NHS Pension Scheme 2015

Presentation prepared by the

Scottish NHS Pensions Group

What is happening?

• From 1 April 2015 the current NHS superannuation scheme will be closed and members will move to a new scheme except -

– Active members within 10 years of their Normal pension age as at 1 April 2012 (who will be fully protected and will not have to move)

– Active members within a further 3 years 5 months of normal pension age as at 1 April 2012 (who will have some protection and may delay their move to the 2015 Scheme)

Why is this happening?

• Hutton Report 2011

• The Public Services Pensions Act 2013

What will the new scheme look like?Main changes:

• Career Average Revalued Earnings (CARE)

• Normal pension age will be linked to member’s state pension age

• An accrual rate of 1/54th of pensionable earnings each year with no limit on pensionable service.

• Revaluation of active member’s benefits increased in line with CPI plus 1.5 per cent. (Deferred benefits increase with CPI)

• Other changes as set out in the “Scottish Framework document”

What is a CARE scheme?

• In a CARE scheme your pension is based on your pensionable pay right across your career.

• The pension you earn each year (1/54th of pensionable pay or earnings) is increased by a set revaluation rate, linked to inflation, for each year up to retirement or leaving.

• The final pension is calculated by adding together the pension earned in each year of membership.

CARE ExampleYear 1 Member earns £27,000

1/54th = £500 Total pension pot for year 1 = £500

Year 2 Member earns £27,000

1/54th = £500 add to year 1 (£500 uprated by CPI+1.5% (CPI for this year is 3.5%) i.e. 5%

= £525) Total pension pot for year 2 is £500 + £525 = £1025

Year 3 Member earns £28,000

1/54th = £518.50 add to years 1+2 total £1025 (uprated by CPI + 1.5% (CPI for this year is 3%) i.e. 4.5% = (£1025 + £46.13 = £1071.13)

Total pension pot for year 3 is £518.50+ £1071.13 = £1589.63

This continues until the member retires

Pension at retirement therefore = total accrued pension per annum

Other Features of NHS Scheme from 2015

• Member contributions on a tiered basis (HM Treasury requirement that contributions overall deliver a yield of 9.8% of total pensionable pay)

• Option to pay additional contributions to fund early retirement

• Added years and Additional Pension contracts from 1995 section will continue on compulsory transfer to 2015 scheme.

• Spouse and Partner pensions based on accrual rate of 1/160th

Other Features of NHS Scheme from 2015(continued)

• Early and late retirement factors

• Option for partial retirement available as 2008 section

• Additional Pension facility

• Optional lump sum commutation at rate of £12 of lump sum for every £1 per annum pension given up (up to HMRC limit of 25%)

• Lump sum on death in service 2 x actual pensionable pay

• Abatement same as post 1 April 2008 arrangements

• Ill health pensions based on current arrangements but upper tier based on enhancement of 50% of prospective service to normal retirement age

What about Benefits I’ve already accrued in the 1995/2008 scheme?

• Benefits accrued will be “preserved”

• Linked to final salary at time of leaving 2015 scheme

• Can be taken at 1995/2008 scheme NPA but must retire from NHS employment

• If 1995 section benefits taken cannot rejoin 2015 scheme

• 2015 benefits can be taken at same time but will be actuarially reduced.

“Choice”

• A second “choice” exercise for members in the 95 Section of the current Scheme will take place after 1 April 2015

• Members able to revisit option to move to 2008 scheme. Those eligible:

- Do not have full protection

- Were eligible at last exercise

• Further information will be issued in due course.

Opting out of Protection

• Those in 2008 section will be given a choice to opt out of protection and move direct to 2015 section

• An exercise offering members this option will take place after 1 April 2015

• Further details available in due course

What else will be different?

• Formal Scheme Governance in place

• HM Treasury will have more financial control

• Pension Regulator will have oversight

Scheme Regulations and Guides

• SPPA aim to consult on Regulations from 1 October 2014

• Regulations to be laid in Parliament early February 2015, coming into force from 1 April 2015

• Scheme Guides - to be developed and available early 2015

Where can I get further information?

• SPPA website - Framework Document, FAQ, Protection Calculator and other docs to be added as developed

• See www.sppa.gov.uk - Changes to the NHS (Scotland) Pension Scheme from April 2015

• email nhspensionsreform@sppa.gsi.gov.uk• Trade Unions• Professional organisations• HR Managers