YOUR Pension

Background

• Currently 2 schemes in operation in the NHS– 1995 section

– 2008 section

• New starters since 2008 in 2008 section• Other scheme members in 1995 section

1995 Scheme Benefits

• Final salary scheme based on best salary in last 3 years• Full pension payable at 60• 1/80 accrual rate for every year in scheme (index

linked)• Minimum tax free lump sum of 3/80 final salary for

each year in scheme (some flexibility to increase)• Voluntary early retirement from 50 with reduced

pension

2008 Section

• Final salary scheme maintained• Normal pension age increased to 65• Early retirement from 55 with reduced pension• 1/60 accrual rate• Maximum scheme membership 45 years• Pension based on average of best 3 consecutive years

salary in last 10 years (allows step down)– All but last years pay revalued in line with RPI before

average of best 3 consecutive years calculated

• Variable tax free lump sum - nothing up to 25% of total pension value = 4.2857 x pension– Pension reduced by £1 for every £12 taken as a lump sum

• Draw down option– Take part of pension whilst continue working in a less

demanding role

– Certain rules apply

• Pensionable re-employment allowed• Same death benefits etc as existing members in new

scheme

Additional Changes 2008

• All employee contribution rates (irrespective of section) increased to ensure schemes viable

• Cap placed on employer contributions so cost to tax payer does not increase

• Any future changes to the NHS Pension Scheme should be negotiated in partnership.

• Current NHS Pension scheme is cash rich, currently paying directly to the Treasury around £2 billion a year more than it costs to pay out pensions

Pensions Choice Exercise

• Since 2008 there has been a staggered exercise allowing 1995 section members to switch to the 2008 section

• Current issues around pension changes and industrial action have nothing to do with this exercise

• The exercise is almost irrelevant since, based on the Government’s proposals, all public sector pension schemes will change in 2015

What’s all the fuss about?

• The new schemes are being proposed without meaningful negotiations

• Planned implementation date for most changes 1/04/15– Increased contributions

– Increased normal pension age

– CARE scheme & revaluation in line with annual pay awards

– 1/65 accrual rate with no lump sum

– CPI used instead of RPI as annual uplift calculator for pension

– Existing pensions up to 2015 protected with existing scheme benefits. Then from 2015-new scheme applies. Could have destabilising effect on scheme membership

Increased Contributions

• Part of Govn plans to reduce public spending• Average increase in contributions of 3.2% phased in

between 2012-2014 (no increase if salary < £15000)• Unions accept some increase may be necessary but not

the amounts proposed and this should maintain current benefits, not reduce them

Full time equivalent Contribution rate (before tax relief)

Pensionable pay 2011/12 2012/13 2013/14 2014/15

Up to £15,000 5% 5% 5% 5%

£15001-£21175 5% 5.6% 6.2% 6.5%

£21176-£26557 6.5% 7.1% 7.7% 8.0%

£26558-£48982 6.5% 7.7% 8.7% 9.2%

£48983-£69931 6.5% 8.5% 10.2% 11%

£69932-£110273 7.5% 9.8% 12% 13%

Over £110273 8.5% 10.9% 13.5% 14.5%

Annual reduction in take home pay (after tax relief)(based on top of pay band)

Reduction in take home pay

Pay Band 2012/13 2013/14 2014/15

2 82 163 204

3 90 181 226

4 105 209 262

5 265 486 597

Reduction in take home pay

Pay Band 2012/13 2013/14 2014/15

6 313 574 704

7 386 707 867

8a 336 616 784

8b 671 1242 1511

8c 805 1490 1813

8d 1115 2182 2666

9 1345 2632 3217

Increased Normal Pension Age

• Retirement age to be brought in line with state pension age (Hutton cost cutting recommendation)

• Currently 65 but increases to be phased in• Proposed normal pension age of 66 in 2020 and 67 in

2027• Further increase planned possibly rising to 70 in the

future• There will still be option to retire early with a

reduction in the annual pension (approx 5% reduction for each year below normal pension age)

CARE Scheme

• Value of pension in new schemes based on career average earnings rather than final salary (Hutton)

• Past service benefits retain link to final salary• Revaluation of earnings based on annual salary

increases• Revaluation would be below inflation

1/65 accrual rate with no lump sum

• Better accrual rate than 1995 section but no lump sum but when take into account lump sum-reduction in value

• Worse accrual rate than 2008 section (typical 8% reduction in value)

CPI vs RPI• Inflation measure used to uplift pension paid each year• CPI is lower than RPI• Based on current predictions this means after 10years

of retirement, pension 8.5% lower with CPI and after 20 years it is 17% lower

• No consultation on this point which was implemented in April 2011

• Legality of this change is currently subject of judicial review

No Fair Deal

• Fair Deal is the hard-won protection by which a private contractor / charitable body has to offer a broadly comparable pension to outsourced NHS employees

• The Government is seeking to remove this protection - it’s “a barrier to outsourcing”

• Outsourced employees could end up with a hugely inferior pension - as they can under TUPE in the private sector

What is Unite doing?

• Unite has been negotiating with the Government alongside the other unions

• Together with other unions we are mounting a legal challenge to the move from the RPI to the CPI

• The point has been reached where only positive action will make employees’ feelings known to the Government

Ballot for Industrial Action

• 1st proposed day for national industrial action• The vote is your voice-use it• GHP advice is to vote yes to industrial action• Government want to impose changes• Unions want meaningful negotiations around all the

proposals for any new scheme. Any changes must be justifiable

• A yes vote is a mandate for industrial action on November 30th and beyond

• Strike action is a last resort• Hope is that the threat of mass strike action will get

ministers to enter into meaningful negotiations• If this happens then unions can call off strike action

• Government starting to make concessions already

November 30th

• If yes vote-industrial action up to and including strike action

• Employees have the right to take part in legal industrial action against the employer

• You are not in breach of code of ethics– Unison Vs NMC

• If result of ballot is yes, what does this mean for the individual member?

Industrial Action by Unite Members in the NHS

• Should guarantee patient safety and deliver a safe service

• Public holiday cover as determined by professional and clinical staff

• Minimum number of staff that are needed to meet essential needs of the patients

• Level of cover/services equivalent to those provided on a Bank Holiday

• You are not entitled to pay if on strike

Update 2/11/11

• The real threat of mass industrial action has led to ministers starting to make concessions

• 1/60 accrual rate for new scheme (removal of proposed reduction)

• Anyone due to reach normal pension age in the next 10 years (from 1/4/12) will be excluded from the changes

• All other proposals stay the same• This is a start but it is not enough• Further analysis being undertaken for sector specific

schemes but not enough to call off day of action yet