Hampshire Fire and Rescue Authority

Human Resources Committee Item 9

21 15/03/2005April 2006

Error! Bookmark not defined.Update on the Firefighters' Pension Scheme

Report by the Chief Officer

Contact: Shella Smith, Employee Relations Manager, Tel: 023 8064 4000 ext 5425

E-mail: [email protected]

1

Summary

1.1

This report summarises the changes that are being made to the existing Firefighters' Pension Scheme (FPS) and also the main provisions of New Firefighters' Pension Scheme (NFPS). In addition, the report explains how the Service is communicating the latest information regarding pensions to all employees.

2

RecommendationError! Bookmark not defined.

2.1

That the Human Resources Committee note the contents of the report.

3

Introduction Error! Bookmark not defined.and Background

3.1

The existing FPS has 34,000 active members nationally and 32,000 pensioners and members who have deferred their pensions. The scheme is one of the most generous of the public sector pension schemes but is also one of the most expensive with total expenditure on pensions in 2006/7 amounting to £378 million. It is estimated that pension costs will absorb 25 per cent of fire and rescue service expenditure by 2007.

3.2

Existing scheme members contribute 11% of their pensionable pay, which means that they can retire from the age of 50 with 30 years' service on a full pension at two thirds of their final salary. Other public sector workers, for example Green Book employees who are members of the Local Government Pension Scheme, typically pay 6% of their pensionable pay and can receive a full pension from the age of 60 or 65 after 40 years' service.

3.3

Most public sector pension schemes typically cost between 18 to 22% of pensionable pay, which means the taxpayer pays 12 to 15%. The FPS however costs 37.5% of pensionable pay and is set to increase. This means that the taxpayer contributes 26.5%.

3.4

An independent report on the UK pensions system, the Turner Report, was published in November 2005. This report said that unless a new pensions settlement is agreed and implemented, the problems would grow increasingly worse as people start to live longer. All public sector pension schemes are being reviewed and reforms to the FPS start in April 2006. The reforms are focused on reducing costs and ensuring that there is no requirement for higher contributions from members, at least for the time being. Both schemes will still be amongst the most generous of public sector pension schemes.

4

Changes to the existing Firefighters' Pension Scheme

4.1

The FPS will remain largely unchanged with maximum pension benefits of two thirds of pensionable pay. The main changes are concerned with introducing a freestanding Firefighters' Compensation Scheme (FCS) for death and injury awards, new financing arrangements, and the introduction of a two-tier system for payment of ill health awards.

4.2

There are no changes to the non-contributory compensatory provisions for death and injury benefits from the introduction of the FCS. The changes have been made to comply with the new tax regime and take effect on 1 April 2006.

4.3

The new financing arrangements apply to both the FPS and NFPS. Fire and Rescue Authorities will continue to administer and pay pensions, as well as any future pensions for new entrants, but this will be from a separate local firefighters' pension fund. Employee contributions and new employer's contributions will be paid into the fund from which pension payments will be made. The fund will be topped up by a new Central Government grant if the contributions are insufficient. Any excess will be recouped by Central Government.

4.4

The new ill health provisions will apply to both the FPS and NFPS. A lower tier pension (i.e. without any enhancement) will be awarded where the employee is able to undertake other regular employment. A higher tier pension will be awarded where an employee is unable to undertake other regular employment. This will be based on service accrued in the scheme plus an enhancement. Regular employment is defined as any employment of not less than 30 hours per week in any 12 month period.

4.5

The FPS will be closed to new members from 5 April 2006. Employees who are eligible to join the FPS but have chosen to opt out have been contacted by the Human Resources Department and given one final opportunity to join the FPS before the closing date.

5

The New Firefighters' Pension Scheme

5.1

The NFPS will be introduced on 6 April 2006 and is open to all firefighters, whether part-time or full-time. Retained Duty System firefighters are also included in the scheme for the first time. This will impact on the existing Bounty Scheme for retained firefighters and the implications of this will be considered in April 2006. Existing members of the FPS can choose to transfer to the NFPS. Employee contributions are at 8.5% compared to 11% under the FPS. The main proposals for the NFPS are as follows:

· Pension entitlement after 3 months membership (currently 2 years)

· Unmarried partners are entitled to receive benefits, if a nominated partner

· If a firefighter dies, his or her survivors receive a lifetime award

· Normal pension age will increase from age 55 in the FPS to age 60. There is no compulsory retirement age in either scheme; employees can continue subject to being fit for their role

· Full scheme membership for ill-health benefits assessed by qualified medical practitioner at commencement

· Two thirds of pensionable pay will be paid at age 60 after 40 years' service

· Members aged 55 can decide to retire and receive an actuarially reduced pension, or, under certain conditions and with the consent of the Service, receive an unreduced pension

· Members can continue in employment and accrue their pension for a further five years resulting in an increased pension on retirement

· Deferred benefits for early leavers payable from age 65 (currently 60).

5.2

Discussions have commenced to consider giving emergency control employees access to the NFPS, subject to costs.

6

Communication to Employees

6.1

The Human Resources Department have already adopted a number of initiatives to ensure that employees are kept up to date with the forthcoming changes through the following means:

1. Regular Routine Notice entries directing employees to the ODPM Pension Circulars and information, including `frequently asked questions'.

2. Links to the above documents via the HFRS intranet site

3. Circulation of an ODPM Pensions Newsletter to every whole-time and retained duty system employee, via fire stations and to home addresses for non-station member based personnel

We will also write to every employee who is eligible to join the NFPS once details of the scheme are finalised and published in order to assist employees to make personal choices about their pension. In addition, we are currently investigating the financial implications and benefit to employees of offering personalised pensions advice to every employee through a telephone advice service run by specialist independent advisers.

7

Contribution to Corporate Aims and Objectives

7.1

The Pension Scheme is a hugely important part of firefighters' terms and conditions of employment and contributes to managing our resources, particularly in terms of recruiting and retaining employees.

8

Risk Analysis

8.1

Changes to pension arrangements assist in managing the financial risk currently created by the FPS.

9

Resource Implications

9.1

These changes have no direct resource implications. However, the changes and communication are absorbing resources from the Human Resources team.

10

Equality Impact Assessment

10.1

A copy of the Equality Impact Assessment is provided as Appendix 1

10.2

The proposals within this report are considered compatible with the provisions of the European Convention on Human Rights, the Human Rights Act 1998, and the Race Relations (Amendment) Act 2000.

11

Consultation

11.1

The Fire Brigades' Union (FBU), Retained Firefighters Union (RFU) and the Fire Officers' Association (FOA) have all been kept abreast of the Service's local plans for communicating information regarding the pension schemes.

Background Information (Section 100D of Local Government Act 1972)

The following documents disclose the facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of the report:

Firefighters' Pension Scheme Circular 06/2006, 15 March 2006

http://www.odpm.gov.uk/pub/491/FPSC62006AmendmentstotheFirefightersPensionSchemeFPS

_id1164491.pdf

Firefighters' Pension Scheme Circular 04/2006, 20 February 2006

http://www.odpm.gov.uk/pub/748/FPSC42006FirefightersPensionArrangementsfromApril2006

PDF53Kb_id1163748.pdf

Firefighters' Pension Special (ODPM Newsletter), March 2006

A New Pension Settlement for the Twenty-First Century (the Turner Report), 30 November 2005 (Executive Summary)

http://pensionscommission.org.uk/publications/2005/annrep/annrep-index.asp

Note: The list excludes: (1) published works; and (2) documents that disclose exempt or confidential information defined in the Act.

Function/Department

Human Resources

Person responsible for the assessment

Employee Relations Manager

Name of the policy to be addressed

Communicating information regarding the Firefighters' Pension Scheme to HFRS employees

Date of assessment

16 March 2006

Is this a new or existing policy

New

1 Briefly describe the aims, objectives and purpose of the policy.

To communicate information regarding changes to the existing Firefighters' Pension Scheme (FPS) to all current members and eligible employees within HFRS and to provide information regarding the New FPS.

2 Are there any associated objectives of the policy, please explain.

N/A

3 Who is intended to benefit from the policy and in what way?

All current members of the scheme and eligible employees within HFRS of both the FPS and New FPS so that they have a clear understanding of the forthcoming changes to their pension and how this impacts on them.

4 What outcomes are wanted from this policy?

All current members of the scheme and eligible employees within HFRS of both the FPS and New FPS to have a clear understanding of the pension scheme changes

5 What factors/forces could contribute/detract from the outcomes?

Provision of timely information from the ODPM will assist with communication, but could also detract from the process if it is not provided.

Poor IT links meaning that electronic methods of communication are not effective

6 Who are the main stakeholders in relation to the policy?

All current members of the scheme and eligible employees within HFRS of both the FPS and New FPS

7 Who implements the policy and who is responsible for the policy?

HR Department are responsible for communicating pensions information to employees and for implementing effective communication methods.

8 Are there concerns that the policy could have a differential impact:

- On racial groups?

- Due to gender?

- Due to disability?

- Due to sexual orientation?

- Due to their age?

- Due to their religious belief?

- Due to them having dependants/caring responsibilities?

- Due to them being transgendered or transsexual?

Yes / No - What existing evidence (either presumed or otherwise) do you have for this?

No direct concerns arising from the process of communicating pensions information to all employees

9 Could the differential impact identified in 8 amount to there being the potential for adverse impact in this policy?

Yes / No / NA - Please explain

Not applicable

10 Can this adverse impact be justified on the grounds of promoting equality of opportunity for one group? Or any other reason.

Yes / No - Please explain for each equality strand, if necessary use a separate piece of paper

Not applicable

11 Should the policy proceed to a partial impact assessment?

Yes / No

12 If yes, is there enough evidence of proceed to a full EIA?

Yes / No

13 Date on which partial or full impact assessment to be completed by

Not applicable

Completing Officer

Name: Shella Smith

Date: 16 March 2006

Review Date: 1 May 2006

Lead Officer

Name: As above

Date: