Time for an update on pensions from McCloud
April 2022 might feel like a way away but when it comes to pensions it always helps to be prepared and keep up to date with the latest information and there have been a couple of recent changes that you should be aware of.
First off you might recall that the 2015 changes to the NHS Pension scheme did not apply to those closest to retirement. Also, the court of appeal ruled that by protecting these schemes, it was discriminatory in the grounds of age. The Government is now correcting this discrimination.
You are affected if you joined the pensions scheme before 31 March 2012 and were an RCM member after 1 April 2015. At the point of retirement, you will be asked to decide which pension benefits you would like to receive between 1 April 2015 and 31 March 2022 – the remedy period. This will apply to the NHS pension scheme in England, Wales, Scotland and Northern Ireland.
You will be provided with the information you need at that time to make your choice. The pensions agencies are currently working to present this information to members so there is clarity and support for you while you make your decision.
New legislation is being introduced to embed changes from October 2023. If you are already retired, or if you plan to retire before October 2023, you will make the choice retrospectively once the legislation has passed. If you are owed money, this will be backdated to the date of your retirement.
From 1 April 2022, all active members of the pension scheme will be in the 2015 scheme. The 1995 and 2008 final salary schemes will be closed at this point. Anything earned in those schemes will stay within them. You will be able to access these benefits in the same way. Benefits after April 2022 will be in the 2015 scheme, which is a career average revalued earning model. All affected members will be contacted by the relevant pensions agency when you need to take any action.
Member contribution consultation – England and Wales
A tiered approach to pensions contributions has been in place since 2008. The contribution structure is designed so that higher earners pay proportionally more than lower earners to access the benefits of the scheme. The contribution tier a member is currently based on their whole-time equivalent earnings, even if they work part time. Member contributions were last reviewed in 2015.
Because the NHS Pension Scheme is moving from a final salary link to a career average revalued earnings model, benefits are built up over a career and the costs and benefits of the scheme are more evenly shared. The Government is now looking to make changes to the current contribution structure and have launched a consultation with its proposals.
The RCM is part of the Pension Scheme Advisory Board whose role it is to give advice on proposed changes to the pension scheme. In 2018 SAB were asked to review member contributions. The view at that time was that it was not appropriate given the effects on pay of the three-year deal.
In 2021 the SAB were once again approached about a review of the structure. While the principles above have been agreed, the SAB felt unable to make any recommendation on the proposed changes to the actual structure. The proposals are therefore set out in the consultation for wider comment.
The SAB will be formally responding to this consultation and The RCM will be responding on your behalf and this will be available for you to see. You can be assured that given the inadequate 3 per cent pay award in 2021 and upcoming National Insurance increases in April 2022, the RCM will not be supportive of any change that leaves our members worse off. You are entitled to respond yourself as a scheme member. This consultation will run until the 7 January 2022 and the link to the consultation. Take part here.
Pensions in Scotland
In Scotland the NHS Pension Scheme Advisory Board is still in discussion around the proposed member contribution structure from April 2022.
Once discussions are concluded a public consultation will take place on the proposals.
What has been agreed at this time is as with the England and Wales Scheme Members’ contribution rates would change to be based on actual pensionable pay instead of member’s whole-time equivalent pay.