Defined Benefit  

Government to save £200m with nuclear pension reform

Government to save £200m with nuclear pension reform

The government is going to save around £200m by reforming nuclear sector workers' defined benefit (DB) schemes.

According to FTAdviser’s sister publication Pensions Expert, the Department for Business, Energy and Industrial Strategy launched a consultation this month outlining the reforms needed to transform the two final salary plans into career average revalued earnings (CARE) schemes.

The Nuclear Decommissioning Authority (NDA) workers are members of two DB pension funds - Combined Nuclear Pension Plan (CNPP) and the SLC section of the Magnox Electric Group of the Electricity Supply Pension Scheme (MEGESPS).

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There are more than 10,000 nuclear workers in these schemes, which have been closed to new entrants since 2008.

The government decided to reform these schemes as recommended by Lord Hutton's Independent Public Service Pensions Commission in 2011, and the deadline for introducing them is 2018.

The estimate of savings of £200m are in the form of transfers from reduced benefits of the pension scheme recipients to decreased costs for taxpayers, the government said.

Four million public sector workers have already moved to new pension arrangements and HM Treasury policy is for final salary pension schemes in the public sector to be reformed to a CARE based scheme, the consultation said.

In early 2017, the NDA initially consulted on two options for reforming these pension schemes.

The first option for reform was for a CARE scheme with pension age increased to state pension age.

The second option for reform would retain a DB pension scheme but with a cap on future pensionable pay increases.

Following discussions with unions, which considered the two solutions “a ‘raid’ on nuclear workers’ pensions”, a third option was proposed – a CARE which retains members’ existing pension age.

The solution was accepted following statutory consultation with affected NDA employees and a ballot of union members.

The current consultation is about how the agreed reforms will be implemented and it will run to 5 July.

According to Sue Ferns, union Prospect’s senior deputy general secretary, “a key part of the agreement was ensuring that legal protections would be immediately put back in place to prevent further detrimental changes being imposed in the future”.

She added: “We will submit a full response to the consultation on behalf of Prospect members to ensure that the outcome of the consultation is in line with what members voted for last year.”