2019/20 Employee Contribution Rates and LGPS Cost Cap Mechanism

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You might have your ear to the ground when it comes to LGPS matters.

If so you may have heard that on 21 December 2018 the LGPS Scheme Advisory Board (SAB) published its paper on cost management.

The LGPS in England and Wales has a separate cost management process which is completed prior to finalisation of the HMT public sector cost cap calculations.

Under this initial phase, the SAB are proposing an improvement to benefits equating to 0.5% of payroll, taking the cost back up to the long term target of 19.5% of payroll. The proposals are broadly as follows:

  • Removal of Tier 3 ill Health
  • A minimum lump sum death in service benefit of £75,000 per member (regardless of salary)
  • Enhanced early retirement factors for all members who are active on 1st April 2019 in respect of their final salary-linked membership only
  • Lower employee contributions for those with salaries at the lower end of the contribution band scale

The HMT cost cap process will be completed once the outcome of the above proposals and subsequent consultation is known.

However, on 30 January 2019 the Government published a written statement which announces a pause in the cost cap process for public service pension schemes pending the outcome of the application to appeal the McCloud case to the Supreme Court.

The statement can be found here: https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-01-30/HCWS1286/

Although the statement gives no timescales for the outcome of this case we understand it could be late 2019 or early 2020 before we know.

Employers should therefore proceed on the assumption that the scheme will not change in April 2019.

In particular employee contributions should be collected in April on the basis of current regulations and the updated 2019/20 table of employee contribution bands as shown below:

Pensionable pay banding Main Section 50/50 Section
Up to £14,400 5.5% 2.75%
£14,401 to £22,500 5.8% 2.9%
£22,501 to £36,500 6.5% 3.25%
£36,501 to £46,200 6.8% 3.4%
£46,201 to £64,600 8.5% 4.25%
£64,601 to £91,500 9.9% 4.95%
£91,501 to £107,700 10.5% 5.25%
£107,701 to £161,500 11.4% 5.7%
£161,501 or more 12.5% 6.25%