MOVING TO A 21ST CENTURY PENSION SCHEME – THE NHS PENSION SCHEME by etssetcf

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									 MOVING TO A 21ST CENTURY PENSION SCHEME – THE NHS PENSION
                SCHEME REVIEW CONSULTATION


AIM

To frame the Trust’s response to the Pension Scheme Review Consultation,
from its perspective as an NHS employer.

      Disclaimer

      This paper is not aimed at explaining the great details of the Review or
      the potential implications for individual Scheme members.

      A full technical consultation document, including a detailed breakdown
      options and costs, is available from the NHS Employers website at :
              www.nhsemployers.org or by request from the NHS Pension
      Scheme Project Team, NHS Employers, 29 Bressenden Place,
      London. SW1E 5DD or nhspensionsreview@nhsemployers.org.

      Tools such as questions and answers, case studies and a glossary and
      a ready reckoner comparison facility to help answer questions that
      colleagues and staff may have are available on the NHS Employers
      website.

RECOMMENDATION

That the Board considers, comments and endorses the proposed employer
response to the Pension Scheme Review Consultation.

1.    INFORMATION

      Annexed is the summary document on the options for changing the
      NHS Pension Scheme contained in Moving to a 21st century pension
      scheme – the NHS Pension Scheme Review Consultation

      This document contains information on:

      •   The background to the Review and reasons for its necessity.
      •   How recommendations and proposals for the new Scheme differ
          from the current Scheme.

      •   How changes would affect scheme members at different times and
          in different situations.

      •   How further information can be obtained.

      •   How to let the Review team know what we think about the
          proposals for change.



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      All Scheme members have received a explanatory leaflet with payslips,
      which strongly recommends personal reading and research through the
      Employers website, to assess personal implications, and to respond
      actively to the Consultation. Additionally, in this Trust, all staff have
      had the opportunity of attending local briefing sessions at which HR
      and Pension/Payroll Team representatives are aiming to raise
      awareness and, through discussion and explanation, encourage and
      enable staff to respond effectively to the Review Consultation.

      Not until 2007/8 will every member receive a personalised pension
      statement which will give the choice and benefit implications of
      transferring into the new Scheme, or remaining on the current Scheme
      to the end of the protection period.

2.    THE REVIEW CONSULTATION

      Through the website, all scheme members are being invited to respond
      to any or all of 30 questions soliciting views on a wide range of detailed
      proposals for change. NHS employers are also be strongly
      encouraged to respond. Taking into account that the Pension Review
      is being led by the NHS Confederation and, apparently uniquely in
      public sector pension reviews, with full partnership with the staff-side
      representatives, this Trust should take the opportunity to respond
      positively.

      The proposed response is limited to the key and significant questions
      relevant to the Trust as an employer. Board members are invited to
      contribute comments on any of the other consultation questions
      or to make any further/additional contributions on the Trust’s
      proposed response.


Question     We would like to know what you think of the Government’s
             intention to increase the normal pension age to 65 for
             public sector workers and its appropriateness for the NHS.
             How in your view could the NHS retain its older workforce
             and what issues need to be addressed in doing so?

Response     While, in principle, extending normal working age to retain the
             necessary skills and workforce is a good and necessary idea,
             the implications and impact on services, jobs and individuals
             need much more detailed consideration. e.g

             •   Any compulsory increase in retirement age would not be
                 welcomed by many staff. It could be that giving choice,
                 coupled with more flexibilities for work in the 60 to 65 age
                 range, could be just as effective in encouraging staff to work
                 on.

                 It may be that the environment in which some NHS staff work


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                is not always compatible with working longer, and little
                positive benefit could be gained for the Trust if injury and
                sickness rates rise, or new forms of ageism arise with older
                staff moving into flexible, but essentially meaningless, step-
                down roles.

Q   We would welcome views on the funding issues, recognising the
    firmly held view on the staff-side that all savings from the proposed
    changes to the Scheme should be made available for improvements,
    and the government position that savings should be made

R   We recognise that any increased need to fund the Pension Scheme
    would almost certainly leave less for improving services to patients. The
    Government’s Pensions Green Paper explained that the higher pension
    age would make savings and would help financial sustainability of public
    sector schemes. The Review was advised that improvements could only
    be financed by this or other structural changes to the scheme. However,
    there is a strong case to support the view of the staff-side Review
    partners that all savings from the new scheme be made available for
    improvements, thereby not seeking to take money out of NHS pensions.

    Any Scheme Review will always create tensions – in the pace of change
    between old and new Schemes; between current and new members; and
    between different scheme members and their personal needs and
    benefits. Maintaining funding levels would increase flexibility and ease
    the transitional path into a new Scheme for all.

Q   We would like your views on which of the two alternative defined
    benefit options are favoured; the retention of final salary pension or
    the introduction of career average pensions in the new Scheme.

R   Career average pensions are generally felt to benefit those with flat
    career structures. However, it does this by taking away from those with
    better career progression.

    We are not convinced that career average pensions would be supportive
    of the aims and aspirations of most staff to advance and progress within a
    career structure. Realistically, the NHS will remain a high pressure
    working environment, heavily dependant upon enthusiastic, experienced
    and skilled local clinical and managerial leadership for maintaining
    forward direction. Retaining the final salary scheme increases the
    chances of retaining the organisational leaders who may otherwise
    leave to secure a better package in an increasingly diverse healthcare
    employment market place.

Q   What do you think about the issue of pensionable career breaks and
    in particular the proposal that recognition of career breaks should
    be available at the employers discretion.




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R   Although this proposal makes a positive contribution to flexible working
    and long-term retention, it would not appear to be workable in its present
    form. Giving employers discretion to offer free added years to make up
    career break gaps would risk inequity and the potential for grievances
    from staff who were not the beneficiaries of employer discretion. This
    provision is either applicable to all career breaks or to none. The Review
    notes that the measure, if introduced, would be expensive for all and, on
    this basis, we would not view its introduction as a priority over other
    proposed adjustments.

Q   We welcome views on the recommendation that there should be
    flexibilities such as step-down, draw-down, pensionable re-
    employment and enhanced pensions for late retirement. What is
    your preferred approach to supporting step-down in a new
    scheme?

R   We welcome usable flexibilities in the Scheme for staff in the run-up to
    retirement. These provisions, however, have to be linked to effective
    and meaningful “step-down” in terms of job roles. There is an obvious
    risk that, either from employer or employee perspective or both, “step-
    down” is viewed as a right, and “winding down” does not involve the
    allocation or performance of meaningful and worthwhile work.

    The preferred approach to supporting step-down in the new scheme
    would be to increase the reference period in a Final Salary Scheme.

Q   We welcome views on which approach should be taken to Money
    Purchase Additional Voluntary Contributions (MPAVCs).

R   Although it was not unique to the NHS Scheme, the collapse of an AVC
    provider, with the resultant pension mis-selling claims, has destroyed
    confidence in AVCs and it is hardly surprising that take-up is very low.
    The Scheme appeared to be unable to exercise any quality control
    function or judgement over this provider and therefore has had to accept
    some critiscms that it has let Members down in some way.

    Learning a lesson from this, if the Review observes that “a single
    provider might offer a better service and better quality product”, then this
    is the route to pursue, rather than choice from a number of providers.

Q   We welcome your views on the options set out for employee
    contribution rates.

R   Staff currently pay a contribution rate of 6%, except manual employees
    who pay 5%. This was originally set in recognition that manual workers
    had less opportunity for career progression and received a lower level of
    benefit from the Scheme. With Agenda for Change, this has become
    inappropriate. Of the options considered, we favour moving all staff to a
    6% rate as any other approach would be unfair and discriminatory.



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Q   We welcome your views on reviewing sickness and ill-health
    retirement arrangements.

R   The Review recommends an integrated approach so that any changes
    to the Pension Scheme are part of managing ill-health absence. This
    could mean changes in employment practice. We support the proposal
    to carry-out a partnership review of sickness and ill-health
    arrangements by NHS employers.

Q   We would welcome your views on the consensus across NHS and
    private sector employers and staff representatives that scheme
    coverage should be extended for both the new and existing
    schemes. Views may also inform the wider debate on public
    service scheme coverage.

R   We would support consistency, particularly for staff transferred through
    PFI schemes, and Valuing People schemes for resettling patients with
    learning disabilities into community settings.

Q   We cannot afford all the improvements or changes outlined
    above, and any recommendations will be subject to government
    agreement, but we recommend that the highest priorities are:

           Improving the accrual rate.
           Providing end career flexibilities.
           Providing partner pensions

    We welcome your views on this.

R   We support these priorities.


Q   We seek views on the possible extension of protection of existing
    members by three to five years.

R   It is proposed that pension benefits earned after 2013 will only be
    payable in full at 65. However the Government has promised that
    existing staff will have all service earned up to 2013 fully protected. It
    is believed that extending the protection period beyond 2013 would
    make the raising of the Normal Pensionable Age to 65 more palatable
    to existing NHS staff. The Review is seeking views on the possible
    extension of the protection period for NHS staff by a further 3 – 5 years
    (to between 2016 and 2018). However, because the protection period
    arrangements are an issue that spans all public sector schemes, the
    Review recognised that any decisions will be made in the light of
    issues across the public sector.

    We support the extension of the protection period by a further 5 years
    to 2018. This would mean that staff currently 47 years old or more
    would be able to retire as planned at 60 with payment of full benefits.


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    To limit protection to 2013 would mean that only staff currently at 52
    years and over would be able to retire as planned at 60. It seems
    unfair and unhelpful to enforce on staff in this age range a review of
    their planned retirement date and benefits. It is felt to be more likely
    that, with protection to 2018, staff and employer will jointly and naturally
    agree an appropriate and natural career end date, not necessarily tied
    absolutely to a 60th birthday.

Q   We would welcome views on the recommendation that protection
    for special class groups be maintained.

R   There is a group of NHS staff who have special retirement rights and a
    normal pension age of 55 rather than 60. In addition, staff with mental
    health officer status after 20 years of membership are subject to double
    the accrual rate and have the right to retire at 55.

    While it is important to consider that if these groups of staff have an
    increase in their pensionable age to 65 this would be double the
    increase that other staff groups face (that is 10 years rather than 5
    years), any protection or continuation of such special rights would be
    hugely inequitable in relation to all other staff.

    With Agenda for Change, and increasing statutory health and safety
    responsibilities placed on employers to ensure that staff are not put in a
    position where their health or capability to do the job is compromised,
    the very basis for “special retirement rights” is unsound.

Q   We want to know your views on the options for existing members
    who choose to transfer to the new scheme. We would also
    welcome views on the package of improvements. We welcome
    views on the transition, including the options set out for moving
    to a new scheme.

R   We support the package of improvements as set out (moving to the
    new Pension Scheme – Page 13)

    We strongly favour giving staff as much flexibility as possible, in
    choosing between the pension schemes. A strong response from staff
    who have attended the local pension sessions has been that they feel
    unable to make any form of judgement about the review options being
    proposed, in the absence of a clear statement as to what it will mean
    for them and their own individual circumstances. Although this will be
    addressed in 2007/8 with the issue of the personal annual statements
    etc., staff are also concerned that, the further away from retirement
    they are, the more difficult it is to make realistic predictions of career
    path, salary and pension consequencies.

    There is no suggestion that staff should be able to cherry-pick between
    the best bits of current and new Schemes. However it does add weight,


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    in our view, to the staff-side view that, as an alternative to a new
    scheme approach, it should be possible to retain a single scheme for
    all employees, but with differing benefits for staff whilst they retained
    current pension ages, and for staff who have increased pension ages.
    This should make it easier and more administratively straight forward to
    facilitate movement into the new arrangements, when each member of
    staff can make an informed judgement about the benefits which suit
    them best.

Q   We welcome your views on how changes might be better
    communicated both locally and centrally.

R   Local pension sessions confirm a profound lack of understanding about
    the current Scheme and its benefits. Most staff are not able to make
    any considered comparison between the present benefits and the new
    arrangements. However, in this Trust, our local pension specialist
    continues to be available to offer the highest quality advice and
    information on the current scheme to any and all staff who seek it. The
    Pension Agency, has also always been readily available, through our
    local expert, to provide additional information, and come on site to
    provide workshops for staff.

    Locally, in communicating to staff about the Review Consultation, we
    have strongly advised staff to access the information from the Project
    Team and uses the ready reckoner which gives a very good
    comparison of current as against projected benefits in the new
    Scheme.

    However well-intentioned, a 30 question Review consultation response
    form will discourage all but a few. (employers, as well as staff!). The
    consultation, both nationally and locally, needs to be structured and
    communicated better, if any credible response is to be obtained. We
    would suggest that it should be possible to structure the Review
    Consultation in terms of a hierarch or priority structure for the decisions
    required against the options available. This would give staff some
    confidence that their contributions would be listened to. Most staff
    currently feel that complexity is a cunning plan to discourage or
    discount effective responses.




                                                                     A Torbet
                                                                      11.3.05



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