Firefighters' Pension Scheme cost ceiling

07 December 2011

The Government has now set the cost ceiling for the Firefighters’ Pension Scheme and are given in the table below, alongside the cost ceilings announced for other schemes on 2 November 2011. Discussions are ongoing between your scheme and Trades Unions to finalise a scheme design within the cost ceiling given.

Pension Scheme	Gross cost ceiling	Taxpayers	Employees
NHS Pension Scheme (England and Wales)	21.9%	12.1%	9.8%
Principal Civil Service Pension Scheme	22.5%	16.9%	5.6%
Teachers Pension Scheme (England and Wales)	21.7%	12.1%	9.6%
Local Government Pension Scheme (England and Wales)	20.4%	10.9%	9.5%
Firefighters’ Pension Scheme (England only)	27%	13.8%	13.2%

Source: HM Treasury following advice from the Government Actuary’s Department

Frequently Asked Questions (FAQ) on Firefighters' Final Cost Ceiling Announcement

What is the offer for firefighters?

The Government has set a cost ceiling for firefighters based on the Government’s preferred scheme design: an accrual rate of 1/57th of pensionable pay and a Normal Pension Age of 60 (subject to regular review). This sets the cost ceiling at around 27% of pensionable pay which reflects the fact that firefighters pay relatively high employee contributions towards their pension.

The Independent Review of Public Service Pensions recommended a lower pension age of 60 for firefighters (along with the police and armed forces) to reflect the “unique nature of their work”.

The offer meets the Government’s commitment that most low and middle earners working a full career will receive pension benefits when they retire at least as good, if not better, than they get now. The employer will continue to pay more towards the scheme than the workforce.

As with the offers for other schemes, this offer is conditional on an agreement being reached with the relevant unions by the end of the year.

What’s a cost ceiling?

Cost ceilings are set by Government and are used to provide parameters for ongoing talks with trades unions and schemes about final scheme designs. They are the level of total contributions from the employee and the employer that are required to meet the cost of the new pension scheme.

Pension schemes and Trades Unions can suggest changes to the Government’s preferred scheme design within the cost ceiling set.

Why did you delay the announcement of the Firefighters’ cost ceiling?

The firefighters’ cost ceiling has been announced after the enhanced offer made to the Teachers, NHS, Civil Service and Local Government pension schemes to allow the Fire Brigades Union and other unions to make representations and present evidence.

However, this does not delay the overall reform timetable. Final scheme designs are due to be submitted by the end of this year.

You say that you intend to protect the pension rights built up so far, but what about the increase from a 1/60th to a 2/60ths accrual rate firefighters in the 1992 scheme are entitled to after 20 years of service?

Currently, those in the 1992 Firefighters Pension Scheme build up a pension at a rate of 1/60th of final salary for each year of pensionable service up to 20 years and then at 2/60ths each year from 20 to 30 years. This is known as double accrual.

Some firefighters in the 1992 scheme will be fully protected from the changes, as the Government has set out an objective that those within 10 years of their Normal Pension Age on 1 April 2012 will see no change in when they can retire, or how much they receive at Normal Pension Age.

For those outside of this protection, the Government will recognise the expectation of double accrual by taking into account length of service on retirement when calculating benefits earned.

Therefore, the value of the pension earned in the 1992 scheme will be proportionate to a firefighter’s total service, not just to the service they have completed so far.

Under my current scheme firefighters are able to take an unreduced pension after 25 years of service if they are aged 50 or over, will this still be the case?

Under the Government’s proposals, the pension you have already earned will be protected. This means your pension would be worked out in two parts:

benefits you will have earned before proposed changes are introduced; and
benefits you will earn after the proposed changes.

You will be able to retire and take the benefits you have earned up to 2015 at the same date as you can now – that is not changing. For instance, if you have 25 or more years’ pensionable service from age 50, you will be able to take your pre-2015 benefits on an unreduced basis at that stage, even if you do not have 25 years’ service prior to 2015. You will be able to take the benefits you earn after 2015 when you reach your new Normal Pension Age.

If you are able to retire before your Normal Pension Age and choose to do so, the pension you earn after 2015 would be reduced to make up for the fact that it will be paid for longer.

The Government has set an objective that those within 10 years of the Normal Pension Age of their current scheme on 1 April 2012 will see no change in when they can retire nor any reduction in the amount they can receive at their current Normal Pension Age.

What about judges, police and the armed forces, are they not affected by the reforms?

Scheme design details for the police and armed forces will be provided at a later date. For the police, this will be after the independent Winsor Review has concluded. The Review is considering the pay and conditions of service for police officers and staff and the final report is due to published in the New Year.

Details of the Judicial Pension Scheme design will follow at a later date.