Health and Social care Pension Scheme 2015

the HSC Pension Service Waterside House 75 Duke Street Londonderry BT47 6FP

Background to Pension Reform 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 : The Facts The new pension scheme was introduced on 1 st 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 1/54 th accrual rate

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 31 st 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 protection 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 pension – it would be worked out 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 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. 1/60 th 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 can still take a tax free cash lump sum.

Part 2 – Worked out from your future average earnings For example, Tom earns £20,000 so his pension in year 1 is worked out as: £20,000 x 1/54 th = £370.37

Part 2– Maintaining your pension’s value 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: £ x 3.5% = £ (if CPI is 2%) The pot continues to be revalued until you retire Year 1 Year 1 retirement pot Tom’s pot for year 1 is worth £ after 25 years

Part 2 – Your pension at retirement Adding your other years’ pots You receive a new ‘pot’ for each year you are a member Add up the pension You earned each year (after it has been revalued) to find your total 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 Features Normal Pension Age (NPA) for members will be their State Pension Age (SPA) 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 Features Actuarial Reduction Buy-out : Allows a member to pay additional contributions to buy out any potential actuarial reduction of retiring before NPA Maximum buy-out = 3 years of actuarial reduction Member with NPA of 68 retiring at 65 will have no reduction applied

ERRBO 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 Retirement Pension 195% 290% 385% 481% 577% 673% * 7 70% 866% 963% 1060% 1158% 1255% 1353% 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 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 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 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 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 HSC Pensions and the Members Communication Choice 2 Opt out of Protection Actuarial Reduction Buy Out De-coupling of Added Years Benefits

Feature or Benefit HSC Staff Practice and Approved Employer Staff Practitioners (HSC Medical and Ophthalmic Practitioners) All HSC workers and Approved Employer Staff Scheme Member Contributions Tiered Contribution Rates Type of Scheme Final 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 Career Average Re-valued Earnings based on a proportion of pensionable earnings in each year of membership Pension A pension worth 1/80 th of pensionable pay per year and pro rata for any part year of membership A pension worth 1/60 th 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 1/54 th 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) Equal to an individuals’ State Pension age Maximum Age75 Maximum Membership Non Special Class/MHO 45 years in total. Special Class/MHO 40 years at age 55 & 45 years overall 45 years No limit

Feature or Benefit HSC Staff Practice and Approved Employer Staff Practitioners (HSC Medical and Ophthalmic Practitioners) All HSC workers and Approved Employer Staff Scheme Minimum Pension Age Age 50 if joined pre 06/04/2006 and not had a break of 5 years or more Otherwise 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 Actuarially Reduced Early Retirement Yes Late Retirement No late retirement factors applied Late retirement factors applied to pension earned before Age 65 No late retirement factors applied Late retirement factors applied to pension earned before Age 65 Late retirement factors applied to all pension earned until retirement Pensionable Re-employment following payment of pension Only available to eligible 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 Partial RetirementNoYesNoYes Ill Health Tier 1 Accrued benefits paid without reduction Accrued pension paid without reduction Ill Health Tier 2 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 Additional Pension in units of £250