MPA Financial Management
Inform, Educate, Inspire
FACT SHEET:
Pension Reforms in the Civil Service
Changes to Civil Service Pensions
The government has recently made significant reforms to the Civil Service pension scheme. Rest assured,
your Civil Service pension will remain a very effective way to save for your retirement. Here is an overview
of the 2015 pension reform and its implications to your pension fund.
The 2015 pension reform
The changes laid out in the 2015 pension reform have made the Civil Service pension scheme very similar to
the existing Nuvos scheme. This is the career average pension scheme which has been offered to everyone
who joined the Civil Service since July 2007.
Career average schemes provide pensions that are proportionate to what individual members put in. The
alternative is a final salary scheme which, whilst providing better benefits to members with higher salary
progression, offers members with low and moderate earnings a less beneficial deal. Therefore, by changing
to a career average scheme, more Civil Service workers will benefit.
Not all Civil Service pension scheme members will be affected by these reforms. Exemptions include:
▪▪
▪▪
Those with 10 years or less till their Normal Pension Age on 1 April 2012. They will remain in their
current pension arrangements until they leave or retire.
Those with over 10 years but less than 13.5 years till their current Scheme Pension Age. They may also
stay in their current scheme for a period beyond April 2015.
1
How it will affect you
The new 2015 scheme design means that you will continue to receive a guaranteed level of pension, otherwise
known as a defined benefit pension, based on a proportion of your salary rather than investment returns.
The pension and lump sum you have already earned up to 2015, based on your current scheme rules, will
not be affected by this change. For those currently in a final salary scheme, these benefits will be based on
your salary at the point you leave or retire, not at the point you move to the new scheme.
The main features of the new scheme design are as follows:
▪▪
▪▪
▪▪
A move to a career average scheme, rather than a final salary scheme, for those currently in Classic,
Classic Plus and Premium schemes. This means your benefits earned after April 2015 will be based on
an average of your earnings for each year you work until you leave or retire rather than the last salary
you are on.
A new accrual rate of 2.32%. An accrual rate is the percentage of your salary that the scheme puts aside
each year towards your pension. The current rate for Nuvos is 2.3%.
A new Scheme Pension Age in line with your State Pension Age (due to increase from 65 to 68 over
time). This is the age at which you can draw your new scheme benefits in full. You would be able to retire
earlier but your Civil Service pension would be reduced to reflect that it would be paid out for longer.
The benefits to you
▪▪
▪▪
▪▪
▪▪
Your employer will continue to pay the majority of the cost of your Civil Service pension through the
employer contribution (currently 18.9% of pay on average).
Your contributions are made from your salary before any tax is taken.
You will keep a guaranteed level of pension based on a proportion of your salary, not an uncertain
amount based on investment returns.
Your Civil Service pension will continue to provide valuable additional benefits for you and your family
including death-in-service payments and dependants’ pensions.
Protection for those close to retirement
Those members who, on 1 April 2012, had 10 years or less until their current Normal Pension Age will see
no change to when they can retire, nor any reduction in the amount of pension they receive at their Normal
Pension Age. Such members of staff will remain members of their existing scheme up to and including the
point at which they draw their pension, and all scheme rules current in 2015 will apply. If a member chooses
to work beyond their normal pension age, they will continue to build up benefits in their current scheme,
as per current scheme rules.
Members of staff who are less than a further 3.5 years outside this protected group will be eligible for an
additional degree of protection, in the form of further accrual in their existing scheme. This protection will
be tapered in a linear fashion depending on their age on 1 April 2012.
2
Contribution costs
The table below lists the member contribution rates based on salary totals:
Annual pensionable salary
Contribution rate
Up to and including £21,000
4.60%
£21,001–£45,000
5.45%
£45,001–£149,999
7.35%
£150,000 and above
9.00%
(full-time equivalent basis)
(% of pensionable pay before tax relief)
Need more information?
You can receive independent financial advice and information on all matters regarding pensions and investments
from an MPA Financial Adviser.
To get in contact with us, use the following contact details.
Contact details
Phone:
01564 795997
Email:
[email protected]
Website: www.mpafm.co.uk
Address: MPA Financial Management Ltd
MPA House, 98 High Street
Henley-in-Arden, B95 5BY
MPA are independent Chartered financial advisers authorised and regulated by the Financial Conduct Authority. The
information contained in this brochure does not in any way constitute advice. Professional advice should always be
sought before making investment decisions.
3