Transcript The Business Services Organisation

HSC Pension Service
Waterside House
75 Duke Street
Londonderry
BT47 6FP
02871 319111
www.hscpensions.hscni.net
[email protected]
the
Background to Pension
Reform
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Government commissioned Lord Hutton to
review ALL Public Service Pensions
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A Proposed Final Agreement (PFA) was
published in 2012 covering high level proposals
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Public Service Pension Act (NI) 2014
HSC Pension Service :
The Facts
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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?
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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)
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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:
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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
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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
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Normal Pension Age (NPA) for members will be
their State Pension Age (SPA)
www.gov.uk/calculate-state-pension
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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)
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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
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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
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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
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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
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Communication
Choice 2
Opt out of Protection
Actuarial Reduction Buy Out
De-coupling of Added Years Benefits