NHS Pension Scheme Review in Scotland: Moving to the Future

The UNISON Scotland Submission to the NHS Pension Scheme Review in Scotland: Moving to the Future

January 2007

Introduction

This paper constitutes UNISON Scotland's response to the NHS Pension Scheme Review in Scotland: Moving to the Future.

UNISON is Scotland's largest trade union representing around 160,000 members working in the public sector in Scotland, including over 50,000 employees in NHS Scotland

UNISON Scotland therefore welcome's the opportunity to further participate in the consultation process by representing views of its membership arising as a consequence of the publication of "Moving to the future:  the NHS Pension Scheme Review".  The joint proposals from the NHS Employers, Unison and other trade unions, now require further detailed consideration in light of the responses received.  Of the specific written and verbal responses received, these concentrated in areas of:

UNISON Scotland Response

Employee's contribution rate

It has previously been reported that contribution rates for members of the NHS Pension scheme are on average, higher than contribution rates in other comparable schemes.  However, UNISON's members have expressed some surprise that whilst costings of pension provision has received greater attention, the NHS Pension Scheme, based on a "notional" fund is not exposed to the same pressures as private sector schemes and therefore were yet to be convinced that the government's estimate of future liabilities over a 50-year cost projection calculated by the Government Actuary's Department (GAD), is a methodology comparable with other pension schemes and it will remain to be seen if this is a practical viable approach. 

UNISON accepts that assessing the right level of contributions from both employees and employers to meet expected costs requires a balance to be struck between competing demands.  The NHS has a high proportion of low paid workers and we are therefore pleased to recommend a lower contribution rate for those currently in receipt of basic pay of less than £15,001.  These lower paid employees have limited scope for pay progression and after an average of 20yrs in the NHS will secure pension benefits of less than £3,750 per annum, a larger percentage of these employees will be women working part-time and therefore their benefits could be less.   It is on this basis that there has been a mixed reaction to the proposed pension contribution rise.  For specific groups, the overall rise in contribution rates represents a 1.5% increase but there is no reciprocal rate rise for employers.  Our membership has stated that payment of increased contributions is accepted on the condition that any additional revenue generated by this increase is used solely for the purposes of securing benefits for the future and their contributions should not be channelled into protecting NHS Employer's exposure to pension scheme expenditure.    Contributors to the NHS Pension Scheme expect to receive pension benefits when they reach Normal Pension Age at least commensurate to that which has been proposed in the consultation document.

Employer's contribution rate

It has not gone unnoticed by our members that the NHS Employer's contribution rate to the NHS Pension Scheme will not change substantially from that which it is set at now.  Whilst many private sector employers have historically paid contributions averaging 15%, NHS employers have only relatively recently increased their rate from 7-14%.  A cap of any nature, let alone one set at such a low rate in comparison to today's rate, of 14.2%, is therefore incongruent with a Defined Benefit principle and UNISON implores the government to reconsider this proposal in the near future.

Normal Pension Age

The confirmation that existing members of the NHS Pension Scheme will continue to retire at the promised Normal Pension Age of 60 (55 for those with MHO and special class status) was welcomed.  Some commentators further felt that this should be extended and cited strong reasons why certain occupational health groups, such as those within the Ambulance sector, having been recognised by the government as being at greater risk of injury, ill-health and lower than average life expectancy, felt that Normal Pension Age for these groups should decrease.

The impact of the proposed reforms in Normal Pension Age must be balanced against the common retirement age of choice which is currently somewhere between 62-63.  The fact that currently, on a voluntary basis, NHS employees choose to work beyond age 60 suggests that to raise the retirement age in a compulsory way may have adverse effects to that envisaged, and may increase the overall scheme costs.  Not all occupational groups, especially those in the NHS will experience similar rates of increased life expectancy compared to the general populous.

Flexible working patterns

One of the key attractions of the new scheme commented upon by our membership was around the flexibility to take all or part of your pension whilst continuing to work in the same job.  Furthermore, the ability to contribute and further build an NHS pension was largely welcomed.  However, it is felt that there needs to be clear communication of the penalties that would be applied when withdrawing pension prior to Normal Pension Age.  On the whole, UNISON member's felt increased flexibility would incentives those that could continue to work.  

Accrual rate

The flexibility offered by a 1/60^th final salary scheme, for all new entrants was very much welcomed.  Some concerns were expressed in relation to the commutation factor, which represents poor value at 1:12.  If life expectancy experience is borne out in the NHS, a revision of this factor will be necessary.  Additionally, UNISON would suggest that the disadvantages to members of taking larger lump sums than that currently available would need to be clearly explained.

Pensionable Service

UNISON has many long serving members within the NHS, some commencing employment and joining the pension scheme before they reach the age of 20.  Currently, those who have continued to work and pay pension contributions until their 60^th birthday, are only permitted to count 40 years toward their pension, even though they could have paid contributions in excess of 40 years - these contributors feel rightly aggrieved by the current restriction.  It is the expectation of these groups that the method by which this restriction is lifted fully recognises past contributions as the fairest way in which this anomaly is rectified.

Partner Pensions

A number of comments were made with regard to the introduction of Partner pensions.  Some felt that the proposal to provide a pension to non-married partners backdating cover to 1988, although welcome, did not go far enough and would like to see the same formula applied to non-married couples as being currently applied to married couples.  With regard to the definition of "Partner", UNISON's view is that it should be as wide as possible to reflect modern families.

Communications

It was clear from our consultative process that there needs to be greater communication of the pension scheme provisions and benefits to all NHS pension scheme members and potential members.  Lack of communication was cited one of the most common complaint.  NHS employees, working unsocial hours or in isolated locations felt that currently, access to information was poor and there was no adequate means to receive details of their rights and entitlement.  UNISON would like there to be greater access to information, along with interactive web-based resources should be an important feature in ensuring that there is an increased level of awareness and understanding in the future.

Comments were also received in connection with the Choice exercise.  Concerns were expressed as to the level and accuracy of the information that would be provided.  It is imperative that information is provided on an individual basis, of the highest accuracy and at a time that was consistent with wider scheme changes.  UNISON believes that additional resources will be needed to channelled into this exercise to ensure that each member be provided with a reliable statement of entitlement and comparison at least six months prior to a decision having to be made.

Other concerns were expressed in relation to the lack of information on the financial security of the pension scheme.  Many members had only the information presented to them in the National Press and other media, which is of varying degrees of accuracy and led to misunderstanding concern over the security of their pension contributions.

Governance

UNISON strongly supports the opening of the scheme to a Governance regime.  It is hoped that this will result in greater accountability to the wider membership; seek to make the scheme fairer and improve the management of the scheme.

Further Considerations

Private contractors

It is vital that in order to facilitate the changing employment patterns within the NHS, such as social enterprises and delivery of services by those not directly employed by the NHS, consideration needs to be urgently focused on ensuring there is a seamless opportunity to continue to build up NHS Pension Scheme benefits.  It is true to say that staff continuing to work in the NHS, albeit indirectly, receive legislative protection on pay and service conditions but this does not extend to pensions.  UNISON members are often left without even a basic comparable scheme and require greater reassurance and a more open and transparent regime to protect their pension provision in the future.  UNSION would welcome discussion and agreement on this aspect, which the consultation proposals is silent upon.

The Public Sector Transfer Club

The original purpose of this facility is to provide greater ease and efficiency for public sector employees moving from one public sector scheme to another.  Presently, there are a number of private sector schemes who also participate in this facility.  At a time when practices within the NHS has resulted in closer relationships between public sector services, and other organisations, we suggest that the Public Sector Transfer Club has a stronger role to play in increasing the portability of pension scheme transfers and provides a fair method for individuals to transfer between public sector schemes and organisations signed up to the "Club" arrangements. 

Conclusions

UNISON Scotland generally welcomes the proposals within this review, especially the decision to provide lifetime protection of retirement age for existing NHS pension scheme members and the decision to retain a final salary pension for all existing and new members.

We also welcome the recognition that saving for retirement can be extremely difficult for the low paid and the proposed cut in their pension contributions goes some way to tackling this problem.

UNISON Scotland also supports the extension of partner's pensions to include not only married and civil partnerships but also partners who are not married or within a civil partnership.

UNISON Scotland would also like more information on how the new scheme will be implemented. For instance, the example give on page 17 of the consultation booklet aims to clarify the potential flexibilities of the new scheme but it is followed by a general disclaimer highlighting that the details of certain sections have still to be finalised. It would have made more sense to have complete examples included in the document rather than this one, which could give a false perception of how the new proposals will work in practice.

For Further Information Please Contact:

Matt Smith, Scottish Secretary
UNISONScotland
UNISON House
14, West Campbell Street,
Glasgow G2 6RX

Tel 0845 355 0845 Fax 0141 342 2835

e-mail matt.smith@unison.co.uk