Office of the Deputy Prime Minister
Local
Government Pensions Division
Zone 2/E7
Ashdown
House
Direct
line: 0207 944 6015
Fax: 0207
944 6019
e-mail: brian.town@odpm.gsi.gov.uk
To:
Addressees as attached
THE
LOCAL GOVERNMENT PENSION SCHEME (Amendment) (No.3) REGULATIONS 2005: ADDENDUM
A statutory consultation
exercise on changes to the LGPS Regulations started on 5 December. Part III of the draft
statutory instrument deals with the effects of the new tax regime which comes into place
with effect from
Removal of Cap
During the earlier consultation exercise on Her Majesty’s Revenue and Customs changes a small group of Class A and B members were identified who could enjoy a windfall if a simple adoption of HMRC revised allowance and lifetime limits were to be adopted as a result of removing current capping limits. It is therefore necessary for consultees to consider and comment on the following addition to the consultation draft.
(1)
This regulation applies where a member’s final pay (calculated in accordance
with regulation
21) would, if his final day of service were
(2)
In such a case, his period of membership for calculating his entitlement to any
benefits payable under these regulations
is obtained by aggregating his period of membership after
that date with the period obtained by applying the formula set out in paragraph
(3).
(3) That formula is X times 105,600 divided by Y,
where X is his period of
membership before 6th
April 2006 and Y is his final pay as
mentioned in paragraph (1).
Lifetime Limit
A small number of current
members may have capitalised pension rights equal too or in excess of the new lifetime
limit of £1.5 million. Others may envisage a point before retirement when the limit is
likely to be exceeded. It is possible for individuals, in the light of any independent
financial advice, to approach HMRC and apply for primary or enhanced protection. Where
such protection is given the subsequent benefit calculation will have to be done on a
basis outwith a calculation for members within the lifetime allowance figure. Pensions administrators and employers will need to bring this issue
to the attention of the relevant employees. The LGPS Regulations will in due course be
amended to allow for such calculations.
AVC Provision
The consultation draft is
silent on this issue, and therefore authorities should continue with the current
requirement to have an AVC provider. This is to ensure consistency across all LGPS
employers. Comments and observations are still, however, needed as to how Chapter IV of
the 1997 Regulations could be simplified as well as how monies from AVC funds would
interact with the facility to increase tax free lump sums as provided by regulation 3 of
the draft consultation.
Responses
Responses to this letter should be made in the same way
as responses to the letter of 5 December and should be received no later than
Therefore please send your comments in the first instance to Nicola Rochester, Local Government and Firefighters' Pensions Schemes Division, ODPM, Zone 2/E6, Ashdown House, 123 Victoria Street, London, SW1E 6DE, (tel: 020 7944 6016),
Electronic responses can be sent to nicola.rochester@odpm.gsi.gov.uk
Yours sincerely,
Brian Town
Addressed
to:
The
Chief Executive of:
County Councils (
District Councils (
Metropolitan Borough Councils (
Unitary Councils (
County and County Borough Councils in
Tameside Metropolitan Borough Council
Wirral Metropolitan Borough Council
Environment Agency.
Town
Clerk, City of London Corporation
Clerk,
Clerk,
Fire
and Rescue Authorities in
Police
Authorities in
Employers'
Organisation
SOCPO
SOLACE
ALACE
CIPFA
New Towns
Pension Fund
ALAMA
Audit Commission
UCEA
Association of Consulting Actuaries
Society
of
Society
of Welsh Treasurers
Society of Chief Personnel Officers
Association
of Metropolitan Treasurers
Society of
National
Probation Service for
Trades
Union Congress
UNISON
TGWU
GMB
UCATT
NAEIAC
AMICUS
Other
Government Departments
GAD
DfES
DoE
(NI)
SPPA