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FIREFIGHTERS'
PENSION SCHEME
Information
on 2004 - 06 Proposals for change
PROPOSALS FOR THE
EXISTING
FIREFIGHTERS' PENSION SCHEME
Members will know, from circulars and
information published on the FOA
website, that we oppose the proposed changes to the current
Firefighters’
Pension
Scheme, largely on the grounds that we consider it as a form of
contract and
that it is not unreasonable to expect that its terms will be honoured
at retirement age.
That said, there have been many
changes to the original scheme since it
began it 1948, many of which are unavoidable as they result from
overriding
legislation. Such changes usually improve the Scheme’s provisions,
examples
being the introduction of widowers’ benefits or more recently, benefits
for Registered
Partners.
We recognise and accept that there are major problems with the
affordability of all pensions arising from societal changes and
increasing life
expectancy we also realise that some action is needed if pension
provisions are
to be maintained in the future. We do not, however, believe that it is
fair to
alter the pension arrangements of people who entered into the pension
scheme in
good faith and whose long-term personal planning is based on post
retirement
benefits being available at the age set out in the pension scheme at
the time
of joining.
The Police Pension Scheme is almost identical to Firefighters Pension
Scheme, however, Government has ring-fenced existing members of
the
police scheme and they will be able to retire at 50 regardless of
their
retirement date. We cannot understand why police officers should
receive protection
whilst fire officers do not. From a financial perspective, the cost of
ring-fencing firefighters would be much less than it is for
police.
We call for Government to honour the Home
Secretary’s statement from
foreword of the 1998 Home Office Consultation Document “Fire Service
Pensions
Review” –
“There is no intention of
reducing the pension benefits that serving or
retired firefighters are entitled to as members of the pension scheme.
Any
revisions to such pension benefits would apply only to new entrants to
the
service, who would pay lower contributions.”
Despite what you might hear from
other sources, the nature of any change
to the current scheme is not yet known and negotiations are still to
take place
to determine which aspects of Government proposals will be taken
forward.
To help members consider the issues and make
decisions about their
response to proposals for the existing scheme, the following outlines
what we
currently know and what we expect to be proposed by ODPM in respect of
current Scheme
members. This is based on the content of last year’s consultation
paper, the
Government’s response and limited discussions with ODPM: -
The Government proposes that, from April
2006, service accrued cannot be
drawn upon as part of the pension until age 55. However, after 2013, it
will
still be possible to retire at 50 but your pension would be based on
pre 2006
service only, the remaining service accrued after 2006 would not be
paid at age
55.
- For example, a member who joined the
service in 1986, currently aged 40,
would be able to retire in 2016 at age 50 but the pension would only be
based
on 20 years service up to April 2006. The remaining 10 years service
could
not be
drawn until 2021.
Members due
to retire before 2013, will not be affected by changes to
the retirement age.
- Dates
of April 2006, and 2013 are referred to in the proposals, however,
debate on proposals for the existing Scheme has not yet taken place. It
is,
therefore, very likely that these dates will slip, indeed there
is some
indication that the 2013 date will slip by up to 5 years.
- Removal
of an upper age limit from the Scheme is certain as anti-age
discrimination legislation will come into force from October 2006 In
any case,
we see no reason why firefighters should not have the option to
continue
working if they remain fit or they occupy a non-operational role. This
should
have no bearing on the pension scheme’s normal retirement age.
- Changes to Tax rules from April 2006
will make it possible to accrue
more than 30 years’ service in the Firefighters Scheme. We believe that
ODPM
could agree to allow up to 35 years service to be counted for pension
purposes.
This would make it possible to receive a pension of 45/60th
final
pay. This financial incentive to work more than 30 years may offset the
wait
until age 55 before accessing the full pension.
- The ability to count more than 30
years service is not an automatic
right and it will be necessary to agree an amendment to the Scheme. It
seems an
attractive option but factors will have to be taken into account to
allow
assessment of the overall impact. For example, any gains from
additional
service could be lost through reduction in the commuted lump sum if the
current
commutation tables remain in place. It may, therefore, be necessary to
consider
changes to the commutation arrangements if members wish to benefit from
working
more than 30 years.
- We
specifically asked the ODPM about the precedence set by concessions
on retirement age given to Civil Servants, NHS and Teachers, suggesting
that a
similar concession be given to firefighters. ODPM pointed out that the
concession is to the retention of retirement at age 60 whereas, for
firefighters, the proposal is a retirement age of 55 rather than 50.
The same
concession could, therefore, not be offered to fire fighters as it was
considered that the FRS had already received favourable treatment.
Injury
benefits will be removed from both the existing schemes to a
separate statutory order which will also provide a statutory basis for
‘Grey
Book’ provision to compensate for death and serious injury at work.
(You may
recall that the previous provision was declared ultra vires by the
Audit
Commission as there was no statutory provision to allow payment by fire
authorities).
A
two-tier approach towards ill-health benefits will be introduced with
the level of award being determined by opinion on a person’s capacity
to
undertake regular employment.
Ill-health
awards remain subject to periodic
review to establish whether the Scheme member’ should remain on the
higher
level or whether their health has improved to the extent that they are
no
longer eligible for an ill-health pension. In the latter case, the
authority
may require the member to return to work (this is no different to
existing
arrangements).
- We find it difficult to argue against
the proposed change to ill-health
enhancements as. Ill-health enhancements are not an automatic right and
they
are intended to compensate for a member’s inability to undertake work
outside
the service. Where members are genuinely unfit, we wish to see that
they
receive all possible assistance - especially where the reason for
retirement is
work related.
- It was proposed that ill-health
pensions could be reviewed for an indefinite
period post-retirement. However, at the FOA’s request, the
committee
agreed to the introduction of a time limit of 10 years or normal
retirement age
whichever is the sooner. We believe that this offers some long term
financial
stability to members who could, if their health improved be forced into
the
jobs market. Having been out of employment for several years we
considered
likely that the member would at a disadvantage in this competitive
environment.
Flexible
duty allowance (FDS) will remain pensionable – there is no
intent to change the definition of pensionable pay for existing members.
- It is likely that protection
arrangements will be introduced to take
account of higher levels of income received prior to the last 3 years
of
service. The FOA specifically asked for the introduction of protection
arrangements to protect the pension entitlement of any staff affected
by rank
to role changes where pay reduced at the end of the pay protection
period. This
request has been accepted by the ODOM but discussion of the detail of
the
arrangements is still to take place. A number of options are available
but,
whichever is agreed, members will be able to count service at their
previous
higher pay rate.
- Employers have expressed concerns that
once people are appointed to a
flexible duty system post they never seem to move into non FDS post.
They
believe that the service artificially keeps FDS posts when they are not
really
needed for maintenance of operational cover. We have disputed this
assertion
and maintain that all FDS staff are necessary for operational cover. It
is also
condition of the ‘Grey Book’ that staff cannot be removed from the FDS
without
their consent, therefore, any change to present arrangements must be
negotiated
at NJC level.
- We accept that there may be officers
who would like to move into
suitable non-operational roles (where they exist) towards the end of
their
service. However such moves are effectively prevented by the lost of
pension
benefits that would occur if they were to move prior to the last 3
years of
service. It is hoped that step-down arrangements can be introduced to
the
existing scheme to allow one’s pension to be split at the time a Scheme
member
decides to change role. This would provide two pensions, one based on
the higher
rate of pay and the other on remaining service at the lower rate. On
retirement, both pensions would come into payment
There are no proposals to
tax lump sum payments but from April 2006 tax
rules will change with the impact on pensions that any tax will be
charged if
the ‘lifetime value’ of the pension exceeds the Inland Revenue limit.
This
limit will initially be £1.5 million which will affect those
earning over
approx. £115,000 per year.
- Government proposals made in the 2005
consultation indicated that some
change will occur but and our impression is that the original proposals
would
will be to the detriment of members. However, The Freighters’ Pension
Committee
has not yet dealt with matters affecting members of the existing
Pension Scheme
and it is too early to say exactly what will emerge as firm proposals.
- However, before being able to form a
firm opinion on the impact of
change it is necessary to consider the package as a whole as there
seems to be
scope to negotiate improvements in other areas. Changes to the tax
regime from
April 2006 make it possible to increase pension benefits but it is yet
to be
seen whether the Government is willing to agree to concessions that
help
balance negative changes.
We will be discussion the
Associations reaction to the proposed changes
to fire and rescue pensions at a National Meeting on February
23rd.
WE NEED TO KNOW YOUR VIEWS ON YOU WOULD
LIKE THE ASSOCIATION TO REACT –
IT IS IMPORTANT THAT YOU PASS YOUR OPINIONS ON TO LOCAL OFFICIALS OR TO
HEAD
OFFICE BEFORE THE ABOVE DATE.
OPTIONS: -
- Resist any change and
mandate the Association to ballot for industrial
action at an early stage
- Await the emergence of precise
proposals for the existing scheme and
then determine how to react
- Continue to negotiate on the nature
and impact of proposals for change
to the current Pension Scheme reserving the right for action if an
acceptable
outcome is not achieved
Send
comments to: pensions@fireofficers.org.uk
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