Question about LGPS APC factors

jsinc

A few weeks ago the maximum amount of additional pension you could buy was £6,822 (2018/19 rates).
For a 36 year old man this cost £47,607.33 - implying £697.85 contribution per £100 additional pension.

Now the maximum is £7,026 (2019/20 rates). For the same 36 year old man the cost is £57,121.38 - implying £813 contribution per £100 additional pension.

Can anyone explain the 16.5% increase from £697.85 to £813?

I've checked the latest actuarial guidance and the £813 2019/20 figure is correct: http://lgpslibrary.org/assets/actgui/ew/AddPen20190301Post14.pdf

I can't find tables for 2018/19. The only other post-2014 tables available were last updated in April 2016. The relevant figure there is £821 not £697.85 so I assume this is either outdated and/or the calculator made an adjustment for varying NPA (65-68): http://lgpslibrary.org/assets/actgui/ew/AddPen20160412.pdf

Even if one accounts for cost of living increase, and adds an extra year of ageing (not correct but for the sake of explanation) it's not 16.5%. I guess changes to life expectancy could be an additional input.

I've seen a few LGPS experts here so thought I'd ask before contacting the Scheme about inputs.
Thanks

Silvertabby

I'm out of this 'circle' now, but the increases could be as a result of a contribution revaluation. ie, the actual pension isn't linked to actual contributions, but the combined employer and employee contributions (plus investment returns) have to bring in enough to make the scheme viable.

Employers don't contribute to APCs - the total cost is paid by the pension fund member. Employee's contribution rates don't change all that often - but employer's can and do. If your employer's contribution rates to the main scheme have been increased, then that will have a knock on effect with APCs.

Other factors may also apply.

jsinc

This is just for the standard calculator 2019/20, with no employer contribution - 'Buying Extra Pension in the LGPS - Additional Pension Contributions (APCs)': https://lgpsmember.org/more/apc/extra.php


I understand the actuarial factors must change regularly but that seems a very large jump for one year (I can't check if such large jumps up and down have been a normal thing from past tables).

Silvertabby

jsinc wrote: »

This is just for the standard calculator 2019/20, with no employer contribution - 'Buying Extra Pension in the LGPS - Additional Pension Contributions (APCs)': https://lgpsmember.org/more/apc/extra.php

I understand the actuarial factors must change regularly but that seems a very large jump for one year (I can't check if such large jumps up and down have been a normal thing from past tables).

Although there is scope for employer's contributions on the work sheet, I've never known it happen (except for periods of authorised unpaid leave). In the main scheme, employer contributions could be 2, 3 or even 4 times the amount you pay - which is why APCs seem so expensive.

An increase of 16.5% as a result of a 3 year revaluation (plus other factors) doesn't sound all that unreasonable to me - but for a definitive answer you will need to speak to your LGPS pensions manager.

jsinc

If the reason I can't find tables for 2018/19 is because there aren't any (last change was in 2016/17) that would makes more sense. But it doesn't explain why recent implied values from the 2018/19 calculator don't match the 2016/17 tables. Unless there were significant additional calculator adjustments for NPA not outlined in the older tables.

It's a question on behalf of a family member as they're not on this forum, but I'll ask them to enquire with their fund. Fwiw I think APCs are (perhaps were) pretty good value vs DC alternatives.

Thanks for taking time to reply

Edit: Actually there are adjustment factors for NPAs with the 2016/17 tables. In this case of NPA = 68 it's 0.85. £821 * 0.85 = £697.85 which matches 2018/19 calculator.

So you're correct about an increase of 16.5% as a result of a 3 year revaluation (plus other factors). Cheers


Edit2: For anyone interested - Government reduced the SCAPE discount rate used in the valuation of LGPS and other public sector pension benefits. Have no clue on the technicalities but would guess this explains much of the change as a lower discount rate effectively makes in-fund benefits worth more, and conversely each £ into the fund buys less. http://lgpslibrary.org/assets/bulletins/2018/177.pdf