UNIVERSITY OF BRADFORD

LOCAL GOVERNMENT PENSION FUND

EMPLOYER’S DISCRETIONS

Introduction

The Local Government Pension regulations require employers to make and publish policy statements on how they will exercise their discretions in four key areas of the pension scheme after consultation with the administering authority (WYPF).

The University in formulating the policy statements outlined below has considered the policy adopted in the context of.

  • The general principals put forward by the then Department for Transport, Local Government and the Regions (DTLR) now the Department for Communities and Local Government (CLG) that the discretionary powers must;

1be exercised reasonably;

2not be used for ulterior motive;

3be used with regard to all relevant factors (cost should be balanced against benefit for the Employer);

4only be used where there is a real and substantial future benefit to the Employer in return for incurring extra costs; and

5be duly recorded when used

  • the views of the West Yorkshire Pension Fund actuary
  • the advice of the Local Government Pensions Committee of the Employer’sOrganisation
  • where applicable the comments made by the Audit Commission in their report on early retirement Local Government
  • the comments of Trade Unions recognised by the Employer

The Employer, will as it sees fit, review the content of this discretionary policy under the Local Government Pension Scheme Regulations 2008 to meet its requirements as an employer participating in the West Yorkshire Pension Fund.

This document sets out the University’s Policy Statements.

Choice of early payment of Pension Regulations 30of the Benefits Regulations.

Thisregulation allows employers to allow current or deferred members who are over the age of 55(over the age of 50 for eligible employees who were members of the scheme at 31/03/2008 and an application is made prior to 01/04/2010) to take their benefits early.

The University will consider applications made under this Regulation having regard to the particular circumstances surrounding each case. Decisions will be made on the merits of each case having particular regard to:

  • the operating requirements of the employing School/Directorate
  • the University’s ability to meet the cost of granting such a request
  • whether any demonstrable cost savings in excess of potential savings available under any severance arrangements in place from time to time can be made
  • the members personal circumstances

Although the member benefits will (where approved) be paid subject to an appropriate reduction for early payment, under sub-paragraph 5 of Regulation 30 the employer can request that this reduction be waived. This will only be considered (i) in the context of all the above: (ii) under purely compassionate grounds, and (iii) if the University can meet the cost of granting such a request.

Actuarial Comment on the exercise of this Regulation 30 Discretion.

The cost of allowing members to take their benefits earlier than their normal retirement age can be considerable, depending on the member’s rule of 85 age (if Applicable) and whether any reduction for early payment is made to the benefits. No allowance is made in the normal employer contributions to the Fund for employers to exercise discretion to allow benefits to be taken prior to age 65(prior to the later of age 60 and rule of 85 age in respect of the pre April 2008 service and for members with protected retirement terms) (other than Ill health) and as a result additional capital contributions are due to the Fund when this discretion is exercised.

In each case of proposed discretion an early retirement cost calculation should be obtained from the fund by the employer prior to confirming any decision. If the discretion is used only rarely, the cost may be relatively small in the context of the funding of the scheme as a whole. Nevertheless, the cost in an individual case may be substantial, depending on the age at retirement, the rule of 85(if applicable) pay, length of service, and whether or not the individual concerned benefits from the protected retirement terms for service up to 2016/2020,

Flexible RetirementRegulation 18 of the Benefits Regulations

The regulation allows employers to allow members who have reduced their hours of work, or their grade, and who are age 55 or over (age 50 or over for eligible employees who were members of the scheme at 31/03/2008 and an application is made prior to 01/04/2010) to elect to take theirbenefits early (either in whole orpart), whilst continuing in employment and Fund membership. Note the final guidance on the operation of flexible retirement is currently awaited from CLG/Government Actuary, and potentially the following may need revision when this guidance is published.

The University will consider applications made under this regulation having regard to the particular circumstances surrounding each case. Decisions will be made on the merits of each case having particular regard to:

  • the operating requirements of the employing School/Directorate
  • the University’s ability to meet the cost of granting such a request
  • whether any demonstrable cost saving in excess of potential savings available under any severance arrangements in place from time to time can be made
  • the members personal circumstances

(Under sub paragraph 3 of Regulation 18 employers can waive any reduction to benefits paid under that Regulation at their discretion.)

Applications for the payment of unreduced benefits in these circumstances will be granted if:

  • in the University’s sole opinion, the special extenuating circumstances surrounding the application, along with the supporting evidence provided justify approval and
  • the University can meet the cost of granting such a request.

Actuarial comment on the exercise of Regulation18 Discretion

The cost of allowing members to take their benefits earlier than normal retirement age can be considerable, depending on the member’s rule of 85 age and whether any reductions for early payment is made to the benefits. No allowance is made in the normal employer’s contributions to the Fund for employers to exercise discretion to allow benefits to be taken prior to age 65 (prior to the later of age 60 and rule 85 age in respect of pre April 2008 service and of members with protected retirement terms) and as a result additional capital contributions are due to the Fund when this discretion is exercised. (other than in Ill Health)

In each case of proposed discretion an early retirement cost calculation should be obtained from the Fund prior to confirming any decision. If the discretion is used only rarely, the costs may be relatively small in the context of the funding of the scheme as a whole.

Nevertheless, the cost in an individual case can be substantial, depending on age at retirement, the rule of 85 age (if applicable),pay, length of service and whether or not the individual concerned benefits from the protected retirement terms for service up to 2016/2020.

Following amendments made to the LGPS Regulations on 16th April 2008 (coming into force on 7th May 2008) it appears that there may also be costs arising from flexible retirementsrelating to service accrued by member after the date of flexible retirement. This is because the retirement benefits of the member for the subsequent service can be based on pay prior to the flexible retirement event, although the member will pay contributions to the fund by reference to their levels of pay earned following the flexible retirement event. Employer may therefore also wish to consider this lost contributions effect when exercising their discretion.

The University will also consider the operational implications, and potential on costs, of the reduction in hours/grade of the member concerned.

In addition, there is a potential cost incurred of agreeing to the payment of benefits prior to retirement for a member attaining age 60/ rule of 85 age who is continuing in employment, given that in the absence of the employer’s consent, payment of benefits would be deferred until actual retirement.

If the University exercises discretion under regulation 18(3) to waive the reduction to benefits an additional capital contributionis required to be paid to the fund.

Power of University of Bradford to increase total membership, Regulation 12 of the benefits Regulations.

This regulation allows employers to ’give’ an extra period of membership to an active member. In the past this facility has generally only been used to augment service for members retiring early but can equally be applied to new hires (for example as a recruitment incentive) or during employment as an additional reward,

The University of Bradford will only consider the augmentation of service having regard to the following.

  • the member’s personal circumstances
  • the interest of the University of Bradford
  • the Additional contributions due to the fund by University of Bradford in respect of the exercise of this discretion
  • any potential benefits or savings to the University of Bradford arising from the exercise of this discretion
  • other options that are, from time to time, available under the Universities’ severance arrangements
  • the funding position of the University within the West Yorkshire Pension fund
  • the ability of the University to meet the cost of granting such an award

The University does not consider the use of this discretion in relation to new hires as an integral part of its recruitment policy.

The discretion will only be used for recruitment purposes in exceptional circumstances having regard to all the facts in each case though particularly where other elements available within the employers benefit package have not proved successful.

Actuarial comment on the exercise of this Regulation 12 Discretion

The capital cost of augmenting service by up to ten years for an individual active member will depend on the period of augmented service, the member’s pay and the age and gender of the member concerned. In general the cost of the augmented membership must be paid for as a lump sum.

On the member’s subsequent early retirement the augmented service can itself give rise to an early retirement strain cost, the same manner as the member’s normal accrued service.

It should be noted that the award of additional service under Regulation 12, in some circumstances, could have the effect of advancing the members rule of 85 (if Applicable), in addition to providing extra years of service. Where applicable this may result in some or all of the members benefits ultimately being paid from an early age (or with a lesser reduction), and so giving rise to further additional costs.

In each case of proposed augmentation a cost calculation should be obtained from the fund by the University prior to confirming any decision. If the discretion is used rarely, the cost may be relatively small in the context of the funding of the schemeas a whole. Nevertheless, the cost in each individual case is likely to be substantial relative to the annual pay of the individual concerned.

Regulations 13 of the benefits Regulations

Power of Employing authority to award additional pension.

The regulation allows the University to award a member an additional pension of no more that £5,000 per annum payable from the same date as the member’s pension is paid.

The University of Bradford will only consider the award of additional pension having regard to the following.

  • the member’s personal circumstances
  • the interests of the University
  • the additional contributions due to the WYPF by the University in respect of the exercise of this discretion
  • any potential benefits or savings to the University arising from the exercise of this discretion
  • other options that are from time to time available under the Universities’ severance arrangements
  • the funding position of the University within the West Yorkshire pension fund
  • the ability of the university to meet the cost of granting such an award

Actuarial comment on the exercise of this Regulation 13

The capital cost of augmenting pension by up to £5,000 per annum will depend on the age at retirement and the amount of additional pension granted. In general the cost of the augmented pension must be paid for as a lump sum.

In each case of proposed augmentation a cost calculation should be obtained from the Fund by the University prior to confirming any decision. If the discretion is used only rarely, the costs may be relatively small in context of the funding of the scheme as a whole. Nevertheless, the cost in each individual case may be substantial.

OPTIONAL DECLARATIONS

Regulation 25 of the Administration Regulations Shared Cost Additional Voluntary Contributions (SCAVCs)

The regulation allows employers to contribute to a member’s in house AVC arrangement.

The University does not consider contributions towards a shared cost additional voluntary contribution scheme to be an essential part of its strategy for the recruitment and retention of employees. Applications for the purchase of shared cost additional voluntary contributions, and consideration of any amount so payable, will only be considered in exceptional circumstances having particular regard to the University’s general policy, from time to time, on the employee remuneration package, whether the contribution to a shared cost additional voluntary contribution is in the University’s interest and following consultation with the West Yorkshire Pension Fund’s Actuary.

Actuarial comment on the exercise of Regulation 25 Discretion

Employer cost must rise in this event, but they are decided by the Employer and will be dependent on member take up level. If an Employer decided, for example, to offer additional death in service benefits for senior officers using the shared cost AVC provision, the cost would be relatively small. Costs would only rise in respect of those members who are eligible.

Existing Optional Discretions unaffected by Recent Changes

Deemed Elections to Increase Widowers Benefits Regulation 9(Transitional Provisional Regulations 1997)

The Employer resolves to deem all married female employees, with service between 1 April 1972 and 5 April 1988 , who have not previously elected to purchase widower’s benefits to have elected to purchase that service and to treat such as an election as being paid in full.

The Following Discretion has beendeleted

Opting in And Out of the Pension Scheme

A member who has opted out of the Scheme on more than one occasion, a

second application for Local Government Pension Scheme membership should be accepted automatically but a third or further option be rejected on grounds of unwarranted administrative effort.

Multiple Opt Ins

Members can now Opt Out and Opt Back in to the scheme as many times as they want without employers consent.

Notes

Discretions Policy Review

It is the responsibility of the University to keep the above Policy Statements under review. The University will therefore, as it sees fit, review the content of its discretionary policy under the Local Government Pension Scheme Regulations to meet its requirements as an employer participating in the West Yorkshire Pension Fund. Any recommendations to change the Policy Statement will be referred to the University’s HR Committee and the University Council for their approval.

Policy Changes

Where a change is made to the Policy in exercising any of the above discretions, or there is any addition to the Policy Statement, the University will inform the West Yorkshire Pension Fund immediately. In addition, all employees eligible to join the Scheme will be informed as soon as is reasonably practicable.

Malcolm Stockell

Principal Clerk

Finance and Pensions

01/12/2008