Employee/Employer contribution LGPS

Moby

I don't fully understand what the following means:-
My pension statement says I contribute 6.8% and my employer contributes 29.6 % towards my LGPS. I don't understand what that means.....can someone advise?

Acquinas

Almost all workplace pensions involve a contribution from the employee and one from the employer. The employer contribution will be an "on" cost for your employer that you will never see (though 29.6% sounds a bit high) whereas the 6.8% will be an actual deduction from your salary before tax. In any event, the 29.6% shouldn't be anything for you to worry about as an individual

Silvertabby

The amount of pension contributions - both yours and your employers - have no bearing whatsover on your eventual pension entitlement. The contributions are simply the amount needed to keep the scheme going, as determined by the scheme number crunchers. Your own contributions are a percentage of your salary, whilst your employer's contributions may and do fluctuate, but will have no bearing on your salary income.

That said, 29.6% is quite generous, so it may be that they are more lenient than some employers when applying employer discretions. This may be to your advantage but, again, at no further cost to yourself.

Moby

The thing I don't understand is the huge disparity....I thought employers usually matched the employee contribution?

Silvertabby

The thing I don't understand is the huge disparity....I thought employers usually matched the employee contribution?

You're possibly thinking of the new(ish) auto enrolment private pension schemes. Please don't make a drama of this - it's only a matter of time before someone has a go at you for benefitting from a public sector pension!

System

Hi

29.6% is actually very low.

When the academies first started rates were 49% and higher for employers. The academies were only guaranteed 7 years of funding to cover a lifetime of payments.

Central Government intervened and told Local Government Pension Schemes to treat the new employer as exactly the same as the old employer. Which contravened LGPS regs.

So a Great British compromise happened and those Academies, that fail or revert to local authority control, potentially landing the said LA's with a huge pension liability, were re-assessed, instead of circa 19% for LA the academedies come out abot 10 - 12% higher as their paying in time is shorter.

We used to get letters/copies from M GOVE on the matter, so that is what this is based on.

But as an employee you have nothing to worry about for your pension rights, the LA underwrites it.

As a council tax payer however the high salaries paid to some 'Principals' that will inevitably land on my bill is very annoying.

OldBeanz

Moby wrote: »

The thing I don't understand is the huge disparity....I thought employers usually matched the employee contribution?

They have matched your contribution and some on top

JoeCrystal

Silvertabby wrote: »

You're possibly thinking of the new(ish) auto enrolment private pension schemes. Please don't make a drama of this - it's only a matter of time before someone has a go at you for benefitting from a public sector pension!

I'll bite

I am shocked that these lucky folks with the DB pension scheme are paying peanuts for such a generous and knowing exactly how much they are getting when they retire later in life. They even get ill health retirement and generous death in service benefit as well. While we, hard working, hard up private sector workers have to pay our hard earned taxes to cover these generous public sector and defined benefit pension schemes while we only get typically minimum contributes 1% of employer. And if we get ill enough that we cannot work, well tough luck, we won't see any income at all.

Having said that. I got less problem with LGPS since it is you know, funded. The Local Governments actually got actual fund to draw upon unlike all other public sector pension schemes which use the taxes in the year to make up shortfall on yearly basis.

GunJack

JoeCrystal wrote: »

I'll bite

I am shocked that these lucky folks with the DB pension scheme are paying peanuts for such a generous and knowing exactly how much they are getting when they retire later in life. They even get ill health retirement and generous death in service benefit as well. While we, hard working, hard up private sector workers have to pay our hard earned taxes to cover these generous public sector and defined benefit pension schemes while we only get typically minimum contributes 1% of employer. And if we get ill enough that we cannot work, well tough luck, we won't see any income at all.

Having said that. I got less problem with LGPS since it is you know, funded. The Local Governments actually got actual fund to draw upon unlike all other public sector pension schemes which use the taxes in the year to make up shortfall on yearly basis.

OK, I'll bite....

when I came out of the CS into "industry" I got a 22% pay rise and enrolled into a DB pension with similar benefits (actually better, death in service is 4x salary, was only 3x in CS).... so my CS salary was way under the "going rate", my pension was not quite so good, so stop moaning about public sector schemes when they (and the salaries) are often inferior to those in Industry

Acquinas

The thing I never quite get about this whole "public servants are impoverishing me" argument is that if the people are complaining about the favourable treatment meted out to public servants, then why have they not followed the logic of their own argument and got themselves one of these gold-plated jobs themselves? It would be uncharitable to suggest it could be that they may possibly not possess the basic skills, knowledge etc I suppose. Or is it that, deep down, while they love to whinge, the bottom line is that public service jobs are, in the main, paid under the market rate for someone with the same skills set and they would prefer to stay in the corporate sector where the expense accounts, fully-expensed cars, big bonuses and tax dodges make the unfairness a bit more tolerable? As John Dough has pointed out, the escalation in LGPS contribution rates of late is the result of HMG attempting to marketise public education: unintended consequences of course, but just goes to show that a dogmatic attack on the public sector does not always leave the tax payer any better off.

hyubh

Acquinas wrote: »

the escalation in LGPS contribution rates of late is the result of HMG attempting to marketise public education

Employer rates in the LGPS are high because the scheme is expensive to fund and valuations are generally done on a more prudent and realistic basis than valuations of the unfunded public sector schemes, not because of 'HMG attempting to marketise public education'. In fact, I'm struggling to see how you are finding cause and effect there (assuming the 'marketisation of public education' is actually a thing) - a brand new free school has to auto-enroll support staff into the LGPS whether it wants to or not, let alone an existing school that converts to become an academy.

That some LGPS administering authorities a few years back looked to treat newly-created academies as quasi-admission bodies was a good thing not a bad thing, because it followed from academies having a relatively contingent existence compared to council employers. That the government then forced administering authorities to pretend otherwise wasn't good at all - it was at a piece with George Osborne's extraordinary statement around the same time that nationalising tjhe old Royal Mail pension fund and converting the scheme into a 'pay-as-you-go' one was bringing down the national debt.