Newspaper article The Journal (Newcastle, England)

YOUR MONEY; Your Money Queries Are Answered by Trevor Clark, Director of Rutherford Wilkinson Ltd, Chartered Financial Planners

Newspaper article The Journal (Newcastle, England)

YOUR MONEY; Your Money Queries Are Answered by Trevor Clark, Director of Rutherford Wilkinson Ltd, Chartered Financial Planners

Article excerpt

Q. I work in local government and I am a member of the Local Government Pension Scheme. A colleague has told me that the pension scheme is set to change. Is this correct? A.Yes. Regulations were introduced recently that will govern how benefits are accrued and administered under the Local Government Pension Scheme (LGPS), with effect from 1 April 2014. The most fundamental change is that the new regime provides for pension benefits to accrue on a "career average re-valued earnings" (CARE) basis, rather than on a "final salary" basis (as is the case at present).

However, the rate at which a member accrues benefits will improve from 1/60th of their final salary to 1/49th of their CARE for each year of pensionable service. Therefore, the change to CARE will, in many instances, mean that members are actually better off under the new scheme. This is likely to be the case for low earners in particular.

The normal retirement age - the point at which a member can begin to receive their pension without actuarial reduction - is set to change also, so that it mirrors the state pension age. Any future increases to the state pension age will be reflected automatically in an increase to the normal pension age for members of the LGPS.

The average member contribution rate will be 6.5%, although contribution rates will be tiered according to a member's salary. One of the most intriguing changes to the LGPS is the introduction of an optional "lowcost" arrangement, whereby members can accrue 50% of the main scheme benefits for 50% of their normal contribution rate.

It is anticipated that additional regulations will be brought forward to provide transitional protection for those members who have accrued benefits in the LGPS prior to 1 April 2014 and, in particular, those members who are close to retirement at that date. If you require further information in respect of the forthcoming changes to the LGPS, I recommend that you contact the Pensions Office of the relevant LGPS fund and/or a chartered financial planner.

Q. I recently married. My wife and I are looking to purchase our first home. We want to take this opportunity to review our finances, not only to assess the amount of mortgage we are able to obtain/ afford, but to ensure that we are saving enough for our retirement and we that have adequate protection in place. …

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