1. Guernsey Public Sector Pension Scheme proposals

2. Purpose
To explain the basis of current pension arrangements and terminology
To outline the Guernsey States proposals for public sector pensions
To compare / contrast with UK developments
To take and answer questions on the proposals
Provide an opportunity for members to take a view on the acceptability, or not of the proposals.

3. Pension terminology (1)
State Pension Age (SPA) the age at which someone can get their ‘state pension’
Normal Pension Age (NPA) the age at which you can access an unreduced pension from your occupational pension scheme
Minimum Pension Age (MPA) the age at which you can access a pension
MPA not include ill health etc – just deals with taking a normal pension -= normally this is either 50 or 55. Set in statute and HMRC etc
NPA relates to occupational schemes –
SPA is the ‘old age pension’
You could have three pension ages and all mean something different so a nurse could;
Have an MPA of 55
A NPA in the Guernsey scheme of 60 and
SPA of 65

4. Pension terminology (2)
Defined Benefit schemes (DB) – such as ‘final salary’ and CARE. Pension benefits are defined by the rules of the scheme and must be paid irrespective of the position of the pension fund.
Final Salary - pension is calculated on either the last year of earnings or over a few years prior to retirement.
CARE – each year of pension contributions (and not solely the final year(s))is calculated for pension purposes. UK public sector schemes moving to CARE.
Defined Contribution (DC) or ‘money purchase’. Pension is dependent upon growth of a ‘pension pot’ . Pension pot is based on contributions from employer and employee – return is not guaranteed
Lord Huttons review of public sector pension in UK was clear that final salary schemes should close. He saw them as delivering a disproportionate benefit to higher earners at the expense of the lower paid. Care is ‘fairer’ to all and everyone builds up the same level of benefits in care and there is no higher earner / final salary effect.
Final salary is not always someones highest earnings
All UK scheme moving to care over a period. GPs have always had CARE and NUOVOS civil service went to CARE in 2008
NHS TUs have never been against CARE just that they were able to negotiate final salary in If not it would have been CARE
Nurses generally have a flat career earnings so CARE should not deliver worse benefits.
But with Rising NPA they may have to work longer

5. Pension terminology (3)
‘Accrual’ – the rate that a pension builds up at, so 1/80th = 1/80th of pensionable pay for each year of pensionable service;
Example - £30,000 / 80 x 20 years = £375x20 years = pension of £7,500
‘Funded schemes’ – ‘unfunded schemes’ –’pay as you go’ – How schemes are funded. Guernsey is a ‘funded scheme’ with real assets and liabilities. NHS is ‘unfunded’ – no ‘pension pot’ but accounted for as if real. Pensions paid out of revenue.

6. Current arrangements (Nurses)
Pre-2008
NPA60 (some members with NPA 55)
1/80th
Final salary plus lump sum
6.5% employee
14.1% employer
45 yrs max
RPI
Post 2008
NPA65
1/60th
Final salary no lump sum
6.5% employee
14.1% employer
45 yrs max
RPIX
So States have already agreed to people (new entrants) to work longer - 65

7. ‘The politics’
UK Hutton Report –’ work longer , pay more get less’; close final salary introduce care, increase retirement age and pay more in pension contributions.
Government (UK) should set a cap on the costs that they are prepared to incur
Employers moving from final salary; see UK Public and private sector, Jersey etc
Not just an ‘affordability issue’ – it’s also about ‘exposure to risk’ in the longer term
Public sector v private sector provision on Guernsey
‘People living longer so receiving pension for longer’ – ‘work longer to deliver pension for longer in retirement’
Not just about if a ‘case for change has been made’ – TUs did not accept the case for change in the UK
Guernsey – States do not want to continue to build up ‘final salary’ liabilities
Guernsey politics? States meeting Feb 2014
Lord Hutton reviewed public sector pensions at request of Govt
Close final salary
Increase contributions
Work longer
No to DC system
Protect final salary benefits at final salary
Case for change not made in UK that was acceptable to TUs – TUs felt 2008 changes were affordable and shared the risk correctly between taxpayers and scheme members;
TU negotiate defined benefit scheme if final salary is not available.

8. Guernsey process
Original discussions outcome not accepted by trade unions (ASEO)
Further discussions 2013 and new proposals tabled – resulting in;
Delayed implementation to Jan 2015
Increased protection from 5-10yrs
Reduction in proposed employee contribution from 8% to 7.5%
Phased increase in reduced contributions; 7% then 7.5%
Guaranteed ‘floor’ on employer contribution
Change to proposed pension increase cap in retirement from 5% to 6% with possibility of further review if over 7.5%
Delayed implementation means that people build up another year in final salary benefits.
More people covered by protection
Pension in retirement rises better in Guernsey than uk
Under previous proposal employer could pay less than employee – rejected by Tus now employer will never pay less than staff

9. Proposals in summary New scheme from Jan 2015
Close ‘final salary’ and introduce CARE in Jan 2015 for ‘future pension benefits’
Normal pension age (now 60/65) in CARE to equal state pension age – rising to 67 by 2031
Accrual 1/80th and 3/80th ‘lump sum’
Compulsory for new and part time staff
Employee Contribution to rise to 7.5% by Jan 2016
Pension increases in service and in retirement at RPIX capped at 6% but with review
Additional pension benefits can be purchased in DC arrangement
Employer contribution rate 12% (max 14%) from14.1%
No maximum service
Earnimngs above £85k to be in DC scheme

10. ‘Protections’ and interim arrangements
Start date put back from 2014 to 2015
Members within ten years of their normal pension age as at 31/12/13 (increased from original 5 years) will have their normal pension age (55, 60 or 65) protected
Final salary benefits earned to Jan 2015 will be based on final salary at retirement and not as at 2015.
Phased increase in contributions: 7% from Jan 2015 and 7.5% from Jan 2016
‘Uniformed services’ SPA minus seven paid for by increased contributions
Protection is of age only and not benefits ie everyone moves to CARE in 2016

11. The UK NHS
Public sector final salary schemes closing and CARE being introduced. Public Sector Pension Act does not allow final salary schemes to be negotiated in future.
Protection is on both retirement age and scheme membership : full protection and tiered protection
Retirement in CARE to equal state pension age
Contributions increased in 2008 to an average of 9.8% - average nurse will pay about 9.3% - could rise further
Employer contribution 14%
Increases in retirement capped at CPI (was RPI)
NHS CARE accrual 1/54th but no lump sum
Working Longer Review
Introduction of cost / risk sharing arrangements
Most unions in UK rejected proposals but rcn 16% turnout and unison 15% turnout problematical
UK two levels of protection
Within ten years of NPS in April 2012=- full protection ie remain in scheme until choose to retire but subject to any contribution increase
Tapered those between 10 and 13.5 years – remain in current scheme for up to 9.5 years for some (others less) then move to 2015 CARE section

12. How it will work….
For consideration by States in February and if passed as proposed..
Someone retiring before Jan 2015 no change
After Jan 2015 all future service will be at CARE
All service to 2015 protected on a final salary basis and final salary link remains for this service
Those within 10 years of NPA in Dec 2013 will retain their pension age so can retire at that point or later without a reduction in benefits.

13. Finally…
RCN view is that the proposals are ‘the best that can be achieved through negotiation’
Rejection means serious consideration of industrial action – what are members prepared to do about it?
Members are asked to give a view in RCN ballot

14. Discussion / feedback
Views
Strength of member feeling
Acceptability or not
If rejection – what next?