Health and Social care Pension Health and Social care Pension Scheme 2015 Scheme 2015

the

HSC Pension ServiceWaterside House75 Duke Street

LondonderryBT47 6FP

02871 319111www.hscpensions.hscni.net

hscpensions@hscni.net

Background to Pension Background to Pension ReformReform

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 :HSC Pension Service : The Facts The Facts

The new pension scheme was 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?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 Check if you have tapered protectionprotection

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 A new way of working out your pension – it would be worked out pension – it would be worked out

in two parts: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 Part 1 – Worked out in the same way (using final salary for most)way (using final salary for most)

Your final salary(When you retire or leave the Scheme)

Your service(the date you joined until the date of the changes)

Your pension rate(e.g. 1/60th or 1/80th)

Your Pension at retirement

This is the same way your pension has always been worked out. There would be no change, and you canstill take a tax free cashlump sum.

Part 2 – Worked out from your Part 2 – Worked out from your future average earningsfuture 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 Part 2– Maintaining your pension’s valuevalue

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 tobe revalued until youretire Year 1

Year 1 retirement potTom’s pot for year 1 is worth £845.68 after 25 years (CPI

@2%)

Part 2 – Your pension at retirementPart 2 – Your pension at retirementAdding your other years’ pots

You receive a new ‘pot’ for each year youare a member

Add up the pension You earned each year (after it has beenrevalued) to find yourtotal 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

Some of the Key FeaturesSome of the Key Features Normal Pension Age (NPA) for members will be

their State Pension Age (SPA)

www.gov.uk/calculate-state-pension No limit on pension accrual Late Retirement: 2015 benefits will receive an

increase if the member retires after SPA Ill Health Retirement (Tier 2) will include 50%

enhancement on prospective service to SPA (previously 2/3rds)

Some of the Key FeaturesSome of the Key Features

Actuarial Reduction Buy-out :Allows a member to pay additional contributions to buy out any potential actuarial reduction of retiring before NPAMaximum buy-out = 3 years of actuarial reductionMember with NPA of 68 retiring at 65 will have no reduction applied

ERRBO exampleERRBO example Greg has a normal pension age of 68 He is not buying additional pension but takes out an

agreement to purchase an ERRBO of three years in April 2015 at age 45

Greg pays additional contributions to age 65 when he retires and claims his pension.

The normal deduction that would apply to the pension being paid 3 years early is eliminated by the buy out and Greg receives his pension in full.

To achieve this Greg will have paid additional contributions of 3.87%, before tax relief, in addition to his normal contributions.

Yrs to Yrs to RetirementRetirement

PensionPension

11 95%95%

22 90%90%

33 85%85%

44 81%81%

55 77%77%

6 6 73%73%

* 7* 7 70%70%

88 66%66%

99 63%63%

1010 60%60%

1111 58%58%

1212 55%55%

1313 53%53%

Reduced VER Benefits are still available in the 2015 scheme.

*e.g. Voluntary early retirement at Age 60 assuming SPA of 67

Option to forgo Protection (2008 Option to forgo Protection (2008 members only)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 in the early summer and members will have 3 months to make their decision

Choice 2 ExerciseChoice 2 Exercise

Members of the 1995 section of the HSC 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 ContractsAdded 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 SchemeSalary 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

Current Issues for Current Issues for HSC Pensions and the MembersHSC Pensions and the Members

Communication Choice 2 Opt out of Protection Actuarial Reduction Buy Out De-coupling of Added Years Benefits

Feature or BenefitHSC StaffPractice and Approved Employer Staff

Practitioners(HSC Medical and Ophthalmic Practitioners)

All HSC workers and Approved Employer Staff

Scheme 1995 2008 1995   2008 2015

Member Contributions

      Tiered Contribution Rates  

Type of SchemeFinal salary based on the best of the last 3 years pensionable pay

Final salary based on the average of the best three consecutive years within the last 10 years

Earnings Accrual. The final value of pensionable earnings after adding all years’ earnings and applying revaluation factors

Earnings Accrual. The final value of pensionable earnings after adding all years’ earnings and applying revaluation factors

Career Average Re-valued Earnings based on a proportion of pensionable earnings in each year of membership

Pension

A pension worth 1/80th of pensionable pay per year and pro rata for any part year of membership

A pension worth 1/60th of reckonable pay per year and pro rata for any part year of membership

A pension based on 1.4% of total up-rated earnings

A pension based on 1.87% of total up-rated earnings

A pension worth 1/54th of each years’ pensionable earnings, re- valued at the beginning of each following scheme year in line with the Consumer Price Index plus 1.5 % whilst in active membership

Retirement Lump Sum

3 x pension. Option to exchange part of pension for more cash up to 25% of capital value

Option to exchange pension for a lump sum, up to 25% of capital value. Certain members may have a compulsory amount of lump sum

3 x pension. Option to exchange part of pension for more cash up to 25% of capital value

Option to exchange pension for a lump sum, up to 25% of capital value. Certain members may have a compulsory amount of lump sum

Option to exchange part of pension for a lump sum up to 25% of capital value

Normal Pension Age

60(55 for Special Class/MHO)

65 60 65Equal to an individuals’ State Pension age

Maximum Age 75 75 75 75 75

Maximum Membership

Non SpecialClass/MHO 45 years in total.Special Class/MHO 40years at age 55 & 45 years overall

45 years   45 years No limit

Feature or BenefitHSC StaffPractice and Approved Employer Staff

Practitioners(HSC Medical and Ophthalmic Practitioners)

All HSC workers and Approved Employer Staff

Scheme 1995 2008 1995 2008 2015

Minimum Pension Age

Age 50 if joined pre 06/04/2006 and not had a break of 5 years or moreOtherwise Age 55

Age 55

Age 50 if joined pre 06/04/2006and not had a break of 5 years or more Otherwise Age 55

Age 55 Age 55

Actuarially Reduced Early Retirement

Yes Yes Yes Yes Yes

Late RetirementNo late retirement factors applied

Late retirement factors applied to pension earned before Age 65

No late retirement factors appliedLate retirement factors applied to pension earned before Age 65

Late retirement factors applied to all pension earned until retirement

PensionableRe-employment following payment of pension

Only available toeligible members who retire from active membership following ill health retirement who re-join prior to age 50

Yes if eligible

Only available to eligible members who retire from active membership following ill health retirement who re-join prior to age 50

Yes if eligible Yes if eligible

Partial Retirement No Yes No Yes Yes

Ill Health Tier 1Accrued benefits paid without reduction

Accrued benefits paid without reduction

Accrued benefits paid without reduction

Accrued benefits paid without reduction

Accrued pension paid without reduction

Ill Health Tier 2Tier 1 plus an enhancement of 2/3rds of prospective membership to NPA

Tier 1 plus an enhancement of 2/3rds of prospective membership to NPA

Tier 1 plus an enhancement of 2/3rds of prospective membership to NPA

Tier 1 plus an enhancement of 2/3rds of prospective membership to NPA

Tier 1 plus an enhancement of 1/2 of prospective pension to NPA

Increasing your Pension

Purchase of AdditionalPension in units of£250

Purchase of Additional Pension in units of £250

Purchase of Additional Pension in units of £250

Purchase of Additional Pension in units of £250

Purchase of Additional Pension in units of £250