The Treasury's "reference scheme" is being used as the basis on which a new public sector pension scheme will be designed. We look at what has changed.
Treasury chief secretary Danny Alexander made public changes to the design in a statement to the House of Commons at 12:30pm today, which included a better 1/60th accrual rate and protection for workers within ten years of retirement.
The original Reference Scheme has the following components.
• A Career Average Revalued Earnings (CARE)pension scheme.
• An accrual rate of 1/65th - NOW CHANGED TO 1/60th
• A normal pension age linked to State Pension Age - WORKERS RETIRING 2012-2022 exempted.
• Earnings revaluation of past CARE service for active members.
• Pensions in payment and in deferment indexed by CPI.
• Average member contributions should be assumed to be 3.2 percentage points above their current level.
• No fixed lump sums, optional commutation, with a 12:1 factor for converting pension to lump sum.
• Ancillary benefits (ill-health, death and survivors benefits) that match provision in schemes that are currently open to new members(e.g. a lower tier ill health pensioner receives an unreduced CARE pension; a partner receives same proportion of member's pension as now).
• Members rejoining after a period of deferment of less than 5 years can link new service with previous service, as if they had always been an active member (so previous accruals are indexed by earnings for that period of deferment).
• Members transferring between public service schemes would be treated as having continuous active service (which would include those transferring between schemes who had rejoined public service after a gap of less than 5 years).
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