 55 or over as at April 2012, and this will ensure that the pension benefit is at least as high as the current final salary arrangements.
For anyone earning less than £43,000 the cost of membership will not increase, and it is likely that for those members who are part-time the cost may actually decrease as contributions will be based upon actual earnings. Contributions for those earning over £43,000 are going to increase, but members will continue to receive full tax relief on all contributions.
For members concerned about the affordability of membership, there is going to be a 50/50 option where members can receive 50% of the benefits for 50% of the cost, but crucially, retaining the full benefits of life and ill health cover.
As the finer details of the scheme regulations are still being consulted upon prior to publication, if you have any queries, contact your local government pension scheme representative, details of which should be on your annual benefits statements.