The National Health Service Superannuation Scheme (Scotland) (Miscellaneous Amendments) Regulations 2014

EXPLANATORY NOTE

(This note is not part of the Regulations)

Part 2 of these Regulations (regulations 2 to 14) amends the National Health Service Superannuation Scheme (Scotland) Regulations 2011. Part 3 of these Regulations (regulations 15 to 29) amends the National Health Service Superannuation Scheme(2008 Section) (Scotland) Regulations 2013. Part 4 of these Regulations (regulations 30 to 33) makes consequential amendments to the National Health Service (Scotland) (Injury Benefits) Regulations 1998 and Part 5 of these Regulations (regulations 34 to 44) makes consequential amendments to the of the National Health Service Superannuation (Scotland) (Additional Voluntary Contributions) Regulations 1998. These consequential amendments are because from 1 July 2013 The NHS Pension Scheme (Scotland) Regulations 2008 (SSI 2008/224) and twelve amending instruments were consolidated into one new set of regulations “The NHS Superannuation Scheme (2008 Section) (Scotland Regulations 2013 (SSI 2013/174)”. As a consequence of this references to the 2008 section in the other scheme regulations are updated.

The following are the main changes made by these Regulation:

Amendment to employee contribution pay bands

Changes are made to the employee contribution pay bands to reflect the NHS Scotland 2014 pay uplift. (regulations 6, 14(c), 20, 21 and 27)

Amendment to the time scale for the refund of contributions where a member opts out of the scheme.

Following auto enrolment, it was recognised that the process for employers to turn around contributions to Scottish Public Pensions Agency (“SPPA”) within the current scheme timescale of one month was proving problematic. Following stake holder discussion it was agreed that the opt out period in which employees are treated as never having joined should be extended to three months. This allows NHS employers more time to deal with those employees who wish to opt out of the scheme and enable them to make refunds of contributions locally and more timely, rather than the member having to contact SPPA directly to apply for their refund of employee contributions. These administrative changes were recently implemented and now require to be embedded in the scheme regulations. (regulations 4, 19 and 26)

Scottish Minister’s right to determine final pay for benefits

Amendments extend the facility to set final pensionable pay, currently available for part-time members, to full time members of the 1995/2008 sections. Where the final pay appears to be inordinate the Regulations allow for a corrected determined pensionable pay to be applied to the calculation of the member’s benefit. Where the determined pay is lower than the original figure a refund of contributions is made. (regulations 5 and 17).

New charges for NHS employers in respect of large pay rises for members prior to retirement.

In order to protect the scheme from those employers which might seek to manipulate final salary for pension purposes a new restriction is introduced. For members of the 1995 section final salary arrangement only, employers will be charged for the cost of pension benefits (but not death benefits) calculated on any pay increases they make, which are greater than a new ‘cap’ equal to the level of the consumer prices index (CPI) + 4.5%. The employer charge will apply to ‘over cap’ increases in one or more of the final 3 years prior to retirement. The members benefits will still be calculated on the pensionable pay submitted but the employer will cover the cost of the pension arising from the pensionable pay in excess of the cap through the capital charge. (regulation 7)

Scheme changes to reflect tax changes

The Finance Act 2013 amended the Finance Act 2004 to reduce the Lifetime Allowance Limit (LTA) from the current £1.5m level to £1.25m with effect from 6 April 2014. Transitional measures include two new protection facilities for individuals who would be affected by the new lower limit. These are ‘Fixed Protection 2014’ and ‘Individual Protection 2014’ which work in a similar fashion to existing protections. The fixed protection is currently available and the Individual Protection facility will be introduced by the 2014 Finance Act. These Regulations reflect these changes: (regulations 11 and 16)

Interest and administration charges on delayed payment of contributions

Most employers pay over scheme contributions by the due date but where this does not happen it can cause extra work for the scheme administrators. A number of small additions to the regulations have therefore been made to clarify existing payment responsibilities and due dates. Changes have also been made to allow SPPA to impose an administration charge and to charge interest to the employer in the case of late payment of contributions. This replicates what is already in the Scottish teacher’s scheme. (regulations 12 and 23)

Pension information required by employers/miscellaneous changes

Other changes clarify pension information required from employers and make other miscellaneous changes to correct previous errors.