Pensions

The FDA has played a key role in ensuring the best possible negotiated agreement o pension reform in the public sector.

In 2012 FDA members voted to accept a package of reforms including the introduction of a new pension scheme in 2015, transitional protection for existing scheme members, and extended pension provision for outsourced civil servants. 

The FDA continues to argue for better governance of civil service pension schemes and fairer contribution rates.

For more on the changes to pensions schemes from 1 April 2015, go to Pensions 2015

Pensions update

October 2015

The FDA worked with a number of other unions on a joint response to the HMT consultation on changing pension tax relief https://www.gov.uk/government/consultations/strengthening-the-incentive-to-save-a-consultation-on-pensions-tax-relief .
The Government are proposing to re-examine the way pension tax relief works. The current approach is that tax relief is provided to individuals saving into pensions but pensions when paid out (in retirement) are taxed as normal income.
The Government are suggesting a move to a model that moves the taxation forwards so that pension contributions are paid on taxed income (not gross as now) but tax would not be payable on pensions in payment.

There is widespread opposition to this move as this would rely on future governments honouring the 'tax free' payment of pensions in the future. Many have also questioned whether the change would encourage or discourage individuals from saving for their retirement. Thirdly, particularly in the public sector, contribution structures have be designed with the current approach to pension contribution tax relief very much in mind.

The FDA's response was submitted jointly with the Association of Principal Fire Officers, the Association of Scottish Police Superintendents, the British Airline Pilots' Association, the British Dental Association, the British Medical Association, the Chief Police Officers' Staff Association, the Hospital Consultants and Specialists Association, Managers in Partnership, the National Association of Head Teachers, the Police Superintendents' Association of England and Wales, and the Police Superintendents' Association of Northern Ireland.

October 2014

On 1 April 2015, 'Alpha', the new pension scheme for civil servants will be launched and will include a number of changes including contribution rates.

The FDA's comprehensive guide on these changes and more in-depth information can be found at Pensions 2015.

The union has also been holding pensions roadshows across departments and around the country, giving members the opportunity to ask questions and find out more. For the latest information, visit Pensions 2015.

August 2014

New Civil Service Pension Scheme

MyCSP has started to issue information on the new scheme (to be known as 'Alpha') and pension provision from April 2015 online at www.civilservicepensionscheme.org.uk.The regulations outlining the provisions surrounding the new scheme have recently been published and can be found here.

Principal Civil Service Pension Scheme (PCSPS) actuarial valuation

The 2012 valuation of the civil service pension scheme (incorporating Classic, Classic Plus, Premium and Nuvos) has just been published and can be found here. This is the most recent valuation, with the next being conducted as at 31 March 2016. This sets the employer contribution for the next five years (to 2019) which will average 21.1% (currently 18.9%) payable from April 2015. The average employee contribution rate is unaffected by this and will be 5.6% as previously set out.

July 2014

PCSPS 2015

Information on the new scheme (to be known as ‘alpha’) and pension provision from April 2015 will start to be available online from MyCSP:  www.civilservicepensionscheme.org.uk
The FDA will also, in due course, provide further information covering:

  • Those transferring to the new scheme;
  • Those who will remain in their existing scheme, and
  • Those who have an option to join the scheme in April or at a later date

Please check the website and newsletters for further updates.

 
The regulations outlining the provisions surrounding the new scheme have recently been published and can be found here: 

http://www.legislation.gov.uk/uksi/2014/1964/pdfs/uksi_20141964_en.pdf

 

PCSPS Actuarial Valuation

The 2012 valuation of the civil service pension scheme (incorporating classic, classic plus, premium and nuvos) has just been published and can be found here: 

http://www.civilservice.gov.uk/pensions/governance-and-rules/actuarial-review

This is the most recent valuation, the next will be conducted as at 31 March 2016.  This sets the employer contribution for the next five years (to 2019) which will average 21.1% (currently 18.9%) payable from April 2015.  The average employee contribution rate is unaffected by this and will be 5.6% as previously set out.

 

HMT Consultation – Freedom & Choice in Pensions

The FDA submitted a response to this Treasury consultation earlier in the year and government has recently published its response to the consultation which can be found here: 

https://www.gov.uk/government/consultations/freedom-and-choice-in-pensions

On the main issues raised by FDA the response is as follows:

  • There will be no ban on transfers from funded defined benefit schemes (ie private sector schemes and the Local Government Pension Scheme) to defined contribution schemes;
  • There will be a ban on transfers from unfunded defined benefit schemes (ie the PCSPS);
  • The minimum benefit/pension age – the lowest age at which you can access you pension (excluding ill health retirement) will increase to 57 in 2028 and then be aligned to ten years below state pension age.

On the third point above, HM Treasury’s response makes clear that there will be discussions around protections to be put in place for members who have a lower minimum pension age – such as civil servants.  However, only the uniformed services have an exemption from this change. 

The FDA is working with the TUC and other unions to address the concerns that flow from this announcement.

June 2014

The Pensions Regulator (tPR) has published an interim response following their consultation on the regulation of public service pension schemes.  This response reflects the fact that a number of the issues raised by the FDA were reflected by other stakeholders and have been recognised by tPR.  

Click here to read the FDA submission to the consultation. 

Further information can be found on the tPR website: 

http://www.thepensionsregulator.gov.uk/doc-library/regulating-public-service-pension-schemes.aspx

April 2014

The FDA has been negotiating with the National Trade Union Committee (NTUC) and Cabinet Office on the final terms of the pension contribution structure for all members of the principal civil service pension scheme from April 2015.

Members will have been informed of their new contribution rates for April 2014-15 recently, these were set out in December 2013 newsletter. Further information can be found below in the March update.

In April 2015 members' contribution rates will change again when the new scheme is introduced. The starting point for the contribution rates from 2015 were set out in the Final Agreement on which FDA members were balloted in 2012. These rates were set to apply to all members, irrespective of scheme, and were to average an overall 5.6% yield.

                    

Full Time Equivalent Salary

Final Agreement Indicative 2015 Contribution Rate

Up to and including £21,000

4.6%

£21,001 - £45,000

5.45%

£45,001 - £150,000

7.35%

Over £150,000

9%

However, as stated in the Agreement these rates were indicative, ahead of implementation in 2015. The Cabinet Office and HM Treasury stated that they would review the rates to ensure they yielded the required 5.6%.

The FDA made clear to the Government that any review would need to meet two criteria:

  1. No member should have a contribution rate higher than that set out in the Agreement
  2. The FDA's objectives for reforming the contribution structure would be considered as part of any review.

Primarily, these objectives centred on moving from a full-time equivalent approach to assessing contribution bands to one based on actual pay; ensuring, as far as possible, the rates were set taking into account the impact of tax relief; and finally that rates should be set at the lowest possible levels to minimise the risk of members (at any earnings level) opting out.

Clearly, within the constraint of point 1 above, scope for movement was limited. However, the FDA did successfully secure a joint proposal from all the NTUC unions to be submitted to Cabinet Office, reflecting these objectives and meeting the Government's requirement for an average 5.6% contribution yield from members.

Cabinet Office Minister Francis Maude has confirmed today that the Government agrees to the unions' proposals. As a result, the contribution rates to be introduced from April 2015 are as follows:

                    

Actual 1 Salary 2

2015 Contribution Rate

Up to and including £21,000

4.6% 3

£21,001 - £47,000 4

5.45%

£47,001 - £150,000

7.35%

Over £150,000

8.05% 5

Notes:

  1. Contribution rates will be based on actual salary rather than full time equivalent
  2. The bands will be revalued by a fixed 1% each April
  3. For Classic members earning under £15,000 this will be phased in with a rate of 3% in 2015, c. 4% in 2016 and the full 4.6% in 2017
  4. The top threshold for this band rises to £47k from the proposed £45k and from 2016 the additional yield generated by the Classic members referred to in note 3 is to be used to increase the top end of this band i.e. £47k should then rise to £48k etc.This would be in addition to the 1% revaluation referred to in note 1
  5. The top rate is reduced from 9% to 8.05%

In summary, this means the following groups of members will pay lower pension contributions than as set out in the Agreement:

  • part time workers whose full time equivalent salary put them in a higher contribution band than their actual salary;
  • members of classic with actual salaries below £15,001 who will temporarily pay less than the rate set out in the Agreement;
  • members earning between £45,000 and £47,001 in 2015 who will be contributing 5.45% instead of 7.35%;
  • members earning between £47,000 and somewhere in the region of £48,500 from 2016 will drop into the 5.45% band as the tapered protection for classic members rolls out, from 2017 this upper figure will be approximately £51,000 and in 2018 around £51,500; and
  • members earning over £150,000 whose rate falls from the 9% set out in the Agreement to 8.05%

 

Please note - no member will pay more than they would have under the rates set out in the Final Agreement

There are other FDA pension updates relating to pension increases, nuvos revaluation and added pension limits below.

March 2014

Pension Increases / Nuvos Revaluation

Government has confirmed that pensions paid from public service pensions schemes, including the PCSPS, will increase next month (April) by 2.7%.  Similarly, the revaluation of nuvos benefits being built up will be the same figure.

The increase is based on the government’s preferred measure of the cost of living, the Consumer Prices Index as at September 2013.  Members will be aware that in 2011 CPI replaced the traditional use of the Retail Prices Index, under the RPI, the increase would have been 3.2%. 


February 2014

Added pension

After no increase to the limits on added pension occurring in recent years, HM Treasury have now revised the maximum amounts of added pension members can purchase.  The new limits apply to payments made from 1 March 2014 onwards.  More information can be found here:  http://www.civilservice.gov.uk/pensions/calculators

The limit on the amount of added pension that can be bought is increasing as follows:


classic
                                              £4,880

                                                         (plus lump sum of £14,640)

 

premium, classic plus and nuvos     £6,100

The purchase of added pension attracts tax relief on contributions made through payroll.  So a contribution of, say, £100 would have a net cost to you of £60 if you pay income tax at the 40% rate.  To get tax relief if you buy added pension by cheque, you will need to tell HMRC about your contribution by making a tax return for the year in which you are buying.

Members will be aware from the pensions update in June 2013 that the limits on the annual and lifetime allowances are being reduced from April.  This should be taken into consideration when looking to purchase added pension.

More information on the implications of these changes is available here:  http://www.hmrc.gov.uk/pensionschemes/tax-basics.htm and here:  http://www.mycsp.co.uk/media/11484/mycsp_lta_aa_services.pdf

December 2013

Fair deal

Members will recall that at the start of October, the FDA was successful in delivering on the commitment in the pension form agreement to the extension of Fair Deal. This now means that, in the absence of exceptional circumstances, members who are compulsorily transferred outside the public sector will retain access to the Principal Civil Service Pension Scheme (PCSPS). This was achieved after a protracted process of engagement with the Cabinet Office, Treasury and the TUC. Following this, the General Secretary received a letter from the Minister for the Civil Service which you can read here.

Member contributions

The consultation proposal from the Cabinet Office regarding member contribution rates for April 2014 to 2015, was outlined in November. The Cabinet Office has now confirmed that it will implement those proposals.

From April 2015, contributions will be uniform across all the schemes: those covered by transitional protection in Classic, Premium and Nuvos; and all those in the PCSPS 2015. The agreement on pension reform contained indicative rates as follows:

Annual pensionable salary
(full time equivalent basis)

Contribution rate
(before tax relief)

Up to and including £21,000

4.6%

£21,000 - £45,000

5.45%

£45,001 - £150,000

7.35%

£150,001 and above

9.0%

The FDA and other unions in the NTUC are discussing a collective proposal for 2015 contribution rates within the necessary parameter of an average 5.6% yield. This proposal would then be put to the Minister. The FDA is determined that no member should pay more than the rate outlined in the final agreement and we are working to make progress on some of the other areas of concern that have been raised in previous contribution discussions and consultations.

 

November 2013

Members will be aware that that the third year of the application of the government’s “3.2% pensions levy” is due to be implemented in April 2014.  The consultation on this instalment is now underway and the Cabinet Office documents relating to the consultation can be found here: http://www.civilservice.gov.uk/pensions/latest-news.

 

The FDA has been pressing the Cabinet Office to limit the additional impact these increases will have on FDA members who have already endured higher than average increases despite facing pay freezes and increases capped at below the rate of contribution increase. The increases that are proposed for 2014 are, for most FDA members, less than was envisaged in 2011 when contributions were first increased.  This suggested that those earning over £60,000 would have contributions increased by a total of 6% over the three year period. 

The proposal from the Cabinet Office for April 2014 is as follows:

 

Classic

 

Full Time Equivalent Salary

Current Member Contribution

New Contribution Rate

Increase in 2014

Total Increase Since April 2011

Up to £15,000

1.5%

1.5%

0%

0%

£15,001 - £21,000

2.7%

3.0%

0.3%

1.5%

£21,001 - £30,000

3.88%

4.48%

0.6%

2.98%

£30,001 - £50,000

4.67%

5.27%

0.6%

3.77%

£50,001 - £60,000

5.46%

6.06%

0.6%

4.56%

Over £60,000

6.25%

6.85%

0.6%

5.35%

 

Premium, Classic Plus & Nuvos

 

Full Time Equivalent Salary

Current Member Contribution

New Contribution Rate

Increase in 2014

Total Increase Since April 2011

Up to £15,000

3.5%

3.5%

0%

0%

£15,001 - £21,000

4.7%

5.0%

0.3%

1.5%

£21,001 - £30,000

5.88%

6.48%

0.6%

2.98%

£30,001 - £50,000

6.67%

7.27%

0.6%

3.77%

£50,001 - £60,000

7.46%

8.06%

0.6%

4.56%

Over £60,000

8.25%

8.85%

0.6%

5.35%

 

 

These tables show the rates and increases before the effect of tax relief is applied. At present, tax relief reduces the cost of pension contributions by 20% for basic rate taxpayers, by 40% for higher rate taxpayers abd by 45% for

additional rate taxpayers.

 

The FDA continues to oppose this arbitrary levy but seeks to ensure that if the Government proceeds to impose an increase, it does not unfairly penalise FDA members. As previously, all contribution rates are assessed on the basis of full-time equivalent salary. We continue to make representations to the Cabinet Office with regard to the disincentive for scheme participation this presents for many part-time civil servants.

 

This contribution change would apply to 2014-5 only.  As a result of the reform agreement, a new scheme will then be introduced and all members (whether in that scheme or covered by transitional protection) would pay an average of 5.6%.  Again these contributions are tiered although a different framework applies.  This is likely to mean that some members will see their pension contributions fall in 2015 while others will see another increase.  The FDA remains in discussion with Cabinet Office about the exact structure of contributions from 2015 and how this affects FDA members. 

The FDA has now responded to the Cabinet Office consultation - our submission is available here.

October 2013

Pensions Agreement - Delivery of New Fair Deal

As a result of FDA members agreeing in a ballot in May 2013 to a package of pension reforms including a new scheme to be introduced in 2015,  government agreed to extend access to the PCSPS to members TUPE-transferred out of the civil service.  This commitment has now been delivered and came into effect on 9 October 2013 in the PCSPS, enabling independent employers to participate in the PCSPS to meet their Fair Deal obligations for staff experiencing a compulsory transfer.

Following detailed negotiation with Treasury and Cabinet Office over the last year, the FDA secured continued access for all current members of the PCSPS who are  transferred out of the civil service whether or not TUPE technically  applies.  Therefore if employees are compulsorily transferred to a new employer that would not provide access to the PCSPS or other public service pension scheme, they will retain the right to remain in the PCSPS for as long as they remain continuously employed on the delivery of the outsourced service or function.

Transfers within the public  sector are currently still covered by the Public Sector Transfer Club. This means that 'broadly comparable' schemes should not be  necessary in the future as the PCSPS will be open to employers outside the civil service.  Given the growing number and variety of providers delivering public services and the number of civil servants who may face a compulsory transfer from the civil service at some point  this is a welcome extension.

HM Treasury's guidance is here

Consultation response is here

FDA's submission to this consultation is here

February 2013

Further consultation on Fair Deal

The FDA responded to HM Treasury's further consultation on the Fair Deal reforms, which form part of the Public Service Pensions reform agreements. The TUC and other unions have submitted similar responses.

FDA response to further consultation on Fair Deal

31 January 2013

Public Service Pensions Bill update

Following the FDA's evidence to the Commons Committee, FDA sent a Parliamentary briefing to members of the House of Lords outlining our areas of concern including the scope of Treasury powers to make retrospective changes and the need for a review of the scheme pension age link to the state pension age.  During the Lords' debate on the Bill in mid-January, Baroness Donaghy quoted the FDA during the discussion on negative revaluation.  The transcript of the debate was published as part of Hansard, the edited verbatim report of proceedings from both Houses. The full discussion can be read via the clause 8 debate transcript. The Government's intention was for the Bill to finish the parliamentary process in the first half of 2013 ahead of the introduction of the new scheme in 2015. Further regulations will be published in due course outlining the detail of the new PCSPS and cost-sharing mechanism. The scope of those regulations was set out in this Bill, which is why the FDA was working to secure certain changes and assurances on its provisions.

The FDA's aim in seeking changes to the Bill was to ensure that the reforms members voted to accept last year were implemented. While we were not seeking to reopen negotiations on the terms of the reforms, the FDA maintained that some amendments to the Bill were required to accurately reflect the terms of the agreement government reached with FDA members.

14 January 2013

State pension reform

On Monday 14 January the Pensions Minister, Steve Webb, outlined the government's plans to reform the state pension system. While the minister presented his plans as leading to a 'simplified' state pension framework, 'streamlined' might, in reality, be a more apt description.

The plan

From 2017 -

In comes:     a flat rate, near universal state pension worth around £144 per week in today's money; 
                    a minimum hurdle of 10 years of NI contributions in order to receive any state pension; and 
                    an increase to 35 qualifying years required for a full state pension.

Out goes:    contracting out rebates for members and employers in contracted out defined benefit schemes; 
                    further accrual of S2P; 
                    pension enhancements for the over 80s; and 
                    Pension Credit and some other means tested pension elements.

Assessment

As was suggested in earlier iterations of these proposals, the benefit expenditure side of the equation is to be in balance, i.e. cost neutral, with some future pensioners getting less than they would have under the existing system and some getting more, but overall the total paid in benefits is to broadly the same (in the short to medium term at least). However, it is also evident that the plan is cheaper overall and that the Treasury will benefit significantly (to the tune of £9.2bn) from these reforms as National Insurance rebates cease to be paid to employers and members of most defined benefit schemes.

The FDA has sought and received confirmation from Cabinet Office that the removal of the National Insurance rebate for employers (including civil service employers) will not lead to any changes to the PCSPS benefits. For other defined benefit schemes employers are to be given the opportunity to reduce scheme benefits to recoup the extra cost to employers.


Further proposals

The Government's proposals also tentatively outline plans for five yearly reviews of state pension age, conducted by Government on the basis of information from the Government Actuary's Department and an independent-led body. The guiding principle is intended to be the maintenance of a specific proportion of adult life in receipt of state pension.

Next steps

Both elements of the Government's proposals - state pension reform and state pension age review - have an impact on FDA members. We are examining the DWP proposals in detail and will seek further discussions with them and Cabinet Office as appropriate. As the planned reforms progress through the Parliamentary process, the FDA will ensure that members' interests are fully represented.

10 January 2013:

Updates on pension contribution increases and the Public Service Pensions Bill