HSC 2015 (CARE) Scheme

CARE Scheme Overview

New HSC Pension arrangements were introduced on 1 April 2015. The main features of the new scheme include:

• A Career Average Revalued Earnings (CARE) scheme, with benefits based on a proportion of pensionable earnings during your career
• An accrual rate (i.e. the rate that your pension builds up) of 1/54th of each year’s pensionable earnings with no limit on pensionable service. This is a higher accrual rate than both the 1995 and 2008 sections of the HSC Scheme
• Revaluation of active members’ benefits in line with the Consumer Price Index (CPI) plus 1.5 percent per annum
• A normal pension age at which benefits can be claimed without reduction for early payment linked to the same age as you are entitled to claim your State Pension
• Pensions in payment to increase in line with inflation (currently CPI)

Protection Arrangements

Most existing members of the current HSC Scheme (both the 1995 and 2008 sections) will move to the new scheme on 1 April 2015, however, there are protection provisions for certain members who have reached, or are close to reaching, their current normal pension age.

Any pension rights members have built up in the 1995 Section or 2008 Section of the HSC Pension Scheme prior to moving to the new 2015 Scheme will be protected and will continue to be calculated on final salary at retirement.  These benefits are known as preserved rights.

• What is a CARE Scheme?

  CARE (Career Average Revalued Earnings) is a defined benefit pension scheme which guarantees a certain level of benefit at retirement. A pension is calculated using a fraction of pensionable pay throughout membership of the scheme.

• How does the CARE Scheme differ from the Final Salary Schemes?

  There are now 2 schemes.

  The HSC Pension Scheme and the HSC Pension Scheme 2015.

  The HSC Pension Scheme has two sections:
  • 1995 Section—Final Salary Scheme which calculates benefits based on the best of the last 3 years pensionable pay and reckonable service accrued.
  • 2008 Section—Final Salary Scheme which calculates benefits based on an average of the best 3 consecutive years reckonable pay in the last ten years and reckonable service accrued.

  The HSC Pension Scheme 2015 – Benefits are calculated on an annual basis using pensionable pay throughout the member’s HSC career. Benefits earned each year are then revalued by a set rate.

• What is the Revaluation Rate

  Your pension earned each year will be increased each year by a set rate, known as ‘revaluation’, to account for inflation in the period before you retire or leave.

  The revaluation rate used to re-calculate the value of a members benefits in the 2015 Scheme is based on the Consumer Price Index (CPI) + 1.5% each year. The CPI factor is based on the official measure of inflation of consumer prices in the United Kingdom.

  The pension earned in a scheme year (April to March) is revalued on 1 April of the following Scheme year and each subsequent Scheme year until you retire or leave. For example, if CPI in a year was 2% then the pension would be revalued by 3.5% (2% + 1.5%) at the beginning of the following year.

  If you leave before becoming entitled to claim your retirement benefits, and do not return within 5 years your pension benefits earned would become deferred and be revalued when they come into payment. However this would be in line with CPI inflation only and would not include the additional 1.5%.

• What is the accrual rate?

  The amount of pension you earn each year is determined by what is known as the ‘accrual rate’ which is usually shown as a fraction of your pensionable pay.

  In the 2015 Scheme the accrual rate is 1/54, so you earn a pension each year of 1/54 of your pensionable pay. So if you earn £18,000 in a year you would earn a pension for that year of 1/54 of £18,000, which equals £333.

  The lower the bottom number in the fraction, the more of your salary you earn as a pension for each year of membership – so 1/54 is better than either 1/60 or 1/80 (as offered by the 2008 and 1995 Sections respectively of the current HSC Pension Scheme).

• How are Benefits Earned and Re-valued in the CARE Scheme?

  Benefits earned on a yearly basis are calculated as 1/54th of the members pensionable pay.

  For example: if a member’s pensionable pay is £20,000 per year their benefit earned is: £20,000/54 = £370. This amount is then re-valued each year (increased to take account of inflation) until the member retires or leaves using the Consumer Price Index (CPI) plus 1.5%.

  For illustration purposes, the revaluation amount used in this example is 3.5% (2% CPI + 1.5%).
  The pension of £370 earned in year 1 is now re-valued by 3.5% as follows: £370 x 3.5% = £13 to give a pension of £383 at the start of year 2. This revaluation procedure continues until the member retires or leaves.

  The Table below illustrates how the members pension will build up over a 5 year period. For illustration purposes the pension has been revalued at a rate of 3.5%.

  Pensionable Pay	No revaluation	1 years revaluation	2 years revaluation	3 years revaluation	4 years revaluation
  Year 1 Salary £20,000	£370.37	£383.33	£396.75	£410.64	Year 1 value at end of 4 years £425.01
  Year 2 Salary £21,000	£388.89	£402.50	£416.59	Year 2 value at end of 3 years: £431.17
  Year 3 Salary £22,000	£407.41	£421.67	Year 3 value at end of 2 years: £436.43
  Year 4 Salary £23,000	£425.93	Year 4 Value at end of 1 year: £440.84
  Year 5 Salary £24,000	Year 5 Value: £444.44

  As you can see the first year’s pension gets 4 years of revaluation, the second gets 3 years and so on until the final year which needs no revaluation. Adding all these years together gives a total annual pension of £2,177.89

  Please note: Any member entering into, or continuing with a salary sacrifice arrangement that reduces their gross pensionable earnings should be aware that this will have a negative effect on the amount of pension they can build up in that year.

• Who can join?

  All Health and Social Care workers who are:
  • Aged between 16 & 75
  • Not entitled to continue membership of the 1995 or 2008 Sections
  • Not in receipt of pension benefits from the 1995 section (there are a few exceptions to this rule)

• What are the Benefits of being in the CARE scheme?

  The new Scheme provides a similar range of pension and life assurance benefits as the 1995/2008 sections of the current Scheme. These include:

  • Normal Age Retirement Pension
  • Voluntary Early Retirement Pension (with reduction for early payment)
  • Redundancy Pension
  • Ill Health Retirement Pension
  • Partner / Survivor Pensions
  • Children’s Pension
  • Lump Sum payable on death

  You also have the option to purchase Additional Pension to increase the amount of pension payable to you at retirement (with or without increases for dependents). This can be done either by a lump sum payment or regular extra contributions up to a set date.

• Retirement Age

  In the HSC Pension Scheme, the Normal Retirement Age (NRA) in the 1995 section of the Scheme is age 60 (Age 55 for Special Class Members). The NRA in the 2008 section of the Scheme is age 65.

  In the HSC Pension Scheme 2015, the NRA for members is linked to the members State Pension Age (SPA). Members can find their SPA by visiting the Government website at www.gov.uk/calculate-state-pension

• Protection

  • Those members who at 01/04/2012 were within 10 years of their NRA under their current arrangements will not move to the new scheme. They remain in their current section of the HSC Pension Scheme, on Full Protection.
  • Members at 01/04/2012 with more than 10 years but less than 13 years 5 months until their NRA would be able to continue to accrue benefits in their existing scheme for a limited period. This is known as Tapered Protection.
  • Protection status can be lost if a member leaves HSC employment or the scheme on or after 01 April 2012 and does not re-join within 5 years.

  1995 Section Special Class member
  Full Protection if the member was 45 years or older at 01 April 2012.
  1995 Section Normal member
  Full Protection if the member was 50 years or older on 01 April 2012.
  2008 Section member
  Full Protection if the member was 55 years or older on 01 April 2012

• What does Tapered Protection mean?

  A member with Tapered Protection will not join the new 2015 scheme on 01/04/2015 but will do so from a date thereafter determined by their age in years and months at 01 April 2012. These members will continue to accrue benefits under the current Scheme Regulations for the period beyond 01/04/2015 until they join the new Scheme.

• How is the Tapered Protection period calculated?

  Tapered Protection is based on how many months beyond 10 years a member is away from retirement at 01/04/2012.

  For each month beyond 10 years the Tapered Protection period is reduced by 2 months. The period of Tapered Protection ranges from 2 months to 6 years 10 months from 01/04/2015

• Service Breaks

  Periods of membership in the 2015 Scheme can be linked providing there is not a break in service of more than 5 years.

  Where there is a link in membership, any pension benefits accrued from before the break will be revalued in line with continuous membership, currently by CPI +1.5%.

• Service Break of more than 5 years

  Any pension earned prior to the break becomes deferred (providing it is sufficient to qualify for pension benefits).

  At retirement these benefits are revalued by a pensions increase factor which is currently linked to CPI and therefore less than the in-scheme revaluation.

• Pre 2015 Service

  These benefits will not be affected. You will still be able to access them on a final salary basis at your current NRA in the 1995/2008 Sections of the Scheme (at 55, 60 or 65 as appropriate) if you continue your membership of the HSC Pension Scheme until you retire.

  To access your benefits, you will need to retire from your current post. You can claim your 2015 benefits at a reduced rate or defer them until you reach SPA. If you decide to return to HSC employment after accessing your benefits, there are a number of rules about whether you can build up more benefits in the 2015 Scheme.

  More information can be found on the HSC Pension Service website: www.hscpensions.hscni.net

• Estimates of Benefits Accured

  As HSC Pension Service can no longer predict future earnings, pension estimates for those that are not protected or within 5 years of leaving cannot be provided. HSC Pension Service however will be providing Annual Benefit Statements from 2016.

• How long can I remain in the scheme?

  You can continue to build up pension benefits in the Scheme until age 75 with no limit to the amount of years of membership you can have. The more years of membership you have, the higher the amount of pension you will earn.

• Can I transfer in or out of the CARE scheme?

  Pension rights in another pension scheme can be transferred into the new 2015 Scheme subject to time limit rules. You can also transfer the cash equivalent value of your HSC pension benefits to another registered pension scheme if you leave the HSC or the Scheme before Normal Pension Age (NPA) or before drawing any benefits from the Scheme

• Can I retire early?

  If you take your 2015 Scheme benefits before your NPA they are reduced to take into account their early payment. A new provision exists for you or your employer to pay extra contributions so you can take your 2015 Scheme benefits at an unreduced level before you reach your NPA.

  You cannot buy an actuarial reduction buy out that would reduced your NPA by more than three years or would result in a retirement age of less than age 65.

  An application must be received within 3 months of joining the Scheme in order for the arrangement to be backdated to the first day of membership. Applications made after this point will be effective from the beginning of the next Scheme year and will only apply to future Scheme years.

• Summary of Changes

  • Pension Benefits in the 2015 Scheme are calculated using the CARE method.
  • Retirement age in the 2015 Scheme is linked to a members SPA.
  • Current members of the 1995 or 2008 Sections of Scheme near their NRA are protected from the scheme changes.
  • Benefits accrued under the 1995/2008 Sections of the Scheme can be accessed at the members NRA for that section (age 55, 60 or 65).