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PDA responds to public service pension scheme consultation

Members working in the NHS will be interested in a public consultation launched last month by Government.

Mon 7th September 2020 The PDA

This public consultation looks at how all public service pension schemes should respond to the successful legal challenges brought by the Fire Brigades Union in relation to age discrimination in the Firefighters scheme.

Paul Moloney, who sits as an employee nominated representative on the NHS Pensions Board, the body that ensures the scheme is run in accordance with best practice, its rules and the law, explains what the consultation is about and the implications for members.

As is often the case with the NHS pension scheme, the complex nature of the various parts of the NHS Scheme is reinforced with any proposal to make changes and this is reflected in this detailed consultation. It is however vitally important to cut through the existing complexities and make sure any changes do not add to this.

This consultation is on the specific issue of how to ensure the scheme does not contravene age discrimination legislation. Although there is no compelling legal or other reason to apply the decision in the Firefighters scheme to other public service schemes, least of all the NHS scheme, HM Treasury has decided as a matter of policy to do this. In particular, the protection given to those within 10 years of retirement when the NHS scheme changed is under the microscope as are the changes introduced in 2015.

However, unlike some other schemes where the changes made clearly disadvantaged younger scheme members, that is far from clear in the NHS Scheme. This is because the NHS scheme, while remaining a defined benefit scheme, changed from a final salary scheme (with two sections, the 1995 and 2008 sections) to a CARE (Career Average Revalued Scheme) with normal pension age also changing in line with state pension age. The combination of these changes mean that it cannot be claimed with any certainty that the scheme does discriminate, this can only be established on an individual basis at retirement.

The consultation currently underway is therefore extremely important for members of the NHS scheme irrespective of which section of the final salary scheme (1995 or 2008) members have benefits in, or whether they only have benefits in the 2015 CARE scheme. To ensure no member of the NHS scheme suffers a detriment based on age, members will essentially have a choice of taking their benefits from the old, final salary rules, or the new, CARE, rules. The PDA Union recognises this is the only way to achieve full equality but the important point that Government are consulting on is when members will make that choice.

Some are arguing that the choice should be immediate, ie now. Others are arguing that the choice should be deferred and only made at the point at which benefits crystalise, most commonly retirement or early retirement on the grounds of ill health.

It is also clear from the consultation document that the Government believes this choice should only be required for service from 2015 to 2022 and that by 2022 everyone will be in the scheme introduced in 2015. The PDA Union believes however that deferred choice should apply to all service, as this is the only way all age discrimination can be eradicated.

The PDA Union, therefore, believes only the deferred choice option will meaningfully assist members and ensure no one suffers any future detriment. This is because it is impossible to predict what a person’s pension will be under the CARE rules with any certainty. Under a CARE scheme, there are more variables to take into account than under a final salary scheme, including future pay increases, career pattern and inflation.

Essentially under a CARE scheme, a portion of pension is earned each year and then revalued under the scheme rules for each year until retirement. This portion is then added to the portion earnt in the next year, which is also revalued each year until retirement and so on for each year of a persons career. The key part of the formula for calculating final pension that is unknown is the rate of inflation as this dictates the amount of revaluing of each portion of pension.

Although such schemes do work to the benefit of those who have a gradual career progression or remain in the same AfC Band for most of their career, and are less favourable to those who receive significant pay increases towards the end of their career, they are unfortunately extremely complex.

For this reason, the PDA Union is firmly of the view that deferred choice, ie at retirement, is the only sensible and meaningful option for members. This is the only point at which members will know what they have accrued under the CARE rules and can be meaningfully compared to what would have been earned under the Final Salary rules. Members will then have the choice of two figures and the expectation is they would choose the higher figure.

It is essential therefore that this is the option that emerges from the consultation.

The Pension Board will be ensuring this option can be delivered by the scheme administrators and will respond to the consultation accordingly. The PDA Union also intend to make its own response, concentrating on those issues of direct importance to our members in the NHS. Any PDA member wishing to share views on this consultation can submit written comments to and we will consider them before submitting the PDA response.

Hopefully, there will be a consensus among all of those involved in the NHS scheme, including employers, administrators and the other health service unions, making the case for no change until a person retires, at which time they can see for certain their benefits under both sets of rules and choose the best option for them individually. We are firmly of the view this achieves the twin aims of ensuring members can make a meaningful choice based on actual figures without the need for a crystal ball to predict changes in inflation and ensuring no one is discriminated against because of their age.

Related links:

The Pharmacists' Defence Association is a company limited by guarantee. Registered in England; Company No 4746656.

The Pharmacists' Defence Association is an appointed representative in respect of insurance mediation activities only of
The Pharmacy Insurance Agency Limited which is registered in England and Wales under company number 2591975
and is authorised and regulated by the Financial Conduct Authority (Register No 307063)

The PDA Union is recognised by the Certification Officer as an independent trade union.

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