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Over the last few months, I have been collating questions from the field in relation to the pensions changes that the Government intend to impose on us in April 2022. I hope you find the answers helpful, and I will reiterate this article via a circular, so all members have access to it. All questions have been answered by a legal pensions expert.
We continue to campaign for a retirement age of 60. 68 is simply too late!
What is happening about the change of retirement age for those of us who originally finished at 60 but have now been changed to 67 or more – surely that is a breach of our terms and conditions?
It’s not a breach of your terms and conditions of employment if you are referring to the terms of your contract of employment. Your contract only says you are entitled to join the pension scheme on the terms set out in the relevant regulations. The regulations are statutory and if Parliament changes the regulations, then your pension rights are changed.
But I have heard that the changes made in 2015 are against the law?
The Government conducted a review of pensions for all its employees in 2011 (the Hutton Review) and concluded that civil service pensions were not sustainable and needed to be altered. They therefore introduced the new Alpha scheme for civil servants, including Prison Officers, which amongst other things imposed a new retirement age equal to each member’s state pension age, which depended on your date of birth. You can find your own state pension age by going to www.gov.uk/state-pension-age
A 2018 Court of Appeal victory (the McCloud case) confirmed that the Government discriminated on the grounds of age by forcing its younger staff into the Alpha scheme. This will now have to be remedied. The Government’s proposal is that all members who were in post on 31 March 2012 will get a choice when they retire to have their service between the date when they were forced into Alpha and 31 March 2022 treated as membership of Alpha or as membership of their legacy scheme.
What is the significance of the 31 March 2012 date? I thought Alpha was introduced on 1 April 2015.
Whether or not a member was protected from the introduction of Alpha depended on their age on 31 March 2012 and depended on them being in post on that date. The effect of the court case is that everyone who was in post on 31 March 2012 is protected from the introduction of Alpha, regardless of their age, and if they so choose, they will be treated as if they never left their legacy scheme.
Everyone who joined the service on or after 1 April 2012 has been treated in the same way, whatever their age. They were not discriminated against.
What does that mean for my retirement age?
The Government’s position is that everyone will move into Alpha on 1 April 2022 regardless of their age. The pension they build up in Alpha from that date will have a pension age equal to their state pension age. The pension they build up before 1 April 2015 will have the pension age of the legacy scheme. That is the age of 60 in Classic, Classic Plus and Premium. It is age 65 in nuvos. Members who were in post on 31 March 2012 will be able to choose which pension age applies to the years of service after they were transferred to Alpha (but before 1 April 2022).
Will I be able to receive the Alpha portion on my Classic retirement date which for me is in 2024?
Your pension will be calculated in three slices. The first slice is the pension you built up before 1 April 2015 (or the date when you transferred to Alpha if that is later). This will be paid without any reduction and will still be based on your pensionable pay as at the date you retire.
The second slice is the pension you build up between the date you transferred to Alpha and 1 April 2022. You will be allowed to choose to have this treated as pension built up in Classic, in which case it will calculated in the same way as the first slice. Alternatively, you can choose to have it treated as pension built up in Alpha, in which case it will be calculated in the same way as the third slice, outlined below.
The third slice is the Alpha pension you build up from1 April 2022. You will be able to receive this slice at the Classic pension age of 60, but if you do it will be reduced by about 5% for each year between your State pension age and your age when you retire.
You should note that the choice you make for the second slice is “all or nothing”. You cannot choose to have part of it treated as Classic pension and part of it as Alpha pension.
It may seem obvious that it would be better to choose to have the second slice treated as Classic pension, but that may not be the case. The rate at which pension builds up in Classic is lower than the Alpha rate, and in Classic your partner will be paid a pension after you die only if you were married. The Alpha scheme pays a pension to unmarried partners. In some cases, an Alpha upper tier ill-health pension is better too.
You will be sent a statement each year which will set out how the two choices compare, but you will not have to make a choice until you retire.
What will happen to the increased pension contributions I have made since 2015?
The members’ contribution rate was increased for all members in 2015, regardless of which scheme they were in and therefore regardless of their age. The increase was not discriminatory and was not against the law. There is no legal basis for arguing that these increased contributions must be re-paid.
Some members chose to pay additional voluntary contributions – AVCs – to increase the value of their pension or to allow them to retire at the age of 65 without having their Alpha pension reduced. The Government has not yet made firm proposals about how these additional contributions will be treated. They will either be refunded or they will be used to increase the value of the member’s pension.
Pensions make zero sense to me, and this makes it worse. Is there not someone who sits down with you and goes through everything with you?
The POA are not able to provide financial advice or to recommend any financial advisor in relation to pension provision for its members. If that advice were inaccurate and placed the member in financial detriment, the union could be held liable. It is each individual’s responsibility to get the best advice they can in relation to their own personal circumstances. This is not the responsibility of the POA.
As a result of partial retirement, I will be accessing my pension fund. Will I be offered the choice of having the Alpha scheme pension converted back to Classic when my quote is finally offered to me?
Under the current proposals you will be offered the choice whether to convert your Alpha pension accrued before 1 April 2022 when you take partial retirement only if that is administratively practical. Otherwise, your partial retirement terms will be calculated on the basis that you are a member of Alpha, but you will be given a choice to convert back to Classic, with retrospective effect, at a later date. That might not be until 2023.
As outlined above, the POA has been advised that this is not what the law requires. You should be given the choice when you take partial retirement.
If I get medically retired when in Alpha, will I get a choice of taking my Classic pension instead?
MyCSP is meant to be adopting a system that will allow members who are going through the ill-health retirement process to be assessed under the Alpha rules and also under their legacy scheme rules. The member would then be offered whichever terms provide the better result. Progress on this has been glacially slow. At the moment, your case would be assessed under the Alpha rules, but it will be re-examined once the 2022 changes are fully in place. That might not be until October 2023.
Our legal advice is that this approach is unlawful. Members should be assessed under both schemes’ rules now and offered the choice of whichever terms provide the better result. We are fighting a test case on this subject. You should note, however, that in some cases the Alpha scheme terms are better than Classic, but only if you are eligible for an upper tier Alpha pension. That is because the enhancement applied to an upper tier Alpha pension can be better than the Classic enhancement.
Until the next issue, continue to support each other, work safely and thank you for your continued support.
All the best.
Representing over 30,000 Prison, Correctional and Secure Psychiatric Workers, the POA is the largest UK Union in this sector, able to trace its roots back more than 100 years.