updates on FBU, Civil service pensions

hugheskevi

THe government agreed to report back by the 27th September with a plan encompassing all the state pension schemes.

Do you have a reference for this?

I believe it was established and acknowledged by the government that it applies to all those who were put on the Alpha scheme.

The Government statement was that:

As ‘transitional protection’ was offered to members of all the main public service pension schemes, the government believes that the difference in treatment will need to be remedied across all those schemes.

That isn't quite the same as all those who were put on the Alpha scheme. Transitional protection only applied to active members in a public service pension scheme as at 31st March 2012.

Would be nice if they stopped taking that 2% they have been overcharging us in contributions for the last 4 years in the meantime...

What is the basis for 2%?

Surely the same could be said for private sector schemes that have been changed in a similar way. I, for example am in the USS and exactly the same happened to our pensions.

Was it exactly the same? I thought all USS members were moved to a new pension arrangement? Moving all employees to a new scheme is fine, as is moving all new entrants to a new scheme and allowing existing employees to continue in an existing scheme. What was ruled unlawful was allowing some members to remain in an existing scheme but not others, solely based on their age.

Does this in any way affect me, as a person who joined the Civil Service pension scheme (alpha) after April 2015?

Whilst it is impossible to pre-empt the decision about the remedy, only those recruited before 31st March 2012 (the cut-off date to be eligible for transitional protection) have been treated differently solely based on their age.

JoeCrystal

chubsta wrote: »

I believe it was established and acknowledged by the government that it applies to all those who were put on the Alpha scheme.

Would be nice if they stopped taking that 2% they have been overcharging us in contributions for the last four years in the meantime...

Overcharging the employees for the PAYG benefit schemes? These employees are still paying peanuts for such benefits. More peanuts than it used to be, but it is still peanuts! But I certainly do not begrudge these employees their pension remuneration though.

swindiff

hugheskevi wrote: »

Was it exactly the same? I thought all USS members were moved to a new pension arrangement? Moving all employees to a new scheme is fine, as is moving all new entrants to a new scheme and allowing existing employees to continue in an existing scheme. What was ruled unlawful was allowing some members to remain in an existing scheme but not others, solely based on their age.

No maybe not exactly the same, there were protections in place though for staff who were closer to retirement age. I can't remember the exact details but in our contracts NRA was 65 but you could retire at 60 without actuarial reduction to your pension. This was removed going forward when they changed the pension unless you had attained the age of 55 at a particular date that I can't remember now. But in effect colleagues of mine who were a few years older than me could take their entire pension at 60 without any of it being reduced.

Tromking

JoeCrystal wrote: »

Overcharging the employees for the PAYG benefit schemes? These employees are still paying peanuts for such benefits. More peanuts than it used to be, but it is still peanuts! But I certainly do not begrudge these employees their pension remuneration though.

Most public sector pensions owing to their unfunded nature are deemed as part of an employees current remuneration but payable on retirement.

chubsta

hugheskevi wrote: »

What is the basis for 2%?

Sorry, I haven't got links but will try to explain it, others may be able to correct it of course -

basically the payments the employee makes into the pension are divided into bands, at the second-lower level it is 5.25% or thereabouts. The rate is defined by how well funded the pension is.

A review was conducted which showed the pension was over-funded and therefore employees should have only been paying 3.25% since the pension was introduced in 2015 - for me this works out at approximately a £3000 overpayment.

The unions have demanded the payment be made back to staff, and that future payments going forward are dropped by the 2%, however the treasury have stated that although the pensions guidance states that we have indeed been over-contributing they are not going to pay us it back, nor are they going to drop the payment in the future. Of course, if they had found out we had underpaid then it would have been completely different...

sammyjammy

chubsta wrote: »

Sorry, I haven't got links but will try to explain it, others may be able to correct it of course -

basically the payments the employee makes into the pension are divided into bands, at the second-lower level it is 5.25% or thereabouts. The rate is defined by how well funded the pension is.

A review was conducted which showed the pension was over-funded and therefore employees should have only been paying 3.25% since the pension was introduced in 2015 - for me this works out at approximately a £3000 overpayment.

The unions have demanded the payment be made back to staff, and that future payments going forward are dropped by the 2%, however the treasury have stated that although the pensions guidance states that we have indeed been over-contributing they are not going to pay us it back, nor are they going to drop the payment in the future. Of course, if they had found out we had underpaid then it would have been completely different...

In the terms of the agreement the review takes place every four years, it only took place this year so the reduction applies from April 2019.

Andy_L

There's a complex interlock of employee, employee contribution caps & collers and the overall "value" of the pension.

The review of the scheme said that some had been breached and changes, in favour of members, should be made to bring the scheme back in line (IIRC the proposals was an improved accrual rate rather than reduced contributions - 6 of 1: 1/2 Doz other).

HMG said (paraphrasing slightly) "Fair enough, however we're going to hold off doing that until the outcome of the changes needed as a result of the Judges/FBU coutcase are known.

https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-01-30/HCWS1286/

"given the potentially significant but uncertain impact of the Court of Appeal judgment, it is not now possible to assess the value of the current public service pension arrangements with any certainty...It is therefore prudent to pause this part of the valuations until there is certainty about the value of pensions to employees from April 2015 onwards."

hugheskevi

basically the payments the employee makes into the pension are divided into bands, at the second-lower level it is 5.25% or thereabouts. The rate is defined by how well funded the pension is.

The second tier contribution rate is 5.45%.

The rate is determined in conjunction with other contribution tiers/rates to produce an overall yield of 5.6%. The target overall yield can change in the event of a cost cap breach.

A review was conducted which showed the pension was over-funded and therefore employees should have only been paying 3.25% since the pension was introduced in 2015 - for me this works out at approximately a £3000 overpayment.

The review concluded that the scheme was costing in excess of 2% less than intended (I don't believe the exact figure has been published).

This triggers a requirement to either improve scheme benefits or reduce member contributions to return the scheme to the intended cost. The process was initiated but not concluded (it was suspended in January 2019) due to the McCloud judgment taking place. The McCloud judgment means the cost of the scheme is unclear, pending legal decisions about the form of the remedy. Therefore the cost of the scheme can only be determined once the McCloud legal proceedings conclude and are implemented by the scheme, enabling a Valuation based on post-remedy member data to be undertaken.

The argument that members have been overpaying in the past is based on the Valuation being as at 31st March 2016, and showing the scheme was costing less than planned, which then triggers the cost cap process. As others have mentioned, the changes would have only applied after 1st April 2019, and there was no conclusion about whether the changes would have been to reduce member contributions or improve member benefits - the default adjustment would have been to improve the alpha accrual rate.

sammyjammy

Next tribunal meeting for FBU takes place on 18th December


https://www.fbu.org.uk/news/2019/09/26/date-set-pensions-remedy-hearing

Tromking

sammyjammy wrote: »

Next tribunal meeting for FBU takes place on 18th December


https://www.fbu.org.uk/news/2019/09/26/date-set-pensions-remedy-hearing

Anyone care to speculate on what remedy the Government will come up with?
I’m guessing that putting people back in their original schemes and a refund of the increased contributions is favourite?
Or is it?