Public Sector Compensation Scheme 2013

Public Sector Pensions Authority Consultation

Compensation Scheme - IntroductionAims and Objectives of this

Presentation Joint presentation Employers/Unions

To outline the proposed new Public Sector Compensation Scheme

Give you the opportunity to ask questions and to provide clarification

Provide details of how to participate in the consultation

Compensation Scheme

What is the Public Sector Compensation Scheme for?

The Compensation Scheme provides benefits for loss of office• Voluntary Redundancy• Compulsory Redundancy

Not a Mutually Agreed Resignation Scheme (MARS) or a Voluntary Resignation Scheme (VRS)

Compensation Scheme

How have we got here?

Interim arrangements are in place for between 1 - 3 years from implementation of Unified Pension Scheme (now in year 2)

Council of Ministers determined a review should be carried out

Public Sector Pensions Authority Working Group, Chaired by the Vice Chair of the PSPA

Compensation Scheme - Introduction

Why is Scheme being revised?• Current arrangements are complex, costly in terms of pension

enhancements, varied and require modernising

• Simplify and harmonise compensation benefits across the public service

• Other considerations: - Existing employees - Labour Market - New Joiners - Private Sector - Taxpayer

• Supporting continuing economic success- Keeping people in employment

• Available to all including those not in the Unified Pension Scheme

Compensation Scheme

Who is covered by the proposed Scheme?

Majority of Public Sector Workers

Full details are in Schedule 1 of the Scheme

Compensation SchemeWho is not covered by the proposed Scheme?

Teachers/Lecturers Fire Fighters Constabulary Manx Radio staff GP/Dental Practice staff Medical/Dental

Practitioners (under a contract for services)

Hospice staff Local Government staff

JudiciaryAttorney GeneralMedical Officer or Chaplin (prison)

Full details are in Schedule II of the Scheme

Current Position – IoM Public Service

Current Position – Isle of Man Public Service:

Civil Servants/Manual Workers etc- Compulsory/Flexible Early Retirement (Over 50 years)- Approved Early Retirement (Over 50 years)- Compulsory/Flexible Early Severance (Under 50 years)

NHS– Up to 24 months’ pay for compulsory redundancy– Up to 24 months’ pay for voluntary redundancy– No additional pension enhancement

Current Position - BenchmarksCurrent position – Benchmarks:

United Kingdom Civil Service– Up to 12 months’ pay for compulsory redundancy– Up to 21 months’ pay for voluntary redundancy– No additional pension enhancement

Private Sector– Statutory Minimum – 1 weeks’ pay per year of service (capped at

£480 per week)– Large Businesses – many capped at 12 months’ pay

Provisions of the Proposed Scheme

Main features:

Provision of a compensation lump sum for new and existing public servants

No automatic right to an enhanced pension - Pension and this scheme are separate

Provisions of the Proposed Scheme

Main Features:

New starters:• Up to 12 months’ pay for compulsory redundancy • Up to 18 months’ pay for voluntary redundancy

Applicants declined voluntary redundancy who are made compulsorily redundant will be entitled to voluntary terms

Compensation will be paid on the basis of a deemed salary of no less than £25,000 per annum

Transitional Arrangements

Based on implementation date of the Scheme:

All staff up to age 45 years: maximum compensation lump sum of 18 months pay for compulsory redundancy and 24 months for voluntary redundancy (based on 1 month’s pay for each year of continuous service)

Transitional Arrangements

Based on implementation date of the Scheme:

Staff aged 45 years and over:maximum compensation lump sum of 24 months pay for voluntary and compulsory redundancy (based on 1 month’s pay for each year of continuous service)

Age Profile of Workforce (excluding Police/Fire/Teachers/Lecturers)

24 & Under 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 650

200

400

600

800

1000

1200

1400

167

362

449

601

990

1299

1298

970

576

2.5%

5.4%

6.7%

9.0%

14.7

%

19.4

%

19.3

%

14.5

%

8.6%

Age Band

Num

ber o

f Peo

ple

Length of Service - % of Workforce (excluding Police/Fire/Teachers/Lecturers)

0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-490

200

400

600

800

1000

1200

1400

1600

1800

2000

1505

1812

1540

688

523

304

199

10036

522.4% 27.0% 22.9% 10.3% 7.8% 4.5% 3.0% 1.5%

Years

Num

ber o

f Peo

ple

0.5% 0.1%

Conclusions

More than 60% of the workforce are aged 45 years and over

Very few staff under 45 years of age will have achieved more than 18 years service

Many staff over 60 years will receive improved benefits

Provisions of the Proposed Scheme

Pension Enhancement Options:

Staff made redundant aged 50 or over will have the option to use some or all of their compensation payment to purchase added service

Staff made redundant aged between 50 and 55 will be able to buy additional service but pension will not be paid before the age of 55

Staff will be able to buy as much or as little additional service as they wish up to the maximum available through the use of the compensation lump sum

Transitional Arrangements

Based on implementation date of the Scheme:

All staff aged over 50 years:will have the option to use some or all of their compensation payment to purchase enhanced added service to increase their pension. Three year transitional arrangement.

Union View UK Scheme Changes 2010 (Civil Service only) - means detrimental

change was inevitable

GUS negotiations - Unions negotiated a period of up to 3 years no change

Aim – improved benefits compared to the UK Civil Service

Aim – ensure pension could be enhanced for those nearing pension age via improved lump sum provision

Aim – transition arrangements for existing members, those nearing retirement, and low paid amongst others

Union View Current proposals – we would like to see them improved. Examples

include:

Key change – existing members should be subject to the same provisions for the life of their employment

Key change - Standard minimum 3 month redeployment and 3 month notice periods across the public sector in cases of compulsory redundancy

Key change – 12 months compulsory and 21 months voluntary for new starters

Union View Each union will submit a response to the consultation in respect of

our members views

We need EVERY union member to input to the consultation individually and we will issue guidance on how you might do that

After the consultation, the scheme will be negotiated through individual forums/members will be balloted

COMIN has agreed that moving these provisions into collective bargaining should be further explored

Next Steps

Public Consultation/Joint BriefingsFinalisation of the Scheme by PSPA Trade Union ballotsPSPA ApprovalNew scheme implementedTynwald Approval

Compensation Scheme – Information

More information on the consultation can be found on the Public Sector Pensions Authority website:

www.pspa.im

Any Questions?