Throughout the year we have been providing members with monthly updates ahead of the introduction of the 2015 NHS Pension Scheme (NHSPS).
In October the Department of Health published the consultation on the draft regulations for the new scheme and we have been examining them ever since. We will also be submitting a formal response to the consultation.
Whilst the details of the new scheme are well known, it is important for us to check the regulations carefully, to ensure that they accurately reflect the way in which the government told members the scheme would work.
We identified a few concerns and will be highlighting the following issues in our consultation response:
At present, members who are made redundant have the right to an unreduced pension. When redundancy terms were reviewed in 2006 a change to the rules was implemented whereby members were compelled to forego a redundancy payment to pay for the unreduced element of their benefits. The rules gave the member an option not to take the unreduced pension, if they preferred to retain the redundancy payment.
"The draft regulations would in future mean that the employee will be expected to cover the difference, or take a reduced pension."
The draft regulations appear to allow for the employee to use their redundancy payment to get an unreduced pension but where the payment doesn’t equal the cost of an unreduced pension the employer is no longer obliged to make up the difference. The draft regulations would in future mean that the employee will be expected to cover the difference, or take a reduced pension.
Loss of HMRC protections
The 2015 NHSPS will be a separate scheme from the existing 1995/2008 sections of the NHSPS. This could have implications for doctors who have any form of HMRC protection against potential pension taxation charges. The number of members affected is likely to be low – possibly none due to protection being unlikely to be of benefit to anyone who is some way from retirement.
Option to buy out early retirement reduction
"We were disappointed to note that the buy-out only applies to the pension accrued during the buy-out period"
Members will be able to pay additional contributions to buy-out up to three years of the actuarial reduction that would be applied beyond age 65 (i.e. up to their potential normal pension age of 68). However, we were disappointed to note that the buy-out only applies to the pension accrued during the buy-out period, i.e. the period during which the additional contributions are paid. This calls in to question the value of making such a purchase and suggests that only those members that begin the buy out on the date that they join NHSPS 2015 would fully benefit.
The BMA are also disappointed that members who purchase the buy out and are subsequently forced to retire on ill health grounds – through no fault of their own – would not receive a refund of those contributions, despite the fact that they would gain no extra benefit from the purchase.
Pension accounts and revaluation
There is a clear expectation from members that revaluation in the NHSPS 2015 means CPI plus 1.5%. The regulations, as written, would allow the government to impose negative revaluation to accrued benefits which is completely unacceptable. We will therefore push for in the draft regulations to be changed so that it reflects member expectation.
Transfers in from other NHS schemes
At present, members who have previously accrued a period of pensionable service in another UK NHS pension scheme are not subject to the same 12 month time limit that applies to other types of scheme when transferring in those benefits. The draft regulations appear to remove that distinction and again we would like to see the present situation continue and be reflected in the regulations.
The government will review all of the consultation responses and issue a further response. We will await the outcome of that and update members accordingly. In the meantime, if you have any comments on the consultation document, you can email them to the Department of Health directly.
Read the next update for January which focuses on the 'Choice 2' letter sent to eligible doctors by NHS Pensions.
If you have any other questions or points to make then please contact the Pensions team