NHS PENSIONS PROPOSAL _- BRIEFING
SoR COMMENTARYONTHEHEADS OF AGREEMENT
This briefingneeds tobereadin conjunctionwith the Heads of Agreement.
Pleasetakethe time toreadthenotes inthis briefing.Pensions areacomplicated, but very important topic.Wehavetried tomakethedetailsoftheofferas clear aspossible.
Final proposals on the package that will be put to members are expected to be concluded by the end of January /early February.
If youhaveany questionsyoushouldcontactyourRegional or National Officer in thefirstinstance. Comprehensive Q and A’s will be published in due course along with a Glossary of common terms.
1WHAT ISPROTECTED?
Accrued Rights
All memberswillseeanypension builtupbefore1April2015 fullyprotectedontheir currentterms. This means thatyouwillretainarighttoapensionlinkedtoyour finalsalaryfortheseyearsof service.
i)Forexample if youare a memberof the1995Sectionof the NHSScheme,andhave 20 yearsofservice upto1April 2015,youwouldreceiveapension, payable fromyour60th birthday of 20/80(one-quarter)of yourfinal pay atthe pointofretirement.Youwould also get a taxfree lump sumof3 timesthis amount.Youwouldalso builduppensionin the pensionschemethatcomesin fromApril2015.
Ii)if youare amemberof the2008 Sectionofthe NHS Scheme, andhave 6yearsofservice upto 1April 2015, youwouldreceivea pension, payable fromyour65thbirthday of6/60 (one-tenth)of yourfinal pay at the pointof retirement.Youwouldalso builduppension inthe pensionschemethatcomesin fromApril2015.
Full Protectionforolder Members
Memberswhoarewithin10yearsof their current NormalPensionAgeat1April2012willbe allowed toremainintheircurrent pensionarrangementsuntil theircurrentNormalPensionAge.
Formembersinthe1995 Section,thismeansthatif you are aged 50 and over
asat1April 2012 (i.e. youwere bornbefore1April1962),you willbe allowedto
remainin yourcurrent pensionscheme,andcontinue tobuildup pensionatthe
current rate after 1 April 2015.You will be able to draw on this whole pension(without
reduction for early payment)at age 60.
LimitedProtectionfor SlightlyYoungerMembers
Memberswhoarejustoutsidethe10 year protectionbutarewithin 13.5years of their NPA will receivesomelimited protectionallowingthemtoremainin their current pensionschemebeyond1
April2015,buttheywouldswitchto the newarrangementsatalaterdate,beforetheircurrent
normalpensionage.
This protectionwilltaperoff meaningthatmemberswouldleavetheircurrentarrangements between 1April 2015and1April 2022dependingontheir dateofbirth. Those closestto their current NormalPension Agewillbenefit from thelongestprotection.
DateofBirth beforeDateofMovingto New Scheme
1995 section / 2008 section01/04/1962 / 01/04/1957 / -
01/05/1962 / 01/05/1957 / 01/04/2022
01/06/1962 / 01/06/1957 / 01/02/2022
01/07/1962 / 01/07/1957 / 01/12/2021
01/08/1962 / 01/08/1957 / 01/10/2021
01/09/1962 / 01/09/1957 / 01/08/2021
01/10/1962 / 01/10/1957 / 01/06/2021
01/11/1962 / 01/11/1957 / 01/04/2021
01/12/1962 / 01/12/1957 / 01/02/2021
01/01/1963 / 01/01/1958 / 01/12/2020
01/02/1963 / 01/02/1958 / 01/10/2020
01/03/1963 / 01/03/1958 / 01/08/2020
01/04/1963 / 01/04/1958 / 01/06/2020
01/05/1963 / 01/05/1958 / 01/04/2020
01/06/1963 / 01/06/1958 / 01/02/2020
01/07/1963 / 01/07/1958 / 01/12/2019
01/08/1963 / 01/08/1958 / 01/10/2019
01/09/1963 / 01/09/1958 / 01/08/2019
01/10/1963 / 01/10/1958 / 01/06/2019
01/11/1963 / 01/11/1958 / 01/04/2019
01/12/1963 / 01/12/1958 / 01/02/2019
01/01/1964 / 01/01/1959 / 01/12/2018
01/02/1964 / 01/02/1959 / 01/10/2018
01/03/1964 / 01/03/1959 / 01/08/2018
01/04/1964 / 01/04/1959 / 01/06/2018
01/05/1964 / 01/05/1959 / 01/04/2018
01/06/1964 / 01/06/1959 / 01/02/2018
01/07/1964 / 01/07/1959 / 01/12/2017
01/08/1964 / 01/08/1959 / 01/10/2017
01/09/1964 / 01/09/1959 / 01/08/2017
01/10/1964 / 01/10/1959 / 01/06/2017
01/11/1964 / 01/11/1959 / 01/04/2017
01/12/1964 / 01/12/1959 / 01/02/2017
01/01/1965 / 01/01/1960 / 01/12/2016
01/02/1965 / 01/02/1960 / 01/10/2016
01/03/1965 / 01/03/1960 / 01/08/2016
01/04/1965 / 01/04/1960 / 01/06/2016
01/05/1965 / 01/05/1960 / 01/04/2016
01/06/1965 / 01/06/1960 / 01/02/2016
01/07/1965 / 01/07/1960 / 01/12/2015
01/08/1965 / 01/08/1960 / 01/10/2015
01/09/1965 / 01/09/1960 / 01/08/2015
01/10/1965 / 01/10/1960 / 01/06/2015
2CONTRIBUTIONS
Government hasnotdeviated fromtheir intentiontodeliversavings byincreasingmember contributions by3.2%onaverage.SoR has arguedfromtheoutsetthat contributionincreases of thisscalearenotjustifiedandwouldbeunaffordable tomany.
Government hasconfirmedtheir intentiontoimplement thefirststageoftheir contribution increases inApril 2012. This wouldthen befollowed byfurtherincreasesinApril2013andApril
2014.
As wellas callingfor all increasestoberemoved, NHSUnions haveaskedfor alternatives, includingtheremovalof the2013increaseanddelayingthe2014increase.All of our requests havemetwith thesameresponse;thatGovernment is committed toimplementingthese increases.
Theimpactofthe2012increaseandapotentialconstructionof thefurtherincreasesare outlined inthetablebelow:
FullTimeEquivalent
PensionablePay
Current
Rate
Confirmed
2012/13rate
Potential
2013/14 rate
Potential rate from 2014 onwards
Upto £15,0005.00%5.00%5.00%5.00%
£15,001to£21,1755.00%5.00%6.20%6.50%
£21,176to£26,5576.50%6.50%7.70%8.00%
£26,558to£48,9826.50%8.00%8.90%9.50%
£48,983 to£69,9316.50%8.90%10.50%11.50%
£69,931to£110,2737.50%9.90%12.10%13.25%
£110,273+8.50%10.90%13.30%14.50%
TheHeadsof Agreement commits Government toconducta review oftheimpact oftheplanned
2012increasebeforetakingdecisionsonhowthefurtherincreasesaretobedelivered.
3PENSIONAGE
Government hasconfirmedthattheyintendforpensionage inthe2015pensionschemetobe
members’pension age.
All NHS tradeunions havegonetogreatlengths tospellthedifficultiesthis will presenttoNHS employees in deliveringtheservicerequired, andtheunfeasible demands thatwill be placedon olderworkers.
Thecurrenttimetableof StatePensionAgesissetout below:
MaleDateofBirth / SPA / Female
DateofBirth / SPA
Upto 06/12/1953
06/12/1953-05/10/1954
06/10/1954-05/04/1960
06/04/1960-05/04/1961 / 65
Rising from 65to66
66
Rising from 66to67 / Upto 06/04/1950
06/04/1950-05/12/1953
06/12/1953-05/10/1954
06/10/1954-05/04/1960 / 60
Rising from 60to65
Rising from 65to66
66
06/04/1961-05/04/1977
06/04/1977-05/04/1978
After 05/04/1978 / 67
Rising from 67to68
68 / 06/04/1960-05/04/1961
06/04/1961-05/04/1977
06/04/1977-05/04/1978
After 05/04/1978 / Rising from 66to67
67
Rising from 67to68
68
Thistimetable canbereviewedbyGovernmentandexpandedmeaningthat evenlaterState PensionAgesarepossibleandearliermovestothesehigherages. AnychangestoState PensionAgewouldimpact on yourwholeNHSPensionbuiltupfrom1April 2015(ordateof movinginto thenewschemeifyouhaveprotection).
NHSTradeUnionsexploredanumberofpotentialchangestothisproposalincludinglinkingpensionage toStatepensionAgeminus3years. Howeverallofthesealternatives (whichcouldhavebeenafforded andaddressedGovernment concernsaboutriskandfairnessacrossgenerations)wererejectedby Treasury.
Earlyretirement(withanactuarialreduction) beforePensionAgeandLateRetirement (with enhancement) willcontinuetofeatureintherevisedscheme. TradeUnionexplorationofallowing generousearlyretirementreductions werevaluedatsuchanexpensiveratebyTreasurysoastomake suchanoptionlookunattractive,forthepricetheywereasking.
Throughsustained Unionpressure, theHeadsofAgreementcontainscommitmenttoreviewandaddress theimpactoflonger workingonfrontline,physicallydemandingandemergencyserviceroles.
4PENSIONAMOUNTS
Government hasconfirmedthattheproposed pensionschemewill operateonacareeraverage basis. Thismeansthatincalculating your pension, theytakeaveragecareerearnings intoaccount, ratherthanyourfinal salary.Toensurethatearly years earnings arenotundervalued, theseare revalued inlinewith inflationupto thedateofyour retirement.
Pension wouldbecalculatedas:
Accrual Rate*Lengthof Service*AverageRevalued Earnings
Accrual Rate–initial Government proposals hadsetaccrual rateat1/65.Throughnegotiationsthis has been improved by20%to1/54 (i.e.youwill get20%morepensionwith a1/54accrualratethan youwouldundera1/65accrual rate).
RevaluationRate–Therateatwhichearnings arerevalued has beensettoCPI +1.5%each year between when theywere earned andretirement.
Example–ifyouhaveaveragepensionableearningsof£20,000and13 yearsofserviceinthenew section, your pensionwouldbecalculated as:
13*1/54*£20,000=£4,815pa
If a worseaccrual rateof 1/65 was imposed, theequivalentpensioncalculationwouldbe:
13*1/65*£20,000=£4,000pa
Pensions wouldbeincreased inpaymentandafterleavingservicein linewith theConsumerPrices index.
Lumpsum –inlinewith currentarrangements,memberswillbeabletoexchangesomeof their annual pension for a taxfreelumpsumatretirement.
Retirementfor Ill Health Reasons–a two tiered systemof ill health retirementwillcontinueto operatefor anyonecertifiedas beingincapableof carryingouttheir job.A lowertierwillcontinue tobasepensionon your accrued service,butwith no reductionforearlypayment.A highertier willcontinuetoexistthatprovides creditedadditionalservice. Howeverrather thanproviding
2/3rdsof your potential futureservice,this highertierwillprovide½of your potential future service.
Spouseandpartnerpensions–thesewillcontinueto beprovidedonthebasisof1/160thof membersearnings for eachyearofservice.
DeathinService –willcontinueas atpresent.
5OTHERELEMENTS
Government hasconfirmedthefollowingin the Heads of Agreement:
i)Fair Deal–thepolicythat provides for pensionprotectionforoutsourced public sector workers,willberetained, improved andextended.
ii)Anydeviationsfromthe initial costof theschemeshouldbe mainlymetthroughthe flexibilitytochangeState Pension Age
iii)Theoverarchingstructureof thereformed pensionschemes will besuitable to protectagainstanysignificantincreasesincostthroughimproved longevity. Howeverif costsdoincrease,employerswould pick upthefirstpartof anyincrease. Similarlyif costsreducebymorethana certainlevel, this wouldresult in benefit improvementsfor thescheme.
iv)TheGovernment believesthatthesereformswilldeliverenoughsecuritytoprevent anysignificantchanges fora periodof25 years.