NHS Pension Review Mark Belchamber Head of Pensions
NHS Pension Review Consultation period E&W 10th Jan - 11th April 2005 Scot + NI 24th Jan - 30th April 2005
Why a NHS Pension Review • 77% workforce is female • Almost 50% work part time • Average NHS pension - £5,400 with membership of 18 years • Life expectancy 1950 - 69.2 & 2005 - 77.2 • Av retirement age dropped to 62 years • Pension paid av. 24 years (21yrs 10 yrs ago)
The Good • Same benefits for widows and widowers • Initial payments - W&W; 6 months (was 3 or 6) • Improved death in service benefits for those with no dependants • Survivor benefits to all named partners • No cessation of benefits on re-marriage
The Good II • Better protection where employees lose pay thru no fault of their own e.g. org change • AVCs - either have 1 or 3 providers • Added pension - • in-house AVC arrangement - buy extra pension • and / or revised added years arrangement.
The Good III • Either no abatement at all or only on the enhanced element of the pension • Accrual rate - from 1/80th (1.25%) to 1/60th (1.67%) - (1.4% to 1.87% for practitioners) • Improved flexibility for lump sum / pensions • Membership limits 16 - 75 (max 59 years!) • £1.5 million lifetime allowance
The Good IV • Pension enhanced if retiring past 65 yrs old (and possibly for past 60!) • Pension Flexibilities - e.g ability to draw down pension at 55 years + keep working and contribute to pension. • All NHS work incl. overtime - pensionable if CARE adopted. Need to pay more too. • MHO status maintained for those who have
The Bad • Added Years possibly stopped • Minimum age of retirement - 55 years old. still 50 for existing staff • Minimum age without actuarial reduction in pension (full pension) - 65 years old • Some new benefits but no new money! • No solution for Pre88 widowers
The Ugly?? • Final salary / Career Av. Scheme - CARE • Reduced Value of pension at age 60 • Improved Accrual Rate includes lump sum • Improved accrual rate - balancing effect? • Higher contributions for higher earners? • Maximum limits reached for some members
The Accrual Rate • “The rate at which you build up pension” • 40 years in the current scheme • Average salary - £80K Total £3,200,000 • 1.4% x £3.2m = pension £45K and £135k L/S • 1.8% x £3.2m = pension £58K but no lump sum. (or £46k and £135k L/S) • 1.87% x £3.2m = pension £60K but no lump sum. (or £49k and £135k L/S) • 1.8% or 1.87% full pension only at 65
The detail - change to 65 years • No one currently working in NHS will HAVE to work until 65 years old • Examples show some extra time needed though - 2.5 years if aged 20 • Extra time related to age when 65 accepted
The detail - change to 65 Years • Pension benefits earned AFTER 2013 - only payable in full at 65 years old • Pension benefits ALREADY earned - payable in full at 60 years old including added years unless… • Doctor, by choice, transfers all benefits into new scheme when given option (2008 or 2013?)
The Detail ~CARE v Final Salary • FT Cons with full NHS career • Final Salary Pension £86,000 • CARE Pension £63,000 • £23,000 per year difference • To buy £23,000 of pension costs……....
What happens next? • Read the documents • Tell us your views - over 1000 e-mails rec’d • Complete BMA survey online - 2000+ • Responses collated and reviewed • Draft to Council - early March • Pensions Committee special meeting 23/3/05
What happens next cont. • Responses needed for each devolved nation. • Local issues considered. • DEADLINE 11 April - E&W, End April Scot and NI. • Responses considered by Review teams made up of TU’s and Employers in each Nation. • Recommendations to Ministers - May?
Decisions? • Possible General Election in May • Unlikely decisions taken before this. • Once decisions made, further negotiation • New scheme effective April 2006 - new staff. (may be delayed and backdated??) • Transition options for existing staff 2008? • 2013 + Existing staff transfer decision??
Recap. • Lots of positive changes • Some not so good! • Some very worrying - ‘£’ - NPA65 - CARE • Still plenty of chances to influence decisions before final shape determined. • Continued involvement of BMA in process.
NHS Pension Review Questions