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The Governments final offer

 
Following the Hutton Review into public sector pensions (published in March last year) all public sector pension schemes will be changed.
 
The NHS Trade Unions have been in negotiations with the Departments of Health and NHS Employers since the summer of 2011 and the Government has now made their final offer for your pension.
 
The main elements of the offer are:
 
  • A career average pension with an accrual rate of 1/54
  • Retirement age equal to state pension age
  • Average pension contributions of 9.8% (currently 6.5%)
  • All accrued rights to be protected.
  • Protection for all those within ten years of their retirement age on 1st April 2012
  • Some protection for those between 13.5 years and 10 years away from their retirement age. (referred to as ‘tapered protection’)
 
The new scheme is expected to start from 1st April 2015; apart from the rise in pensions contributions which will start in April 2012, with further rises in 2013 and 2014.
 
The final offer is stated in full in the NHS Pension Scheme ‘Heads of Agreement’. This document will be available shortly.  
 
A Career Average Pension
Currently, your pension is based on your final salary, so for every year you work you earn a proportion of your final salary (this is called an ‘accrual rate’).  Under a career average scheme for every year you work you will earn a proportion of your career average salary.
 
To work out the career average salary each years salary will be uprated by inflation then added together and divided by the number of years worked.
 
The accrual rate in the new scheme is 1/54 so for each year you work you earn 1/54 of your career average salary. This is better than the 1995 scheme (1/80) and the 2008 scheme (1/60).
 
In essence, you will earn a bigger proportion of a smaller amount. The vast majority of midwives and MSWs should see no difference in the amount of pension they earn.
 
 
Working till State Pension Age 
The final offer is that the retirement age of the NHS Pension Scheme will be equal to your state pension age currently between 60 and 68 depending on your date of birth.  
 
It is likely that the state pension age will increase in the future; if it does the retirement age will automatically increase.
 
If members retire earlier than the retirement age their pension is reduced by ‘early retirement factors’ - this is about 5% for each year.
 
However, as all current members of the scheme will have ‘accrued rights’ i.e. the pension they earned before the new scheme will be based on their existing retirement age, they may be able to retire earlier than their state pension age. We recommend you visit: www.dh.gov.uk/health/agenda-calculator/  and use the pensions calculator—this will show you the effect of your ‘accrued rights’ and tell you how long you need to work to earn the same pension.
 
Increased Contributions
The Government want this to rise to an average contribution of 9.8%. The contribution increase will start from April 2012 and will rise again in 2013 and again in 2014.
 
Protection of Accrued Rights
All ‘accrued rights’ are protected. This means everything you have earned up until the start of the new scheme (for most members it will be 1st April 2015) will be protected; so it will still be linked to your final salary when you retire and will be linked to your current retirement age. Therefore it will only be the pension you earn in the new scheme that will be based on your career average salary and linked to your state pension age
 
Protection for those nearest their retirement age
All employees who are within ten years of their retirement age (of the NHS scheme) on 1st April 2012 will not move into the new scheme, they will keep their existing retirement age and final salary pension, however they will have to pay the increased contributions.
 
So to qualify for protection if you have special class status your retirement age is 55 so you will need to be 45 or over on 1st April 2012; if you are in the 1995 scheme but do not have special class status your retirement age is 60 so you will have to be 50 or over on 1st April 2012; and if you are in the 2008 scheme your retirement age is 65 so you will have to be 55 or over on 1st April 2012.
 
Tapered Protection
For those employees who are between 13.5 and 10 years away from their retirement age on 1st April 2012 they will move into the new scheme later than 1st April 2015. Therefore they will earn more ‘accrued rights’ in the old scheme. If this applies to you the date that you will switch to the new scheme can be found on the briefing paper ‘Tapered Protection’.