the

HSC Pension ServiceWaterside House75 Duke Street

LondonderryBT47 6FP

02871 319111www.hscpensions.hscni.net

hscpensions@hscni.net

Background to Pension Background to Pension ReformReform

Government commissioned Lord Hutton to review ALL Public Service Pensions

A Proposed Final Agreement (PFA) was published in 2012 covering high level proposals

Public Service Pension Act (NI) 2014

HSC Pension Service :HSC Pension Service : The Facts The Facts

The new pension scheme will be introduced on 1st April 2015

All pension rights earned in the HSC Pension Scheme up to 31/03/2015 will be calculated as at present when you retire.

Full Protection and Tapered Protection rules apply Retirement age is linked to SPA Career Average Re-valued Earning Scheme 1/54th accrual rate

What is Protection?What is Protection? Full Protection means you are not affected

by the reform therefore the current scheme remains open to you until age 75

(you are within 10 years of normal retirement age at 1/4/12)

Tapered Protection means the current scheme is open to you for a period beyond 31st March 2015

(you are within 10 years and 13 years 5 months of normal retirement age at 1/4/12)

Check if you have tapered Check if you have tapered protectionprotection

You can check the calculator on the website

to see if you fall under tapered protection

rules and what date membership of the

current scheme will be closed to you

A new way of working out your A new way of working out your pension – it would be worked out pension – it would be worked out

in two parts:in two parts:

Part 1 – what you have earned before any changes Worked out in the same way (using final salary for most) Part 2 – what you earn after the changes Worked out from your future average earnings

Part 1 – Worked out in the same Part 1 – Worked out in the same way (using final salary for most)way (using final salary for most)

Your final salary(When you retire or leave the Scheme)

Your service(the date you joined until the date of the changes)

Your pension rate(e.g. 1/60th or 1/80th)

Your Pension at retirement

This is the same way your pension has always been worked out. There would be no change, and you canstill take a tax free cashlump sum.

Part 2 – Worked out from your Part 2 – Worked out from your future average earningsfuture average earnings

For example, Tom earns £20,000 so his pension in year 1 is worked out as:

£20,000 x 1/54th = £370.37

Part 2– Maintaining your pension’s Part 2– Maintaining your pension’s valuevalue

Revalued by CPI +1.5% each year

This is then revalued until you retire to maintain its value

Year 1

The £370 that Tom earns in year 1 is revalued at the end of the next year. So at the end of year 2, this part of Tom’s pension is worth:

£370.37 x 3.5% = £383.31 (if CPI is 2%)The pot continues tobe revalued until youretire Year 1

Year 1 retirement potTom’s pot for year 1 is worth £845.68 after 25 years (CPI

@2%)

Part 2 – Your pension at retirementPart 2 – Your pension at retirementAdding your other years’ pots

You receive a new ‘pot’ for each year youare a member

Add up the pension You earned each year (after it has beenrevalued) to find yourtotal pension

Annual pension at retirement

If Tom has a 1% salary rise each

year, by adding all of the other years’

pension pots together, he could

expect a pension of £16,000 a year after

25 years’ service

Changes to Current Changes to Current ArrangementsArrangements

A service break of less than 5 years is treated as continuous service

No Special Class Status or Mental Health Officer Status in the new scheme (currently only limited availability to certain members of the 1995 section)

No limit on pension accrual Late Retirement: 2015 benefits will receive an

increase if the member retires after SPA

Changes to Current Changes to Current ArrangementsArrangements

Normal Pension Age (NPA) for members will be their State Pension Age (SPA)

www.gov.uk/calculate-state-pension

Ill Health Retirement (Tier 2) will include 50% enhancement on prospective service to SPA (currently 2/3rds)

Changes to Current Changes to Current ArrangementsArrangements

Actuarial Reduction Buy-out :Allows a member to pay additional contributions to buy out any potential actuarial reduction of retiring before NPAMaximum buy-out = 3 years of actuarial reductionMember with NPA of 68 retiring at 65 will have no reduction applied

Option to forgo Protection (2008 Option to forgo Protection (2008 members only)members only)

Members of the 2008 section of the scheme with tapered or full protection will have a one off opportunity to forgo all protection of future accrual in the 2008 section of the scheme and move to the new 2015 scheme.

The option is expected to be available after commencement of the 2015 scheme and members will have 3 months to choose

Choice 2 ExerciseChoice 2 Exercise

Members of the 1995 section of the current scheme, who do not have full protection, will have a second chance to move their accrued service into the 2008 section

This exercise will take place following the introduction of the new scheme in April 2015

Added Years ContractsAdded Years Contracts

Members can continue to pay for added years contracts following a move to the 2015 scheme

Members of the 1995 section of the scheme (moving to the 2015 scheme) can access the added years benefits separately and before their main 1995 benefits are due to be paid.

This will permit members to have future accrual in the 2015 scheme.

Once 1995 section benefits are accessed further accrual in the 2015 scheme is not permitted

Salary Sacrifice SchemeSalary Sacrifice Scheme

The value of the noncash benefit is not pensionable in the scheme

Scheme contributions are based on the reduced salary

Only the reduced salary will be used toward the pension pot

Also affects death in service benefits

Upcoming Issues for Upcoming Issues for HSC Pensions/MembersHSC Pensions/Members

Communication Choice 2 Opt out of Protection Actuarial Reduction Buy Out De-coupling of Added Years Benefits