NHS Pension

Silvertabby

hugheskevi said:

Silvertabby said:

daveyjp said:

For clarification.  The NHS doesn't pay anything into employees individual pension.

The NHS contribution of 23.7% is based on an actuarial calculation which is updated every 4 years.   It has no influence on how much pension is received when an employee retires.

Yes and no.  If the employer contribution were to be reduced, then the pension accrual rate (and/or other factors) would also have to be reduced to reflect that.  

The main cause of a big employer contribution rate change is a change to the scheme discount rate. That affects the value of liabilities, and in turn the notional past service deficit/surplus.

Under the cost cap regulations, protected elements such as accrual rate, etc, only change if the scheme is outside of the cost cap at the 4-yearly valuation, and changes to financials such as the discount rate do not count toward the cost cap assessment.

So lots of hocus pocus actuarial calculations, but as a result of the rules, there can be very big changes to employer contributions that do not affect member benefits, hence why the employer contribution rate is meaningless in determining the value of member pension.

As an example, in 2015/16 the average Civil Servant employer contribution was 21.1%. It is now 28.97%. The rules of the alpha scheme have not changed in that time, so members accrue exactly the same pension, they are just told it is worth 28.97% now, rather than 21.1%.

So, employer contributions had to be increased in order to maintain the accrual rate? 

When the LGPS CARE details were first announced, my then colleagues and I couldn't believe how generous they were, considering that they had been introduced with a view to saving money. Yes, long term career seniors would have been better off on a Final Salary scheme, but many low paid manual workers - particularly those on substantial extras/overtime (which weren't pensionable under FS) will receive a higher pension under CARE than if they had remained on FS terms.  I suspect the NHS has similar stats - but perhaps not the Civil Service, as they don't seem to have as many minimum wage/manual staff.