To ask the Scottish Executive when it will publish proposals for the reform of the Scottish NHS and Teachers’ Pension Schemes.
Consultation papers setting outproposals for the reform of the Scottish NHS and Teachers’ Superannuation Schemesare being published today, with a closing date for responses of 5 January 2007. Copiesof each consultation paper are available in the Scottish Parliament InformationCentre (Bib. numbers 40545 and 40544 respectively) or via the Scottish Public PensionAgency (SPPA) website on
http://www.sppa.gov.uk.
In 2004 and 2005 the ScottishPublic Pensions Agency consulted on a number of options for reforms to the Teachersand NHS pension schemes in Scotland. The responses indicated a very strong preference forthe retention of a final salary pension scheme and for existing scheme members toretain their current main pension benefits. The proposals published today wouldretain a normal pension age of 60 for all existing members of each scheme and retaina final salary pension for both existing and new staff. At the same time the proposalswill ensure that the pension schemes are sustainable in the long term, generatingsignificant savings compared to current arrangements, with limits placed on thefuture costs to employers and increased contributions from employees. The GovernmentActuary’s Department has estimated that the reforms to the Scottish NHS and Teachers’pension schemes will deliver around £0.5 billion (NHS) and £0.4 billion (Teachers)over 50 years. These form part of the £13.5 billion overall public service pensionreform savings expected by HM Treasury from the NHS, Teachers’ and Civil Serviceschemes across the UK.
NHS Pension Scheme
The changes to the NHS schemeare joint proposals agreed by the Scottish Pensions Review Group, a partnershipbetween employers and staff representatives of the Scottish NHS and the ScottishExecutive. Similar proposals are currently under consultation in England and Wales. For existingNHS scheme members, the main proposals include:
Keeping a normal pension ageof 60 (or 55 for staff with special rights) and the right to take a pension afterthe age of 50;
Keeping a final salary pensionwith 1/80th accrual rate and 3/80th lump sum for each year of service based on thebest of the last three years of work before the age of 60;
A new option to take a largerlump sum, up to 25% of the value of the pension, in return for giving up some of the pension, and
Survivor pensions extended topartners in addition to widows, widowers and civil partners.
For new NHS scheme members, theproposals include:
A normal pension age of 65 andthe right to take a pension after the age of 55;
A final salary pension with 1/60thaccrual rate for each year of service based on the average of the best three consecutiveyears of membership in the ten years before retirement (allowing staff to take alower paid job in the run up to retirement but have their salary calculated on thehigher salary they had before stepping down);
The choice to convert up to 25%of the pension in to a lump sum, and
A more flexible pension withthe ability to take all or part of the pension while continuing to work and buildup more pension.
Both existing and new practitionerswill have a career average scheme with the same benefits as the other staff. A newcontribution rate system is proposed that will have lower contributions for thelowest paid and higher rates for the highest paid, with rates between 5% and 8.5%.
It is proposed that the new schemewill start in 2007 with changes for existing staff from April 2008. From a dateto be agreed, existing staff will be asked whether they wish to transfer into thenew scheme.
Teachers’ Pension Scheme
The changes to the teachers’scheme are based on those discussed and agreed at a UK-level by teachers’ employerand staff representatives and similar proposals are due to be implemented in Englandand Wales in January 2007. The Management Advisory Group (Scotland), consistingof Scottish teachers’ employer and staff representatives and the Scottish Executivehave also agreed that the proposals are appropriate for consultation in Scotland. Theconsultation paper is being published by the Scottish Public Pensions Agency.
For existing teachers’ schememembers, the proposals include:
Keeping a normal pension ageof 60 and minimum pension age of 50 (55 from 2010) except on the grounds of ill-health;
Keeping a final salary pensionwith 1/80th accrual rate and 3/80th lump sum for each year of service based on thebetter of final salary or the average of the best three consecutive years of membershipin the ten years before retirement (allowing staff to take a lower paid job in therun up to retirement but have their salary calculated on the higher salary theyhad before stepping down);
A new option to take a largerlump sum, up to 25% of the value of the pension fund, in return for giving up someof the pension;
Survivor pensions extended topartners in addition to widows, widowers and civil partners;
Revised ill-health retirementpackage; a tiered approach and a higher level of benefits for total incapacity andlower level of benefit for partial incapacity;
A more flexible pension withthe ability to take all or part of the pension while continuing to work in a reducedcapacity and build up more pension, and
Death grant increased tothree times salary.
For new teachers’ scheme members,the proposals include:
A normal pension age of 65 andminimum pension age of 55, except on the grounds of ill-health;
A final salary pension with 1/60thaccrual rate for each year of service based on the better of final salary or theaverage of the best three consecutive years of membership in the ten years beforeretirement (allowing staff to take a lower paid job in the run up to retirementbut have their salary calculated on the higher salary they had before stepping down);
The choice to convert up to 25%of the pension fund in to a lump sum;
Survivor pensions extended topartners in addition to widows, widowers and civil partners;
Revised ill-health retirementpackage; a tiered approach and a higher level of benefits for total incapacity andlower level of benefit for partial incapacity
A flexible pension with the abilityto take all or part of the pension while continuing to work in a reduced capacityand build up more pension, and
Death grant of three times salary.
The members’ contribution ratewill increase to 6.4% of pensionable salary and the employer contribution rate willincrease to 13.5% in April 2007 when the new arrangements are planned to be introduced.The employer rate will probably have to increase further in April 2008, dependingon the results of the 2005 scheme valuation for which information is currently beingcollated for assessment by the Government Actuary’s Department.
For both schemes, it is proposedthat future contribution rates will be based on actuarial assessments of the schemeand that, subject to significantly different overall cost pressures, the employeecontribution rates in Scotland will be set to be equal to the employee rates set followingthe equivalent valuation in the relevant England and Wales scheme. In this way, the limits applying to the futureemployer rates in England and Wales will also apply in Scotland, ensuring that future pensioncosts to the employers are sustainable and that future cost increases are sharedbetween employers and employees.
