NHS Pensions Review Briefing 110
Introduction
This briefing outlines the proposals made in
the consultation paper on the NHS pension scheme review in Scotland.
The overall responsibility for the review of the NHS scheme lies
with the Scottish NHS HR Forum (HRF). The HRF, in general terms,
is charged with the role of addressing NHS staffing issues on
a Scotland-wide basis, including pensions. Its membership is made
up of NHS trade unions, NHS employers and the Scottish Executive.
Any changes to the NHS Pension Scheme in Scotland
require secondary legislation to be approved by Scottish Ministers
and agreed by the Scottish Parliament.
New NHS Pension Scheme
The consultation paper proposes a number of changes
for a new NHS pension scheme in Scotland.
These include:
- Keeping the scheme as a defined benefit scheme but a proposal
to move away from a final salary to a career average scheme.
- A normal scheme retirement age of 65. Where benefits are paid
before this age, except on ill-health grounds, they would be
actuarially reduced to reflect the fact they are being paid
early. Benefits brought into payment after this age would be
actuarially increased.
- Benefits would accrue at a rate of 1/60th of pensionable pay
for each year of membership of the pension scheme. This is an
increase from the current rate of 1/80th of pensionable pay.
- It is not intended with such an accrual rate that the Scheme
could provide an automatic lump sum, but could instead allow
members to commute part of their pension at a rate of 12:1;
in other words, for every pound of pension foregone, £12 of
lump sum would be awarded.
- Provision could be made for flexible retirement to remove
the cliff edge between retirement and work. Proposals include
being able to draw down a part-pension while continuing to work
and build up further pension benefits; having the opportunity
to take full pension benefits and continue to work without a
break in service, thus building up further pension benefits;
and the opportunity to retire, take full pension benefits and
then rejoin the scheme after a break.
- It is proposed that survivor benefits could be extended to
unmarried partners and same sex partners. Other proposals include
multiple nominations for death in service lump sum benefit and
paying a pension at the salary rate on death in service for
6 months.
- New ways to save more for retirement, including proposals
to amend current added years and Additional Voluntary Contributions
schemes.
- A review of sickness and ill-health arrangements including
redeployment to another post that suits the skills and abilities
of employees if they are unable to return to their own post.
- Widening access to the pension scheme for healthcare staff
employed in the private sector, for instance via PFI transfers.
Implications
Some of the key elements and their implications
are highlighted below.
Final Salary vs. Career Average
UNISON Scotland opposes the proposal to move
from a final salary scheme to a career average scheme. While the
final salary scheme is well known and valued by members there
is not enough information on the operation of the career average
scheme to allow it to be properly valued. In the private sector
the shift to career average schemes often results in a reduced
pension.
There is a further concern that just as the NHS is introducing
better training and career opportunities to help staff move up
through the ranks, they are taking away a very good incentive
to take on additional responsibilities and try to improve career
chances. UNISON Scotland also regards the final salary pension
scheme as an aid to the recruitment of new staff.
Raising the Normal Retirement Age
UNISON Scotland has argued against this proposal
in responses to the Local Government Pension Scheme and is concerned
that the same spurious arguments about increased life expectancy
have been used in this consultation.
UNISON Scotland is not against increasing the
retirement age of workers but believes that it is a decision that
each worker should take dependent on their own personal circumstances.
There is a fear that forcing employees to work longer could lead
to more ill-health retirals, a risk to patient safety and a reduction
in staff morale.
Further details of this debate can be found in
previous P&I Briefings and Responses (see below).
Accrual Rate & Lump Sum
UNISON Scotland welcomes an increase in the accrual
rate as this would help scheme members build up a larger pension.
However this change is proposed alongside a change affecting access
to a lump sum payment.
The new look NHS pension scheme proposes to have
no automatic lump sum whereas the current scheme provides on equivalent
to 3/80ths of pensionable pay. Although the new proposals could
result in a larger lump sum (up to 25% of the benefits accrued)
there is a resultant reduction in the pension awarded.
Ill-Health
UNISON Scotland is concerned about the new proposals
on ill-health. Further consultation needs to take place on this
issue.
Forcing members into alternative employment when
they are incapable of carrying out their previous post seems a
breach of the pensions contract. There does not seem to be any
guarantee that employers will re-employ those who are unfit to
continue in their original posts.
Contribution Rates
Proposals for changing the contribution rate
for the pension scheme include: all staff paying 6%; a lower contribution
rate of 5% for those up to the top of pay band 2, with everyone
else paying 6%; and a variable rate ranging from 5% to 7.75%.
Action for Branches Further Information
This briefing paper is intended to update members
on the proposals to change the NHS Pension Scheme in Scotland.
Branches should be involved in the Protecting
Public Service Pensions Campaign on Friday 18th February
2005. This involves a lobby of all MPs and MSPs in Scotland to
stop the proposed changed to the NHS Pension Scheme and other
public sector pension schemes.
UNISON Proper Pensions Campaign
http://www.unison.org.uk/pay/pensions.asp
UNISON Scotland Response to Proposed LGPS Phase 2 Changes
http://www.unison-scotland.org.uk/response/pensionresponse.html
UNISON Scotland Pensions MiniSite
http://www.unison-scotland.org.uk/pensions/index.html
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