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Members Briefing Document 3.3

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Members Briefing Document
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  C1667806.2   PUBLIC SECTOR PENSION REVIEW ASEO Membership Briefing Note re Proposed Pension Scheme Changes November 2014 Preamble Following the last meetings in September 2013, ASEO member organisations balloted/consulted with their members which resulted in a rejection of the proposals placed before you in late 2013. Since then we have continued to try and negotiate for an improvement in the offer the employer was prepared to make. In the late spring of this year, both parties agreed to enter into mediation in order to try and resolve the differences. Following this process a new updated proposal was submitted to the ASEO for consideration and follows this introduction. The ASEO believes it is vitally important for members to be fully informed when participating in the balloting/consultation processes that will follow in the coming weeks. Members should understand the proposed changes and how they will be individually affected along with the risks involved in not accepting the proposals, and what may be expected of them to support such a choice. It is also important to point out that the benefits you have accrued under the current scheme up to the 31 st  December 2014 will be unaffected by these changes other than a move from RPI to RPIX. This part of your pension will still be based on your final salary at the time you retire. What you get under the ‘current scheme’ part of your pension will depend on how many years you have accrued, and the date you joined the scheme. This document is intended to be a factual description of the proposed changes only, and deliberately does not offer any opinions on the changes. Individual unions will issue commentary on the proposals to their members.   2 C1667806.2 1. Introduction This paper sets out in detail the proposal for the future pension provision for States’ employees. 2. Accrued benefits 2.1 Pensioners and deferred pensioners It is proposed that the accrued benefits of pensioners and deferred pensioners should be unaffected by the proposed changes. This includes benefits potentially payable on death. It is proposed that future pension and deferred pension increases from the implementation date  (likely to be 1 st   July 2015 if agreement is reached)  will be based on the increases in RPIX rather than the increases in the RPI. 2.2 Active members Active members are employees who are in the service of the States and members of the Scheme on the day before implementation date. The proposal is that active members’ accrued benefits up to the day before implementation date would continue to be linked to their salary up until the date they leave the service of the States, leave the Scheme, die or retire (whichever is the earlier) ie members’ accrued benefits would retain the final salary link while the member remains in the States’ employ and as a member of the Scheme. The proposal is those members’ accrued benefits up to the day before implementation date could be received in full from the member’s current Normal Pension Date if the member retires at that date. For example, consider a pre 2008 active member who has a current Normal Pension Date of age 60. If he/she retires at age 60, accrued benefits earned up to the day before implementation date would be payable in full ie would not be reduced. If he/she retires prior to age 60, these accrued benefits would be reduced for early payment (based on years before age 60). For the avoidance of doubt, it is not proposed that a current active member will be able to start to receive their accrued benefits at their current Normal Pension Date whilst remaining in service and accruing benefits under the new structure, unless the arrangements for flexible retirement apply.   2.3 Death benefits/ill health benefits If an active member were to die in service, in deferment or after retirement, a spouse/qualifying partner/children’s pension would be paid based on the accrued benefit only. (Any enhancement to benefits would be paid from the new structure.)   3 C1667806.2 For example if an active member has accrued 10 years of service at implementation date and dies in service 5 years later when his/her final salary has increased to £30,000, a spouse’s pension of 10/160 x £30,000 = £1,875 pa would be paid. (The pension to a qualifying partner would be based on service qualifying for this benefit.) A similar calculation would apply on death in deferment or death in retirement. For the avoidance of doubt, any enhancement to the death in service benefits and the lump sum payable on death in service would be available from the new structure, together with a benefit based on service under the new structure. The calculation of a pension on ill health would follow similar principles. The benefit would be based on accrued service only whatever the level of incapacity, any uplift would be provided through the new structure, together with a benefit based on service under the new structure. The death in service lump sum remains 3x your annual salary.   2.4 Pension and deferred pension increases It is proposed that pension and deferred pension increases to active members’ accrued benefits to the date of implementation will be based on increases in the RPIX. 2.5 Protection for members approaching Normal Pension Date It is proposed that protection will be given to active members who are contributing members of the Scheme and within a period of 10 years before Normal Pension Date (but no younger than age 45) at 31 December 2013. They would remain in the final salary section of the Scheme under its current terms and conditions including paying the same level of contributions as they do now. Those members who would receive the above protection to remain in the final salary section of the Scheme would have the option of foregoing that protection and opting to move to the new structure. Such decision would need to be made within 3 months prior to the implementation date. 3. New structure 3.1 Hybrid arrangement The new structure is proposed to be a hybrid arrangement. This would be made up of a Career Average Revalued Earnings Scheme (CARE scheme) for earnings up to a cap, currently £85,552 which will increase with civil service pay grade SO6. The employer contribution paid on pensionable pay above the cap is 12% of pensionable pay. The member contribution is at the standard rate (see below).   4 C1667806.2 Employer and member pension contributions on pensionable pay above the cap will be paid into a new defined contribution section within the new structure. This defined contribution section would be established as part of the Superannuation Fund. The new defined contribution section will be available to enable all members to pay additional voluntary contributions. 3.2 The details The details are as follows: ã   the CARE accrual rate is proposed to be 1/80 th for pension and 3/80 th  for a separate lump sum. ã   the earnings cap is proposed to be £85,552. This will increase in line with civil service pay (grade SO6). ã   the CARE indexation both in the period to retirement and once in payment is proposed to be the increase in the Guernsey RPIX, subject to a maximum increase in any year of 6%. However, if the increase in the RPIX for the 12 months ending on the preceding 30 June on which the increase is to be based has exceeded 6.0% pa, the Policy Council on advice from Treasury and Resources will have the authority to consider whether the increase to be awarded for that year should exceed 6%.. They will take into account, amongst other matters, the funding position of the scheme and the general position of the States' finances. There would follow an open and transparent discussion with trade unions over the proposed increase and if agreement cannot be reached, then arbitration would be available to settle any dispute. For the avoidance of doubt, separate decisions would be made regarding the indexation in the period to retirement for current employees, the indexation in the period to retirement for deferred members and the increase to be awarded to pensioners. ã   Normal Pension Age (NPA) is proposed to be linked directly to the Guernsey State Pension Age (SPA). The SPA is due to rise to 67 by 2031. At this point, any further increases in SPA would not automatically apply to members who were in the scheme as of the implementation date. Any increase in NPA for these members would be subject to discussions at the Pensions Consultative Committee. For members joining after the implementation date, any increases in SPA beyond 67 would automatically increase their NPA as well. ã   Special Groups –(Police, Fire, Nurses and Mental Health Officers) Their NPD will be age 60 or SPA less 7 years, if higher, for members of the police force, fire fighters, nurses and mental health officers who currently have an NPD below age 60, who remain in service until age 55. At this age or above members may defer payment of benefits until NPD or draw benefits actuarially reduced with reference to NPD. Other deferred members of these groups will have an NPD of the SPA. The employer will be able to determine that a police officer or firefighter who is at least age 55 but less than NPD should be retired from the service having regard to the economical, effective and efficient management of the service and the costs likely to be incurred in that particular case. In such a case the pension awarded would be the accrued pension.
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