The Government’s plans for the NHS Pension Scheme reform were the focus of this topical discussion on the second day of conference.
Chair: Steve Griffin, deputy director, NHS Employers
Speakers:
- Andrea Hester, head of pay and reward, NHS Employers
- Tim Sands, deputy director, NHS Pay, Pensions and Employment Services – Department of Health
- Derek Benstead, partner, First Actuarial LLP
- Jim Rowley, management side representative, NHS Pensions Governance Group
Andrea Hester explained the Government’s rationale for change, saying that:
• changes made to the scheme in 2008 did not go far enough to address sustainability issues
• people are living for longer and the state pension age has been raised
• the current final salary scheme does not provide fairness between low and high earners
Revised offer
Speaking of the planned day of action on 30 November , Tim Sands said that the Government has listened to feedback and made a revised offer, announced on 2 November 2011, which ensures that all those within 10 years of their normal pension age will get the same pension they would have received, and protection of accrued rights paid at final salary on retirement.
Tripartite discussions
Tim said that tripartite discussions are currently ongoing with NHS Employers, the unions and the Government. The aim is to reach agreement on a deal that is fair to staff but that also recognises long term sustainability issues. He said that employers need to find ways to communicate what is being offered to staff at a time when people are averse to paying more for their pensions.
Comparisons
Derek Benstead made comparisons with the 1995, 2008 and the career average scheme structure. He showed, for example, what difference the new scheme would make to the pension of a nurse and a consultant. Comparisons showed that high earners would take the biggest pension drop and this opened up a discussion about total reward strategies.
Pension tax regime
Jim Rowley talked through reforms to the pension tax regime. The annual tax allowance was reduced from April 2011 to £50,000 and the lifetime allowance will be reduced to £1.5 million from April 2012. This raises a number of issues for employers. It is estimated that some 10,000 employees may be affected nationally, so employers should:
• undertake a local risk assessment
• gain a better understanding of how this will impact your own organisation
• ensure changes inform approach to reward strategies
• mitigate against changes in retirement planning