NHS workers to keep retirement age of 60 and final salary pension scheme

Changes to the NHS pension scheme have been unveiled today by NHS Employers and healthcare trade unions.

The proposals would retain a pension age of 60 for existing members of the NHS Pension Scheme and retain a final salary pension for both existing and new staff.

The proposals are the culmination of three years of negotiation between employers and staff.

David Jordison, chair of the NHS Employers pensions negotiating team, said: “We have listened carefully to what staff and employers have told us, and that is why we are proposing both the existing and the new scheme are final salary for all staff apart from GPs, who are already on a career average scheme.

“I believe the proposals will be good for both staff and their employers. We are proposing improvements to the existing scheme, in terms of benefits for surviving partners and increased flexibility in lump-sum payouts,” he said.

“We have also designed a brand new scheme for new staff, and those existing staff who wish to transfer, that allows members much more control over how they save for their retirement and when, and how, they retire.  At the same time, we have been careful to ensure that the proposals don’t cost the NHS more.”

A new contribution rate system will be introduced that will have lower contributions for the lowest paid and higher contribution rates for the highest paid. Employer contribution rates will be capped at current levels.

Jordison said: “While staff will be generally paying more for their pensions, the NHS Pension Scheme remains excellent value. By tiering contributions according to salary, we are also ensuring that contribution levels fairly reflect the benefits individuals will receive.”

Staff-side chair Eddie Saville said: “At the start of this process back in 2003 the health unions’ objectives were to see existing staff’s normal pension age of 60 honoured and to maintain the principle of a final salary pension for all who work in the NHS.

“I am delighted that we have achieved this and more on behalf of our members NHS unions have secured a pension package that is sustainable for the future and offers members added security in their retirement.”

Proposals for existing scheme members include:

  • Keeping a normal pension age of 60 (or 55 for staff with special rights) and the right to take a pension after the age of 50
  • Keeping a final salary pension with a 1/80th accrual rate and a 3/80th lump sum for each year of service based on the best of the last three years of work before the age of 60
  • A new option to take a larger lump sum, up to 25% of the value of the pension, in return for giving up some of the pension
  • Survivor pensions extended to partners in addition to widows, widowers and civil partners

Proposals for new scheme members include:

  • A normal pension age of 65 and the right to take a pension after the age of 55
  • A final salary pension with a 1/60th accrual rate for each year of service based on the average of the best three consecutive years of membership in the 10 years before retirement
  • The choice to convert up to 25% of the pension into a lump sum
  • A more flexible pension with the ability to take all or part of the pension while continuing to work and build up more pension.

Both existing and new GPs will have a career average scheme, with the same benefits as other staff.

A three-month consultation period on the proposals will run from September until November.

It is proposed that the new scheme will start in 2007 with changes for existing staff coming into force from April 2008. Existing staff will be asked next year whether they wish to transfer into the new scheme.

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