The Greater Manchester Pension Fund is the largest fund in the statutory Local Government Pension Scheme for England and Wales. Tameside MBC is the administering authority.
Employees (apart from teachers, police officers and fire-fighters) of all the local and joint authorities in the Greater Manchester area and of many other public bodies have automatic access to the Scheme. Employees of a wide range of other bodies providing public services can join the Scheme if covered by a relevant resolution or by an admission agreement made between the body concerned and Tameside MBC. Local authority councillors may also be eligible to join the Scheme. A list of employers contributing to the Fund at 31 March 2011 can be found via the link below.
The Scheme is a traditional final salary scheme where we normally use years of membership and pay near to retirement to work out benefits. Statutory regulations define the benefits and they do not depend on investment performance or market conditions.A summary of the main benefits offered by the Scheme
as it stood on 31 March 2011 can be found in the section headed 'Scheme at a Glance'.
Standard employee contributions vary according to levels of pay, ranging from 5.5% of pay to 7.5% of pay. Employers meet the balance of the cost of the Scheme through variable employer contributions. GMPF’s actuary normally sets employer contributions following actuarial valuations held every three years. Employer contributions can rise or fall depending on the solvency of GMPF and the estimated cost of providing benefits for future membership. The contribution rates for 2010-11 can be found via the link below. Both years’ rates derive from the actuarial valuation as at 31 March 2007. A further actuarial valuation of GMPF as at 31 March 2010 was completed during the year which has determined new employer contribution rates to apply for the three years from 1 April 2011 onwards.
Employee Contribution Rates
Members of the Scheme are contracted-out of the State Second Pension (S2P) because the Scheme provides at least broadly equivalent benefits. Members and their employers pay lower National Insurance contributions as a result. The Scheme is also registered with Her Majesty’s Revenue and Customs, so has favourable tax treatment, including tax relief on employee contributions.
Overall, scheme membership continues to grow and the total of employee, pensioner and deferred members at 31 March 2011 was 267,315 compared with 262,931 at 31 March 2010. (These figures include 12,297 former employees who have retained a right to a refund of contributions or a transfer of pension benefits to another scheme). However, whilst the numbers of pensioners and deferred members continue to grow, the number of employee members of GMPF has fallen for the fourth year in a row, further increasing its maturity. See further comments later under membership levels.
There has been a further increase during 2010-11 in the number of employers contributing to GMPF. The overall number of actively contributing employers has risen from 236 as at 31 March 2010 to 254 as at 31 March 2011. The main sources of new employers are academies, which are designated in the scheme rules as “scheme employers” and therefore required to participate, and new admitted bodies. In most cases, admission agreements are made to allow existing scheme members who are outsourced by a local authority or other scheme employer to a private sector contractor to continue as members of the scheme. In other cases, agreements have been made to reflect an existing body’s change of legal status.
Academies are now shown as a separate group of employers in the list of employers, reflecting their increasing numbers over the past few years. More academies are expected to join GMPF in future.
The total number of employers at 31 March 2011 is made up of 10 local authorities, 3 higher education corporations, 21 further education corporations, 20 foundation or voluntary schools, 27 academies, a further 24 other scheme employers and 149 admitted bodies.
Although local authority employees still make up the overwhelming majority of active members in GMPF, the significance of other employer types continues to increase. Non-local authority employees now make up almost 30% of the total, around double the proportion in 2001.
Further amendments to the scheme rules have been made by:
- The Local Government Pension Scheme (Miscellaneous) Regulations 2010, and
- The Local Government Pension Scheme (Benefits, Membership and Contributions) (Amendment) Regulations 2011
The 2010 regulations incorporated some 56 separate changes – mostly technical clarifications – to the existing LGPS rules. For example, they further amend the provisions for ill health retirement and also cover matters such as access to benefits in divorce cases and the implications of the Academies Act 2010.
The 2011 regulations make further amendments to the ill health retirement provisions.
The Independent Public Service Pensions Commission chaired by Lord Hutton published its Interim Report in October 2010 and its Final Report in March 2011. The Panel submitted responses and participated in Lord Hutton’s consultations. Following the interim report, the Chancellor announced the Government’s intentions to increase employee contributions to yield an extra 3% of pay to help pay for the cost of pensions. The Chair of the Panel wrote to the Chancellor expressing the Panel’s concerns regarding the proposals to increase contributions by this scale and the impact this may have on Scheme membership. A copy of this letter can be found at via the link below.
Letter from the Panel
The final report included 27 recommendations covering pension principles, scheme design and governance matters. There has been extensive coverage in the press on the reports and subsequent negotiations between Government and trade unions with Government proposals expected in the Autumn. GMPF continues to produce newsflashes and updates and it will continue to do so. These can be found in the News and Updates section of this website.
News & Updates
How the Government chooses to implement the Commission’s recommendations will affect all public sector schemes, with principles such as career averaging to replace final salary, and normal pension age to increase in line with State Pension Age, being already announced. At the time of writing, two vital components remain unknown: the rate of pension accrual and the rate at which employees will contribute.
Membership changes over the last three years were as follows:
The changes in the three types of membership are as expected in the current environment, with the numbers of deferreds and pensioners expected to grow further. The number of employee members is expected to continue to fall and probably significantly. This is because of reductions in public expenditure resulting in local authorities and other employers contracting, facilities and services being outsourced or different delivery methods being adopted, and in part due to the long-standing reductions in the active memberships of employers not admitting new members. More people have also been opting-out of GMPF (see details below).
The actuarial valuation of GMPF as at 31 March 2010 was finalised during the year. Overall results were reported to the Pension Fund Management Panel at its 4 March 2011 meeting. The funding level (i.e. assets divided by liabilities) at 31 March 2010 is calculated at 96.4% - a decline from the 100% level calculated at the previous 2007 valuation. However, the position of individual employers varies significantly depending on their individual circumstances, with most employers having a funding level of between 80% and 120%. Increased monitoring of and communication with employers will be required in future as GMPF’s liabilities mature so that adequate funding is achieved whilst keeping contribution rates as stable and affordable as possible.
An important part of GMPF’s response to consultations is providing evidence to help inform the consultation process. Some illustrations of what we considered relevant statistics are shown in the table and chart below.
Pay bands: It is Government policy that low earners should be protected from employee contribution increases. Hence, the proportion of staff in the relevant pay bands is critical to determining the scale of increases. The table on the right details current contribution rates based on full time equivalent salaries and the proportion of GMPF employee members in each of these pay bands.
The Government has commented on its commitment to protect the low paid from employee contribution increases. The demographics of the LGPS with a higher proportion of employees on lower pay bands compared to other,unfunded, public sector schemes demonstrates the challenge of delivering increased employee contributions in line with the Treasury’s aim. It also illustrates the consequences for employees that are on higher pay bands if the requirement to try and deliver an average 3% increase is pursued. The Government has said that it will take into account the LGPS’s unique funded basis in determining increases in employee contributions and other options for saving that are possible because the LGPS is funded, but at the time of writing it has yet to publish its proposed changes.
Optants out: The impact of a pay freeze, inflation and other factors is resulting in an increase in the number of members opting out. Our survey results suggest affordability of the Scheme is becoming an increasingly important issue for employees. The chart and table below illustrates the trend of an increasing number of members opting out of GMPF.
||A sample analysis has been undertaken of those members opting out. The average age was 36 and their membership averaged 6 years. The norm from this analysis was that those on lower pay bands were more likely to opt out than those on higher pay bands on a pro rata basis. Looking forward the evidence suggests that the proportion of members opting out will continue to grow.
Benchmarking has continued via our membership of the CIPFA club for administering authorities, with our 2011 annual administration costs (i.e. those relating to the Pensions Office) remaining competitive at just over £14 per member. This compares very favourably with the all-fund average of £22.72 for last year. We also continue to meet with representatives from the other five metropolitan funds to share ideas regarding best practice.
We use Tracesmart, a mortality tracing firm, to help identify deaths of UK pensioners that have not been notified to the Pensions Office. We also send life certificates each year to pensioners living abroad. The latter may also choose to have their pensions paid in local currency, via the Worldlink service from Citigroup.
The mailings of annual statements to employee members and deferred beneficiaries continued, with the former being a combined statement for the first time in that it provided details of State pension as well as GMPF benefits.
Booklets and leaflets were also updated with a targeted mailing to high earners taking place regarding pension tax changes. There was also a Pension Power newsletter for employee members and a Grapevine for pensioners.
Several email alerts were also published through the year, with the number registered for these growing. These allow topical comment from GMPF to be circulated very quickly regarding, for example, Lord Hutton’s proposals.
We continued to comment on CLG consultations and officers have continued to take an active part in national and regional meetings, including:
- LGPC’s Officer Advisory Group
- user groups for Scheme AVCs, Payroll and CLASS - the Computerised Local Authority Superannuation Scheme (consisting of those administering authorities that use AXIS), and
- the CLG’s Policy Review Group
- the Shrewsbury Pensions Officer Group
An important consultation currently being undertaken by the Government relates to Fair Deal. When activities are outsourced, it is common for the new employer to become an admitted body allowing transferring employees to continue with their scheme membership. The consultation is seeking views on the continued appropriateness of this arrangement. GMPF’s response supported the continuation of this arrangement and suggestions were made regarding the effective implementation of such an approach.
For over ten years the Pensioners’ Forum had been held at the Co-operative’s New Century House in Manchester. This is now reserved for Co-op use however, leading to the Forum moving to the Point Conference Centre at Lancashire County Cricket Club, Old Trafford. The modern, new venue was very successful, in part due to it being better suited to those whose days of running up and down stairs are behind them. Presentations were heard from Peter Morris - Director of Pensions, Ged Dale - Head of Pensions Administration and Lynda Brislin from the North West Air Ambulance. The event was very well received.
There were successes during the year regarding professional CIPP qualifications, with congratulations due to Paul Hill, Georgia Massey and Stuart Taylor on successfully completing the foundation course, and to Joelle Heslop and Jane Miller on being awarded the Professional Certificate in Team Management.
Each year we carry out various surveys to check what our customers think of the level of service they get from us. In the last year we have surveyed website users, existing pensioners and new members, and they all indicated good levels of satisfaction.
The table on the right summarises our performance in the 16 categories identified by the Panel some years ago. As can be seen in 11 of these, we achieved a rating of 99% or 100%.