HSC Pension Service Waterside House 75 Duke Street Londonderry BT47 6FP 02871 319111 www.hscpensions.hscni.net
[email protected]
the
Background to Pension Reform
Government commissioned Lord Hutton to review ALL Public Service Pensions
A Proposed Final Agreement (PFA) was published in 2012 covering high level proposals
Public Service Pension Act (NI) 2014
HSC Pension Service : The Facts
The new pension scheme will be introduced on 1st April 2015 All pension rights earned in the HSC Pension Scheme up to 31/03/2015 will be calculated as at present when you retire. Full Protection and Tapered Protection rules apply Retirement age is linked to SPA Career Average Re-valued Earning Scheme 1/54th accrual rate
What is Protection?
Full Protection means you are not affected by the reform therefore the current scheme remains open to you until age 75
(you are within 10 years of normal retirement age at 1/4/12)
Tapered Protection means the current scheme is open to you for a period beyond 31st March 2015
(you are within 10 years and 13 years 5 months of normal retirement age at 1/4/12)
Check if you have tapered protection You can check the calculator on the website to see if you fall under tapered protection rules and what date membership of the current scheme will be closed to you
A new way of working out your pension – it would be worked out in two parts:
Part 1 – what you have earned before any changes Worked out in the same way (using final salary for most) Part 2 – what you earn after the changes Worked out from your future average earnings
Part 1 – Worked out in the same way (using final salary for most)
Your final salary
Your service
Your pension rate
(When you retire or leave the Scheme)
(the date you joined until the date of the changes)
(e.g. 1/60th or 1/80th) This is the same way your pension has always been worked out. There would be no change, and you can still take a tax free cash lump sum.
Your Pension at retirement
Part 2 – Worked out from your future average earnings
For example, Tom earns £20,000 so his pension in year 1 is worked out as: £20,000 x 1/54th = £370.37
Part 2– Maintaining your pension’s value Revalued by CPI +1.5% each year This is then revalued until you retire to maintain its value
Year 1
The £370 that Tom earns in year 1 is revalued at the end of the next year. So at the end of year 2, this part of Tom’s pension is worth: £370.37 x 3.5% = £383.31 (if CPI is 2%) The pot continues to be revalued until you retire
Year 1
Year 1 retirement pot Tom’s pot for year 1 is worth £845.68 after 25 years (CPI @2%)
Part 2 – Your pension at retirement Adding your other years’ pots You receive a new ‘pot’ for each year you are a member
Add up the pension You earned each year (after it has been revalued) to find your total pension
Annual pension at retirement If Tom has a 1% salary rise each year, by adding all of the other years’ pension pots together, he could expect a pension of £16,000 a year after 25 years’ service
Changes to Current Arrangements
A service break of less than 5 years is treated as continuous service No Special Class Status or Mental Health Officer Status in the new scheme (currently only limited availability to certain members of the 1995 section) No limit on pension accrual Late Retirement: 2015 benefits will receive an increase if the member retires after SPA
Changes to Current Arrangements
Normal Pension Age (NPA) for members will be their State Pension Age (SPA) www.gov.uk/calculate-state-pension
Ill Health Retirement (Tier 2) will include 50% enhancement on prospective service to SPA (currently 2/3rds)
Changes to Current Arrangements Actuarial Reduction Buy-out : Allows a member to pay additional contributions to buy out any potential actuarial reduction of retiring before NPA Maximum buy-out = 3 years of actuarial reduction Member with NPA of 68 retiring at 65 will have no reduction applied
Option to forgo Protection (2008 members only)
Members of the 2008 section of the scheme with tapered or full protection will have a one off opportunity to forgo all protection of future accrual in the 2008 section of the scheme and move to the new 2015 scheme. The option is expected to be available after commencement of the 2015 scheme and members will have 3 months to choose
Choice 2 Exercise
Members of the 1995 section of the current scheme, who do not have full protection, will have a second chance to move their accrued service into the 2008 section This exercise will take place following the introduction of the new scheme in April 2015
Added Years Contracts
Members can continue to pay for added years contracts following a move to the 2015 scheme Members of the 1995 section of the scheme (moving to the 2015 scheme) can access the added years benefits separately and before their main 1995 benefits are due to be paid. This will permit members to have future accrual in the 2015 scheme. Once 1995 section benefits are accessed further accrual in the 2015 scheme is not permitted
Salary Sacrifice Scheme
The value of the noncash benefit is not pensionable in the scheme Scheme contributions are based on the reduced salary Only the reduced salary will be used toward the pension pot Also affects death in service benefits
Upcoming Issues for HSC Pensions/Members
Communication Choice 2 Opt out of Protection Actuarial Reduction Buy Out De-coupling of Added Years Benefits
