2015 Pension Reform
The Government has announced that, following Trade Union ballots on the Proposed Final Agreement, the scheme outlined within the Agreement will now be implemented.
The 2015 scheme is similar to the existing nuvos scheme – the career average pension scheme – which has been offered to everyone who joined the Civil Service since July 2007.
These changes will not affect all civil servants. If you had ten years or less to your Normal Pension Age on 1 April 2012 you will remain in your current pension arrangements until you leave or retire. Those who are over ten years but less than 13.5 years from their current ‘Scheme Pension Age’ may also stay in their current scheme for a period beyond April 2015.
For those civil servants who move to the new 2015 scheme, the main features are:
- A move to a ‘career average’ scheme, rather than ‘final salary’ for those currently in classic, classic plus and premium schemes. This means your benefits earned after April 2015 will be calculated in a different way. They will be based on an average of your earnings for each year you work until you leave or retire rather than the last salary you are on. nuvos is already a career average scheme.
- A new ‘accrual rate’ of 2.32%. An ‘accrual rate’ is the percentage of your salary that the scheme puts aside each year towards your pension. The current rate for nuvos is 2.3%.
- A new ‘Scheme Pension Age’ in line with your ‘State Pension Age’ (due to increase to 68 over time). This is the age at which you can draw your new scheme benefits in full. You would be able to retire earlier but your Civil Service pension would be reduced to reflect that it would be paid out for longer. The current Scheme Pension Age for nuvos is 65.
The new 2015 scheme design means that you will continue to receive a guaranteed level of pension otherwise known as a ‘defined benefit pension’. This is based on a proportion of your salary rather than investment returns. The pension and lump sum you have already earned up to 2015 based on your current scheme rules will not be affected by this change, and for those of you currently in a final salary scheme these benefits will be based on your salary at the point you leave or retire, not at the point you move to the new scheme.
The Government announced in July that it would implement changes to the Civil Service Pension Scheme from 2015, subject to any issues that might arise from Equality Impact discussions. Those discussions have now ended and Cabinet Office is publishing the Equality Impact Assessment (PDF).
As a result of that assessment the Government is making one small change to the new scheme to ensure that a specific group of individuals who are currently members of the premium or classic plus pension schemes who are suffering from serious health conditions are given some protection from changes to their benefits when they move to the 2015 scheme.
The ongoing benefits of your Civil Service pension
Your Civil Service pension will remain a very effective way to save for your retirement and the benefits will remain far greater than those on offer from most other employers. It is still a very important element of your overall reward package.
- Your employer will continue to pay the majority of the cost of your Civil Service pension through the employer contribution (currently 18.9% of pay on average).
- Your contributions are made from your salary before any tax is taken. This means, if you pay tax, your take-home pay will not be reduced by the full amount of the increase.
- If you were to leave your Civil Service pension to make your own pension arrangements and wished to maintain comparable benefits, you would have to pay considerably more, and if you paid the same contribution as now you would get considerably less pension.
- You will keep a guaranteed level of pension – based on a proportion of your salary, not an uncertain amount based on investment returns.
Your Civil Service pension will continue to provide valuable additional benefits for you and your family including death in service payments and dependants’ pensions.
An updated Q&A (also available in PDF) is now available along with a PDF of whats changing and why. The 2015 new scheme calculator and Guidance on using the calculator (also available in Word) are also available. The Equality Impact Assessment is now available (PDF)