NHS pension scheme review consultation

Mental Health Nursing,  Mar 2005  

• E-mail
• Print
• Link

Are you interested in your NHS pension? The current pension arrangements for 1.2 million NHS staff are under review. In January the NHS published a consultation document on the pension scheme. The document is available from www.nhsemployers.org. Amicus members working in the NHS should obtain a copy of the document and respond to the consultation. Extracts on the key issues in the consultation document are provided below

The consultation document is a product of over 12 months of partnership working between management and staff representatives, employers, trade unions and other interested parties. We, the Review partners, have agreed on much but have not been able to agree on everything: in particular, the Government's proposal to increase the normal pension age to 65 and the financial scope for benefits changes.

Why is a review necessary?

The aim of the Review is to ensure the NHS Pension Scheme meets the needs of a modern NHS and its staff, by making benefits more appropriate for today's workforce. This is the first time the Scheme has been fundamentally changed since its inception in 1948.

We want to ensure the Scheme helps the NHS recruit and retain staff and encourages staff to return, particularly staff among older age groups. The current Scheme could do more in this respect as it was designed around a career very few can or will achieve - a 40-year full-time working life and overnight retirement at the age of 60. Today's workforce is 80% female, around half of whom work part time.

Changes in the stock market and demographic pressures mean pension costs have grown, and although NHS pension benefits are guaranteed to be paid by the Government, the Scheme is not immune to the cost pressures.

* The NHS is currently in an unparalleled period of expansion. Since 1999, the workforce has been expanding at nearly 4% per annum and demand for staff will continue to rise.

* Our population is getting older. Over the current decade the numbers in the UK population in the 45-54 age group are expected to increase by 19% while those in the 25-34 age group are set to decline by 19%.

* UK life expectancy is increasing - from 69.2 in 1950 to 77.2 in 2000 - and is expected to continue to rise. At the same time the average retirement age in the UK has been falling from 66.2 in 1960 to 62.7 in 1995. In the NHS this means that the annual loss from, for example, the nursing workforce is projected to increase from around 15,000 in 2004 to 25,000 in 2015.

Legislative and policy changes

The Government has proposed increasing the normal pension age (NPA) to 65 across UK public service pension schemes.

The Review partners have different views on the proposal to increase the NPA. Management side partners believe that this is a reasonable response to the demographic pressures facing the scheme today. Although this proposal is contentious, an increase in NPA would create savings that could be reinvested. This reinvestment gives the NHS the opportunity to create a Scheme that better meets the needs of staff and employers.

Staff side partners strongly oppose a compulsory increase in the NPA. They believe that the Government has not made the case for increasing NPA, that the environment in which NHS staff work is not always compatible with working longer, and that a voluntary approach to extending working lives would be more appropriate.

The NHS Pension Scheme will also have to comply with recent European Union and UK legislation, including directives on age and gender discrimination and new pensions tax legislation. The Scheme is required to introduce the right for same-sex civil partners to receive the same rights as married partners and to ensure there are not unjustified differences of treatment simply because of age.

A new pension scheme

It is envisaged that if the Government decides to go ahead and implement a higher normal pension age for staff, there should be a new pension scheme for new staff. Existing staff will have the opportunity to join the new scheme should they wish, probably on the basis that staff will transfer all existing membership into the new scheme with a pension age of 65. Staff would then have access to all benefits in the new scheme. Staff side partners also proposed the option of moving to the new scheme for future service only.

Mental Health Officer status agreements are not affected by the proposals.

The principal points to be considered in a new scheme are:

* Choice over the size of tax-free lump sum that is taken.

* Changes to the way the pension is built up (accrual).

* Survivor benefits for unmarried partners.

* More flexibility around taking the pension.

* New ways to save more for retirement.

* A review of sickness and ill-health, arrangements.

* Widening access to the Pension Scheme for healthcare staff.

Final salary or career average?

A final salary scheme:

* Provides a pension that is predictable and easily calculated.

* Is well understood and well valued by staff.

* Will ensure that any greater career progression provided by Agenda for Change is carried through to a better pension.