The UK Government has given a commitment to review the long-term affordability and sustainability of public service pensions. In a recent review of Public Service Pension Schemes, The Independent Public Service Pensions Commission, chaired by Lord Hutton, concluded that reform is needed. The Government accepted Lord Hutton’s recommendations as a basis for consultation in due course with public sector workers and trade unions on long-term reform of pension arrangements. The UK Government has signalled a clear intention to introduce changes to public sector pension arrangements based on Lord Hutton’s recommendations. These changes are expected in 2015.
Ahead of this longer-term reform, the Commission made clear that there is a rationale for increasing pension scheme member contributions to ensure a fairer distribution of costs between taxpayers and members.
The costs of the Scheme are determined by the UK Government and also the Scheme actuary who performs periodic valuations of the Scheme to determine how much needs to be paid in to provide the benefits paid out. These costs are shared between the HSC employers and the Scheme members.
As a Scheme member, you pay a contribution towards your pension based upon your pensionable pay; the money you earn, the higher your contribution rate may be. The HSC employers pay the rest.
There are seven rates of member contribution, ranging from 5% of pensionable pay for the lowest earners to 13.3% of pensionable pay for the highest. The thresholds at which the rates change are linked to nationally agreed pay rates at set levels and are based on salaries equivalent to someone working full-time. If the overall cost of the Scheme increases, the amount you pay may also increase.
Contributions are taken from pay before tax so members receive tax relief on any amount they pay. Members may also pay a lower rate of National Insurance. This can reduce the actual amount that they pay to between approximately 4.0% and 7.98% depending on their contribution rate, earnings level and personal rate of tax. You will find factsheets on the links below for the years 2011/12 through to 2013/14 contribution rates. When referring to each year it is the Scheme year not the calendar year. For example the 2013/14 Scheme year is from 1 April 2013 to 31 March 2014.
Important – The consultation on the proposed contribution rate changes for the Scheme Year 1 April 2013 to 31 March 2014 is now complete and the contributions detailed in the factsheet below came into effect on 1 April 2013.
The rules in respect of tiered contributions apply to members of both the 1995/2008 and the 2015 Sections of the HSC Pension Scheme.