NHS Pension Review

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NHS Pension Review

• Mark Belchamber
• Head of Pensions

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NHS Pension Review

• Consultation period
• EW 10th Jan - 11th April 2005
• Scot NI 24th Jan - 30th April 2005

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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)

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The Good

• Same benefits for widows and widowers
• Initial payments - WW 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

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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.

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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

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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

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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

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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

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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

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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

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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?)

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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....

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• 460,000

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What happens next?

• Read the documents
• Tell us your views - over 1000 e-mails recd
• Complete BMA survey online - 2000
• Responses collated and reviewed
• Draft to Council - early March
• Pensions Committee special meeting 23/3/05

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What happens next cont.

• Responses needed for each devolved nation.
• Local issues considered.
• DEADLINE 11 April - EW, End April Scot and NI.
• Responses considered by Review teams made up of
  TUs and Employers in each Nation.
• Recommendations to Ministers - May?

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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??

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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.

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NHS Pension Review

• Questions