The decision follows advice from the scheme actuary showing that significant increases in contributions would be required to maintain the current benefit level in the DB scheme, with employer contributions needing to rise from the current 20% to 25.8% and member contributions needing to rise from 12.2% to 15.7%. Following the abolition of contracting out, in April 2016, the majority of members would also see an increase in National Insurance contributions of nearly £500 a year.
The approximately 600 MNOPF members affected will instead join the Ensign Retirement Plan (for the MNOPF) on highly favourable terms, with contributions totalling 30% (20% from employers and 10% from employees). The Ensign Retirement Plan (for the MNOPF) is a replica of the flagship industry wide DC scheme, the Ensign Retirement Plan. This replica scheme has been set up within the framework of the MNOPF to create a Money Purchase section within the MNOPF. A set of delegated authorities has been established between the Trustee Boards of MNOPF and the Ensign Retirement Plan.
In addition, affected members will receive an enhanced annual increase in their preserved DB benefits of 1.5% above the statutory revaluation and will retain their entitlement to existing "in-service" death and ill-health early retirement benefits, whilst the Ensign Retirement Plan will provide them with access to the flexibilities offered more widely under recent changes to DC pensions.
The decision to close to future accrual follows extensive discussions with both employer and employee representatives, including a member consultation and opportunities for members to discuss the proposal with the MNOPF executive team both face to face and by telephone. Feedback from the members was largely in support of the proposal.
MNOPF Trustee Chair, Rory Murphy, said:
"As a Trustee Board, we are proud of our record of strong governance. As we progress on our 10 year journey plan to full funding, the Trustee Directors work cohesively to take leadership decisions that are in the best interests of the Fund and our members. Whilst closure to future DB accrual can often be interpreted as a bad news story, in the case of the MNOPF we do not believe that this is the case. Our discussions with both employers and employees have indicated encouraging levels of support among both groups, and I am delighted that we are making this transition in a way that is supported by both members and employers. There are very few DC pension scheme members in other pension schemes, who will see their retirement pot benefit from a monthly contribution of 30% of pensionable salary and this will ensure that our members continue to receive valuable benefits from their MNOPF membership."