You may not have heard but the NHS Pension Scheme, in line with other public pension schemes, will change from 1 April 2015. All those joining the scheme for the first time along with members of the current arrangements who do not fall within the protected group will transfer to this new Scheme.
What is different about the new scheme?
The new scheme will no longer be a final salary arrangement (i.e. pension based on the member’s pensionable pay and length of scheme membership at the time of retirement), but will be based on a proportion (1/54th) of the member’s pensionable earnings each year. The pension will be the sum of each year’s value built up over the length of the member’s career and revalued each year in line with the rate of inflation (plus 1.5% for as long as a member continues to pay contributions). This is called a Career Average Revalued Earnings or “CARE” scheme and further information on how it works is available on the Scottish Public Pensions Agency (SPPA) website at www.sppa,gov.uk. The other main difference in the new scheme is that the normal pension age will no longer be fixed at a set age, but will be linked to the member’s individual state pension age.
Which members are protected?
Members who were within 10 years of their current normal pension age at 1 April 2012 will remain in their current section of the scheme and not have to move to the new 2015 scheme. Some members who were within a further 3 years 5 months of their current normal pension age at 1 April 2012 will have some protection (known as “tapered protection”) but will have to move to the 2015 scheme at a later date. Again further information on “protection” is available on the SPPA website.
Can members choose to opt out of protection?
Those entitled to Protection in the 2008 section will be given an opportunity sometime after 1st April 2015 to opt out of Protection if they wish. This option will be offered because for some members it is possible that if they do not receive promotional pay increases before retirement that the higher accrual rate in the 2015 arrangement could deliver a bigger pension than the 2008 section. Further information will be issued to those affected after 1 April 2015.
What happens to the pension a member has accumulated in the current scheme?
Whether a member moves to the new scheme on 1 April 2015 or later, the pension benefits already built up in the 1995 and 2008 sections of the previous scheme will be unchanged and calculated on the member’s final pay at or near retirement. A member can retire and claim his/her pension accrued in the old scheme without reduction for early payment once the member reaches the current normal pension age for the relevant section of that scheme (age 55, 60 or 65).
If a member does decide to retire from the 1995 section they will not be able to continue in the 2015 scheme. (Except for those who have been out of the scheme for 5 years or more, as they will have lost their link to final salary at the time of retirement). They will then have the option of either leaving their 2015 benefits and claiming them at state pension age or taking them at a reduced level. For those in the 2008 section who retire and take their benefits from that section, they will be able to re-join the 2015 scheme. Again though, if they take 2015 benefits before state pension age those benefits will be reduced.
What about the choice exercise that happened in 2010?
The original Pension Choice Exercise which took place in 2010 enabled 1995 section members who were expecting to stay in the NHS Pension Scheme and retire close to age 65 or later, to gain an expectation of a higher pension if they transferred to the 2008 section. In transferring to the 2008 section they could convert all of their existing 95 section service to pensionable service in the 2008 section. Now that the landscape has changed it has been decided that those who were previously eligible for “choice” and decided not to transfer to the 2008 section at that time should be given the opportunity to consider this again. This is because some people may have made a different decision had they realised that in the future their normal pension age would be linked to state pension age. When this will happen has yet to be decided but those affected will be contacted at the relevant time by SPPA.
When will members receive further information?
There is currently information available on the SPPA website at www.SPPA.gov.uk . This will be expanded as communication products are developed. SPPA, NHS Employers and Trade Unions are currently developing communication strategies for cascading information to members. New Scheme guides are expected to be available from early 2015.