The RFU has provided periodic information relating to the Modified Pension Scheme to members for some time. We have responded to individual queries from members on a regular basis throughout this period. From that starting point and taking into account our membership in England as well as the devolved administrations, we have compiled a table which we hope will promote a better understanding of the differences in the schemes across the UK, particularly as many members continue to question why industrial action is currently taking place in England and not elsewhere.
It is important to note that the overall cost of each pension scheme remains the same in each administration; it is a matter of how the costs are applied as to where the differences lie. i.e. if member benefits increase, the additional costs have to be found elsewhere within the scheme and vice-versa.
The industrial action that we have witnessed since 2013, has been ultimately down to how soon a member could retire with the least reduction to their pension.
In the 1992 scheme Wholetime firefighters could retire as early as 50 years if they had already completed 25 years’ service. This changed in 2006 with the introduction of the New Firefighters’ Pension Scheme (NFPS was open to Wholetime and Retained) which introduced a Normal Pension Age (NPA) of 60 and anyone wishing to retire before the NPA would have their pension reduced accordingly (see table).
As 1992 scheme members could, at the time, remain in that scheme and were not forced to transfer to the NFPS, there was no industrial dispute (only Retained or new recruits to either duty system were directly affected, who would have been made aware of this upon appointment).
Following the introduction of the 2015 pension scheme protection was provided for anyone who was a member of the 1992 scheme and on 31 March 2012 was ten years (or less) away from reaching the NPA (55 years). This protection means that they can remain in the 1992 scheme (or the Modified Scheme for RDS staff) until they retire.
To ensure that there is no ‘cliff edge’ between being protected or unprotected, there is a further four years tapered protection for anyone who was aged between 41-44 on 31 March 2012.
The same protection applies to members of the NFPS using the schemes NPA of 60, again, also with tapered protection.
Each year, a percentage of a member’s salary is notionally put aside.
The precise percentage will vary depending on the accrual rate of the scheme.
On retirement the cash value of all these annually calculated percentage pots is added up and that provides the member with annual pension.
For example the accrual rate in England is 1/59.7ths (or 1.675%), whereas in Northern Ireland it is 1/64.8ths (or 1.54%).
The lower the bottom number, the better the pension benefit you will have received for an equivalent amount of pensionable service.
For example: A firefighter with the same earnings, and length of service, will have a larger pension in England than any of the schemes due to the higher accrual rate.
Alternatively, to achieve the same size pension, firefighters will have to serve longer where the accrual rate is lower. For example, firefighters with the same earnings in Northern Ireland will have to work the longest to achieve the same level of pension compared with all the schemes.
Retiring before Normal Pension Age (60)
With the exception of Northern Ireland where the NPA is 55, if you choose to retire before the NPA (excluding Ill-Health retirement) and wish to immediately access your pension, your pension will be reduced by a percentage, the level of reduction will depend on your age and which scheme you are in.
For example if you were in the 2015 in Scotland and aged 56, your pension could be reduced by up to 7.2% (see table).
Why are there different accrual rates?
Each scheme (Scotland, Northern Ireland, Wales and England) has a budget, if the benefits of the scheme are improved this could be compensated by an increase in member contributions. In this case if the level of reductions to pensions taken by members aged 55-59 is reduced, the cost of this has to be found elsewhere, in this case the accrual rates.
To pay for a lowering of pension reductions for members retiring aged 55-59, everyone else’s pension will be worth less.
The winners of this arrangement will be anyone retiring aged 55-59, the losers will be everyone else.
A deferred pension is when you retire from the service before the NPA and choose not to access your pension until the deferred pension age, for the 2015 scheme this is the State Pension Age (SPA), which is currently 67. A deferred member will have the option to take an actuarially reduced pension from the age of 55.
We have put together a guide to the 2015 Pension Scheme which is available on our website.
If you need any further clarity on this issue please contact RFU HQ.