Pensions Contributions Consultation - Members Briefing

2023 SPPA CONTRIBUTION RATES INCREASE CONSULTATION RESPONSE

UNISON Scotland is Scotland’s largest health trade union. We represent staff who provide public services in the public, third and private sectors. We represent the whole NHS and health care team. Our members include nurses, student nurses, midwives, health visitors, healthcare assistants, paramedics, cleaners, porters, catering staff, medical secretaries, clerical and admin staff and scientific and technical staff. As such we represent not only the largest number of contributors to the scheme but the widest group of pay bands and grades amongst the contributors. We welcome this opportunity to contribute to the consultation.

Our members see their pension scheme as a key component of their overall terms and conditions and accordingly we have consulted widely and convened many members meetings in order to formulate this response. What came out clearly in those meetings was the potential for people to leave the scheme and a knock-on effect on retention of staff in key staffing areas.

UNISON understands the requirement for a greater level of contribution from scheme members and are not in principle opposed to increase in contributions.

We are however strongly of the view that the proposal being put forward by the SPPA are not an acceptable method of addressing current difficulties. Rather than finding a way of increasing the member yield in a way that is fair, the structure proposed will reduce contributions for the highest paid and increase the percentage paid by some of the lowest earners. This is not the correct approach to take as it carries with it a likelihood of lower paid members either leaving or not joining the scheme.   

Q1. Do you agree or disagree that the proposed member contribution structure should be phased over 2 years? If you disagree or don’t know how to answer, please explain why.

UNISON does not agree that the proposed member contribution rates should be implemented   and so our answer to this question should be read in that context

In terms of the proposal to phase in the contribution structure over 2 years, UNISON notes that the proposal as written sees proposed increases heavily weighted in year 1.

For example, a UNISON member with pensionable earnings of £32,915 would see their contributions increase from 9.5% to 10.5% in year 1 (an increase of 1%) and 10.5% to 10.6% in year 2 (an increase of 0.1%).

We feel that the small year 2 changes are not fair and will not be well received by our members – particularly those members in bands which will see significant increases.

Further with the cost-of-living crisis continuing to place a significant burden on family incomes – particularly in respect of utilities, food and mortgage costs we feel that any increase should be phased over a longer period of 3 years and be phased in increments of equal value.

If this approach were taken then members could spread the cost through a series of annual pay awards. Hopefully securing some relief if as forecast inflationary pressures ease.

Our biggest concern here is that a sharp rise in year 1 will provide an incentive for members to quit the scheme entirely. A more evenly spread gradual ie 3 year increase would be far less likely to be felt burdensome.

In taking this approach we are merely following the logic of the Equalities Impact Assessment prepared by the SPPA where it is acknowledged that a phased approach is necessary to “dampen the impact on take home pay for lower earners and mitigate the risk of increasing the number of staff leaving the scheme on grounds of affordability.”[1]

Our concern here is not just for the longer term viability of the scheme, but also for the prospects of lower paid staff who withdraw from the scheme upon reaching retirement. Their prospects in old age are likely to be challenging, which will in turn put further demands on public expenditure and public services, including the NHS.

Q2. Do you agree or disagree with the proposed member contribution structure set out in this consultation document? If you disagree or don’t know how to answer, please explain why.

UNISON notes that in previous consultations the union agreed to the principle of a flatter structure. However, the UNISON, alongside other staff unions also set a number of conditions for our support.

It is the position of UNISON that, the proposal fails to meet a number of those conditions including:

·         The structure should retain broadly progressive contribution rates

·         The structure should protect the low paid

·         Minimise the risk of opt outs

These concerns are set against the backdrop of the cost of living increase, below inflation pay awards and our members struggling to pay their monthly bills.

Evidence produced by the SPPA which analysed scheme participation and presented to the Scheme Advisory Board in March 2023 gives credibility to our concerns.

In that paper, SPPA noted that overall membership of the scheme had reduced by more than 1% over the period June 2022 – Dec 2022. Specifically amongst Agenda for Change pay grades where membership declined overall by 1.5%.

The proposals do not protect the low paid – only the very lowest paid. Meanwhile those with highest earnings will see a reduction in the level of their contribution. This after these highest paid members have benefitted from changes introduced to enable them to avoid paying tax.

It is worthy of specific note that membership amongst women saw the sharpest decline and overall there were fewer members in the scheme who were employed in band 1, 2 and 5.

UNISON believes that the rates as proposed will make the NHS Pension seem unaffordable or at the very least, unattractive, for many members. This will have a direct impact on the sustainability of the scheme and longer term on public spending the state if our members have felt unable to save towards retirement.

We do however support the plan to move to actual pay instead of WTE. This will benefit part time workers who will pay less for their pension and their contribution will better reflect their benefit.

Q3. Do you agree or disagree that the annual increase in contribution tier thresholds should be based on the average uplift in AfC pay. If you disagree or don’t know how to answer, please explain why.

UNISON agrees that the annual thresholds should be increased by the average AFC uplift. However, the union is concerned that there may still need to be a ‘manual’ exercise to sense check the impact of this policy, if annual pay awards continue to follow a pattern of ‘stepped’ increases.

Often pay awards are ‘bottom loaded’ meaning a minimum sum is guaranteed as an increase even if this is in excess of the agreed percentage increase. Mechanisms need to be developed which will monitor and prevent lower paid members finding themselves in a higher tier pension band wiping out the value of their pay rise.  

Q4. Do you agree or disagree with the miscellaneous scheme amendments as proposed in this consultation. If you disagree or don’t know how to answer, please explain why.

We have no comment to make on the miscellaneous scheme amendments

Q5. Do you agree or disagree that the proposed draft amending regulations deliver the policy objectives set out in the consultation? If you disagree or don’t know how to answer, please explain why.

The drafting amendments appear to be adequate to implement the proposals outlined. However we believe that what is needed are different and fairer proposals as outlined above.

[1] https://pensions.gov.scot/sites/default/files/2023-06/Equality_Impact_Assessment_-_Implementing_changes_to_member_contributions.pdf p7