New look Scheme on the horizon?A Statement was made to Parliament on 23 November by Phil Woolas MP, Minister for Local Government, about proposals for a new look LGPS from 2008.

The Government is keen to develop the Scheme into one which is affordable to employers (and therefore taxpayers), flexible and accessible for both employees and employers, and one which will provide a modern, equality-proofed range of defined benefits, both now and in the future.

The Government has already carried out a consultation exercise called Where Next to get feedback on various options, including variations on the current final salary type scheme, but also alternatives such as career average (pension build up) schemes. The feedback has now been analysed, with there being an overall preference for some kind of final salary scheme. Here’s what the Government is proposing:

A final salary scheme, with the standard benefits package being a pension based on 1/60th of pay for each year’s membership, but with the option of converting some pension into lump sum at the rate of £12 lump sum, for every £1 of pension given up (this is the same exchange rate we have now, and the same Revenue limits would also apply)

Normal Pension Age of 65 for drawing unreduced benefits

Minimum retirement age to go up to 55 except on grounds of ill-health (this would apply by 2010 for current members and from 1 April 2008, for members joining from this date

The opportunity for employers to enhance membership/benefits

Final pay to be taken over last 12 months, or the best three consecutive years in the last ten (plus inflation proofing)

We currently just have survivors’ pensions for husbands, wives,  same sex civil partners and children, but the new Scheme would extend this to named dependent partners too

Revised ill-health retirement package with different levels of benefits for different levels of incapacity

Better lump sum life cover of three years’ pay (this is currently two years)

More chance of lump sum life cover after retirement

Phased retirement (which we assume would be similar to the recently introduced flexible retirement)

Scaled contributions related to income, which would see a lower contribution rate of 5.5% on the first £12,000 of pensionable pay, but 7.5% on the remainder. The Government estimate this averages out at 6.3%

A facility for members to purchase up to a maximum £5,000 of additional pension

A facility for Scheme members to contribute towards their pension in conjunction with external AVC providers (this exists now)

To find out more from the DCLG, or to pass on your own comments, why not visit their website at: www.communities.gov.uk/lgps

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