Important changes as a result of the LGPS (Miscellaneous Amendment) Regulations 2018
Amendments to the Local Government Pension Scheme (LGPS)
This note for scheme members covers the combined effect of the LGPS (Amendment) Regulations 2018 and LGPS (Miscellaneous Amendment) Regulations 2018.
Changes to when deferred benefits can be taken
Effective from 14 May 2018
Early payment of deferred benefits – if you left the LGPS with a deferred benefit before 1 April 2014 you can now choose to take early payment of your deferred benefits from age 55 (rather than 60). The change to the scheme rules means that you no longer need the consent of your former employer to take your benefits between the age of 55 and 59. Members who left the LGPS with a deferred benefit on or after 1 April 2014 (except councillors) were already able to choose to take early payment of their deferred benefits from age 55 without needing their former employer’s consent, and this has not changed.
Early payment of deferred benefits for pension credit members
If you were awarded a share of your ex-spouse’s LGPS pension as part of a divorce settlement and you are a pension credit member in the LGPS, you can now elect to take payment of these benefits from age 55 regardless of when the pension sharing order took effect. Before the change, if the pension sharing order took effect before 1 April 2014 or your ex-spouse left the LGPS before 1 April 2014 you could only choose to take early payment from age 60.
Reductions to your benefits for early payment
If you choose to take your deferred benefits earlier than your Normal Pension Age (NPA) they will normally be reduced to take account of the fact that your pension will be paid for longer. How much your deferred benefits are reduced by depends on how early you take them. The reduction is based on the length of time (in years and days) between the date you take them and the date your deferred benefit will be payable without a reduction for early payment. If you are unsure when your NPA is, you should check your annual benefit statement.
The early reduction factors are set by the Government and can vary from time to time. The current factors can be found on the national LGPS member website - www.lgpsmember.org/more/reductions.php
More information about taking your deferred is available on the national LGPS website - www.lgpsmember.org/arl/already-left-when.php
An application for early payment of your deferred benefit should be made in writing to the Fund.
Changes to pre- April 2014 AVC contracts
Effective from 14 May 2018
If you are a member of the LGPS who is, or was, paying Additional Voluntary Contributions (AVCs) and the contract to pay those AVCs started before 1 April 2014, you will see some changes to the way your AVCs are calculated and how you can take your AVC plan.
If you are currently paying AVCs:
you can now pay up to 100% (rather than 50%) of your pensionable pay into your AVC plan.
AVCs will now also be deducted from any voluntary overtime you work (if you pay AVCs as percentage of your salary).
Active & Deferred members
If you are or were a member of the LGPS on or after 1 April 2014 and you are/were paying Additional Voluntary Contributions (AVCs) and the contract to pay those AVCs started before 1 April 2014, you will see some changes in how you can take your AVC plan.
When you take your AVC plan:
you can now buy additional pension from the LGPS with your AVC plan when you take your benefits from the scheme. Before the change, this option was only available to members who took immediate payment of their main scheme benefits and their AVC plan when they left the scheme.
when you take your main scheme benefits you will no longer be able to leave your AVC invested and take it later.
if you die before taking your AVC and a lump sum is to be paid from your AVC plan, your pension fund now has absolute discretion over who to pay that sum to (rather than it having to be paid to your estate). If the lump sum is paid at the discretion of the pension fund it does not form part of the estate and will not be subject to inheritance tax.
For information about the other ways you can use your AVC plan see the national LGPS website - www.lgpsmember.org/more/AVCoptions.php
Expansion of the underpin
Effective from 1 April 2014
Active, Deferred & Pensioner members
The way your pension is calculated in the LGPS changed from 1 April 2014. If you were a member of the LGPS before 1 April 2014 any benefits built up to 31 March 2014 are protected as final salary benefits and will normally be calculated using your membership to 31 March 2014 and your final year’s pay.
An additional protection was put in place for members who were active members of the LGPS on 31 March 2012 and who were within 10 years of age 65 at 1 April 2012. Subject to certain conditions, these members will get a pension at least equal to that which they would have received had the scheme not changed on 1 April 2014. This protection is known as the underpin.
This underpin protection has now been extended to also apply to people who were active members of a different public service pension scheme on 31 March 2012 and who were within 10 years of age 65 on 1 April 2012; if these people join the LGPS and transfer their pension benefits from the other public service pension scheme into the new LGPS scheme and part or all of that transfer buys final salary benefits in the LGPS, subject to certain conditions, the underpin will apply.
This change takes effect from 1 April 2014.
More information on the underpin is available on the national LGPS website - www.lgpsmember.org/more/underpin.php
Changes to survivor benefits for same sex spouses and civil partners
Effective from 5 December 2005 for civil partnerships and 13 March 2014 for same sex marriages
Active, Deferred & Pensioner members
A change to the scheme rules has been made to provide that survivor benefits payable to a same sex spouse or a civil partner are equal those paid to the widow of a male member.
Why has the change been made?
The change has been made as a result of a Supreme Court judgment (Walker v Innospec) which found that Mr Walker’s male spouse was entitled to the same benefits that would have been paid if Mr Walker had left a widow in an opposite sex marriage.
Why does this apply to the LGPS?
The government believes that the implication of this judgment for all public service pensions schemes, including the LGPS, is that surviving civil partners or surviving same sex spouses should be provided with benefits equal to those that would be left to the widow of a male member.
When does the change take effect from?
The change is backdated to the date the civil partnerships and same sex marriages were introduced – this is 5 December 2005 for civil partnerships and 13 March 2014 for same sex marriages.
This means that where a member of the LGPS has died leaving a surviving civil partner or a same sex spouse, the survivor’s pension in payment will need to be reviewed and any additional amounts paid, where applicable. We are in the process of reviewing the impact of this change and will be contacting affected civil partners and same sex spouses in due course.
The change will automatically be taken into account in survivor benefits paid to civil partners and same sex spouses in the future.