Posts Tagged ‘Local Government Pension Scheme’

David Davison

Recognising the many difficulties charities who participate in Local Government Pension Schemes face, a series of really helpful guides have been published over the last few weeks:-

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David Davison

A change in practice by local government pension scheme Lothian Pension Fund (‘LPF’) outlined in a recent Bulletin has finally looked to rectify a long standing anomaly with pension schemes of this type.

Many charities joined LGPS as a result of outsourced arrangements from local authorities or other public bodies. These arrangements resulted in the transfer of staff from the local authority and allowed these staff to continue their pension provision.

Unfortunately Funds were unable to segregate the service for these individuals between the two employing bodies which meant that the later employer, usually a charity, inherited all the liabilities. Read more »

David Davison

Spence & Partners latest blog for Pension Funds Online –

Many charities participating in local government pension schemes (LGPS) have been increasingly frustrated by the lack of recognition of the issues they face by the schemes and indeed the Department for Communities and Local Government (DCLG) who oversee them.

The issues are not new but there remains an element of denial and finger pointing and it’s very easy to see how charities could be frustrated. Read more »

David Davison

Local Government Pension Scheme (‘LGPS’) – Technical consultation on Local Government Pension Scheme Rules – December 2014

Introduction

The evolution of LGPS over the last number of years has created significant inconsistencies and unfairness particularly in the treatment of admitted bodies.  This is highly problematic for participants as well as building up significant difficulties for the LGPS themselves. It has also resulted in LGPS looking unresponsive to the issues that their admitted bodies face.

The consultation specifically requests “suggestions on how to better protect local tax-payers where there is a risk they will have to foot the bill for employers who leave the scheme.” LGPS need to recognise that the current approach is unfair, impractical and ultimately unsustainable. LGPS would appear to prefer to continue to pursue excessively prudent cessation settlements which are rarely if ever paid, as they are unaffordable, while organisations continue to accrue further liabilities which will remain unsettled until a point where an organisation ceases to operate and the burden is left with the tax-payer. Surely to protect the tax-payer it would be much more sustainable to find a way to prevent additional unaffordable liabilities accruing and adopt a more pragmatic methodology in calculating and obtaining any cessation liabilities due.

In this response I will therefore look to identify a number of the key issues faced and offer some proposals how the LGPS could adapt for the good of participants and themselves. Read more »

David Davison

When encouraging change to the approach taken with charity pensions I’m constantly asked the question by large schemes and regulators – have you got any analysis of the issues. This has often been difficult to obtain and as a result the pension difficulties charities face are often all too easily ignored. Charities really need to have their voice heard and here is your chance. Charity Finance Group are carrying out a pension survey to use to better inform on the issues faced and to assist in negotiations with DWP and LGPS for a change in legislation and approach.

This is a great opportunity for charities to influence future pension policy and thinking, and to really get their views across at a high level.

I would strongly encourage charities to participate by following the link and providing your experience.

But don’t delay as the survey closes on the 7th April.

 

David Davison

Finance Directors of charities not disclosing their multi-employer pension liabilities on their balance sheet may be sleeping just a little uncomfortably at the moment following a consultation document issued by the Financial Reporting Council.

If the proposals are accepted charities will need to recognise any agreement to fund a deficit in a multi-employer scheme on their balance sheet. Read more »

Greig McGuinness

After much deliberation Unions and Government appear to have reached agreement on the future benefit basis for the Local Government Pension Scheme in England and Wales. As a result, the average government worker will now receive a higher pension with no requirement for additional contributions, although they will not get their hands on it until a few years later than originally anticipated. Read more »

David Davison

In Hanoi, under French colonial rule, a program paying people a bounty for each rat pelt handed in was intended to exterminate rats. Instead, it led to the farming of rats!!

The Government has announced a huge cull of quangos in a move it says is aimed at improving accountability as well as meeting deficit reduction objectives. Whilst I don’t expect this particular cull to result in the establishment of quango farms in the home counties, it may well have equally unintended consequences as I doubt what could be very significant pensions implications have been properly considered. These implications may well threaten the future solvency of some organisations not directly mentioned, and only loosely connected, and dwarf any potential financial savings expected. Read more »

Ian Conlon

In the June 2010 budget the Chancellor of the Exchequer announced the Government’s intention for future increases in public sector pensions to be linked to changes in the Consumer Prices Index (CPI).  Historically such pensions were linked to increases in the Retail Prices Index (RPI).

The Pensions Minister subsequently issued a statement on 8 July confirming that the Government also intends to use CPI for determining statutory minimum increases which apply to private sector pension schemes.

These changes will undoubtedly have an impact where pensions are a factor in divorce proceedings.

Although both are measures of inflation, RPI and CPI are calculated using different methods and are based on different “baskets” of goods.  Historically this difference has resulted, for most time periods, in CPI being a lower measure of price inflation that RPI.  Overall, commentators expect CPI to be around 0.5% to 0.8% lower than RPI over the longer term.

For all public sector pension schemes* the expectation is that future increases in pensions will be lower than previously expected.  Therefore, the switch from RPI to CPI will affect the assumptions underlying the calculation of Cash Equivalent Transfer Values (CETVs). This change is likely to reduce CETVs and may have an impact on what is deemed an appropriate percentage Pension Share.

By way of illustration, for someone who is currently 40 years old with a pension in a public sector pension scheme, the impact of this change alone could result in a reduction of around 20% to the CETV.

For private sector pension schemes, the impact of the change is likely to vary by scheme and will depend upon the rules of the particular scheme.

It is likely that many pension schemes will defer issuing new transfer values until the changes have been considered.   Further, pension schemes may decide to put on hold the implementation of Pension Sharing Orders.

For ongoing divorce cases where pension information has been provided, the solicitor and parties involved should carefully consider whether it is appropriate to base any decisions on this information and such advice as may have been provided, whether in relation to Pension Sharing or Offsetting without first seeking further advice from an actuary specialising in pensions on divorce.

Spence & Partners can provide an early indication of the likely impact on the value of the CETV and implications for Pension Sharing on taking account of these changes.

For more information on this or any other pension on divorce issue contact our divorce team divorce@spenceandpartners.co.uk

*Public sector pension schemes include the Principal Civil Service Pension Scheme, Health and Personal Social Services Superannuation Scheme, Armed Forces Pension Scheme, Local Government Pension Scheme, Police Pension Scheme, Teachers’ Pension Scheme and Firefighters’ Pension Scheme.

Ian Conlon Actuary

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