FAQs for running a Section 20 mutually agreed resignation scheme

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The following frequently asked questions (FAQs) are useful to organisations who are running local Mutually Agreed Resignation Scheme (MARS) as well as those running the national MARS. They are for illustrative purposes only and will be dependent on what is agreed with local staff side representatives. 

These FAQs cover five main areas: 

Mutually Agreed Resignation Scheme

  

What is a Mutually Agreed Resignation Scheme (MARS)? 

A Mutually Agreed Resignation Scheme (MARS) is a scheme under which organisations may offer a severance payment to an employee to leave their employment voluntarily. A MARS helps to increase flexibility for an employer to be able to address periods of rapid change and service redesign. 

What is the purpose of the scheme? 

The scheme has been developed to assist employers in addressing some of the financial challenges facing the NHS in the years ahead. Its key purpose is to create job vacancies which can be filled by redeployment of staff from other jobs or as a suitable alternative for staff facing redundancy. This scheme is time limited, running from mid-September until the end of October 2010 and has HM Treasury approval. 

Does the scheme apply to all employees?

It would be for employers working in partnership with local staff side to determine the eligibility criteria for the MARS. Section 4.2 in the national MARS sets out the required exclusions to the eligibility criteria. 

What if an employee registers an interest in leaving under a MARS and then changes their mind about applying for the scheme?

Registering an interest does not commit employees to proceeding with voluntary severance. Employees can withdraw their application at any time up to the point that they sign a compromise agreement.

What about employees currently absent from their organisation – will they be able to apply? 

Yes, if they satisfy the eligibility criteria. This should include staff on maternity leave, long term sick leave, secondment or unpaid leave. The nature of their absence may mean communications are difficult or sensitive, but it is important that their attention is drawn to the existence of the scheme. It is the responsibility of employers to identify and contact these employees to inform them about the scheme.

Should employers approach employees directly to see if they are interested? 

It is for employers to ensure that all employees are alerted to the scheme but employers should not target anyone specifically. This could be misinterpreted and may leave the organisation open to potential litigation on a number of grounds including discrimination. 

What if an employee approaches me directly for my opinion? (where I know that I could not support the application because the employee is essential to retain). 

Explain that there is a process and you will have an opportunity to provide your feedback if they apply. You cannot advise them personally on whether or not they should apply.

Can employees apply for the scheme if they have already indicated their intention to leave the organisation prior to the launch of the scheme? 

If an employee has already submitted their resignation or given some other kind of clear indication that they intend to leave the organisation, they are not eligible for a voluntary severance payment.  If an employee asks to rescind their notice in order to apply for the scheme this should not be agreed to regardless of whether a termination notice has been completed.

How do the terms of MARS compare with redundancy payments? 

The MAR scheme is not a redundancy or a voluntary redundancy. Entitlements to redundancy are set out in Section 16 of the NHS terms and conditions of service handbook.  

Could employees be classed as redundant, therefore potentially able to claim benefit? 

Employees are not being made redundant under MARS as they are leaving voluntarily. The national benefit rules are very complex and depend upon personal circumstances. If employees feel that they may have to rely on benefits, then they should seek advice before submitting an application. They could contact the national benefits helpline for advice: Tel:  0800 055 6688, or visit the Directgov website , or alternatively contact Citizens Advice on 0844 8487979 for further information. 

What is basic pay? 

Basic pay is defined as the pay employees receive based on pay scale/band and as stated on their pay slip.  It does not include any additional payment such as: 

  • Overtime/emergency work done/waiting lists
  • Additional programmed activities 
  • On call 
  • Emergency Commitment payments 
  • Acting Up 
  • Special Duty/Enhancement payments 
  • Recruitment and retention Premia (Long & Short) 
  • Discretionary points 
  • Distinction awards 
  • Band Supplements 
  • Intensity Supplements 
  • CD Responsibility  
  • Clinical Excellence Awards

Employees in receipt of protection for basic pay due to organisational change, is this protected? 

Yes, this is classed as part of basic pay. 

If employees receive an increment after the closing date for this scheme, will this affect their severance pay?

Basic pay will be confirmed to employees if their application is accepted. The payment will be based on the basic pay which they are entitled to on their last day of service.

Additional questions to consider: 

Employees may also ask about the selection criteria or local approval process. These are matters for local discretion. Employers should prepare appropriate local FAQs to address these: 

  • What is the decision making process for receiving expressions of interest? 
  • What criteria should be considered by the Organisational/ Divisional/Directorate panel?  
  • I may have exceeded my annual leave entitlement by the leaving date, what happens?  
  • What happens if you do not get enough applications, will redundancies be compulsory after this offer has ended? 

Pension questions 

This section will provide some general information for employers that may help their employees to decide to seek further information to assist them in making a decision on whether to apply for the severance scheme or not. 

The Pension Scheme website’s factsheet on “Leaving Early and Transferring Out” is available to download from their website.  Employees can access the Pensions Website on www.nhsbsa.nhs.uk/pensions   

What happens to their pension if employees leave? 

Employees can choose to: 

  • leave their pension contributions in the scheme 
  • transfer their  pension to another scheme 
  • take their contributions out of the scheme if they have less than two years service 
  • apply for their Pension 
    • take voluntary early retirement subject to eligibility criteria
    • claim their  pension - subject to eligibility criteria 

What happens if employees leave their pension contribution in the scheme? 

If employees leave their pension contributions in the scheme, it will be index linked. This means it will grow in line with inflation, with the annual uplift being applied each April. 

If employees do re-join the scheme within 12 months, their membership will link up and all the membership will count when their retirement benefits are worked out. 

If employees have less than 2 years membership and choose not to return to the NHS within 12 months then they can apply for a refund. They do not have to wait until they have been out of the NHS employment for 12 months to exercise this option.

If employees do not return to NHS employment within 12 months and have not applied for a refund, the pension agency will contact them at their last known address and advise them that they have insufficient membership to retain an NHS pension and the contributions will be refunded. 

Employees can apply to have their pension paid when they reach normal pension age, provided they have qualified for benefits. Those employees with a pension under the 1995 Scheme who leave under MARS and then return to the NHS within 5 years will be eligible to rejoin the 2015 Scheme so long as they have not already taken their pension. 

How do employees transfer their pension credit to another scheme? 

If employees decide to transfer their benefits, they should contact their new provider. They will explain how much pension their transfer value will buy in their scheme and employees can decide if they want this transfer to happen. Transfer can only take place if their new scheme is registered with HMRC. 

Those with at least two years’ membership can apply for a transfer at any time before they reach normal retirement age. Those with less than two years’ membership would need to register with a new registered pension scheme within 12 months of leaving NHS pensionable employment. In addition they would need to apply for a transfer within 12 months of joining a new scheme or before they reach normal retirement age, whichever is earlier. 

How do employees take their contributions back? 

Employees can only do this if they have less than 2 years service. Employees will not receive the full amount of pension contributions they have paid. The amount paid will be subject to Tax and National Insurance deductions. Employees can download a form to request a refund of contributions from the pension website. 

Employees are of minimum pension age; can they take a MARS payment and apply for their pension? 

This may be possible - to qualify for early retirement when leaving the NHS under this voluntary scheme, staff in the NHS Pension scheme must have at least two years’ pensionable service. If the member of staff has been an active pension scheme member since 5 April 2006 or earlier, early retirement may be possible from age 50. If the member of staff joined the NHS pension scheme after this date, early retirement may be possible from age 55. 

However, unless employees are over age 60, their accrued benefits will be reduced by an actuarial sum, based on the cost to the scheme of them accessing their pension benefits early.

Employees in the NHS Pension scheme who qualify for early retirement may also choose not to access their pension benefits at all immediately on leaving, in which case their accrued pension benefits will remain in the pension scheme and may be either taken as a deferred pension at normal retirement age or may be transferred to another pension scheme in the future.

Employees have an outstanding application for retirement on grounds of ill-health; can they apply for the MARS? 

Organisations would not be able to consider this whilst an ill health application is being considered by NHS Pensions.  However, if employees are told that it is not successful and they are not appealing against the decision, they may submit an application for voluntary severance by the end of October 2010. 

Under the voluntary severance scheme, there is no provision for organisations to make a payment which would give employees an enhanced early retirement pension payment. Therefore, should employees leave their organisation under voluntary severance terms over the age of 50, they will not be eligible for an enhanced retirement package.  If they wish to leave the organisation in these circumstances, they should be advised to seek further guidance prior to opting for voluntary severance so that they are aware of all the implications.

I am leaving the NHS on MARS terms and taking (actuarially reduced) early retirement benefits from the NHS Scheme.  Can my employer use the MAR lump sum to prevent my pension benefits from being reduced? 

Not directly; your benefits from the NHS Scheme must be reduced because they are being paid before your normal retirement age.   But you can if you wish, ask your employer to use some or all of your MAR lump sum to buy "Additional Pension" (AP).  AP is paid at the same time as your early retirement benefits and could help offset the actuarial reduction.  Remember though that AP increases only your early retirement pension, not your lump sum.  It is important to note that, as a consequence of the employer buying the "additional pension", any amount over £30,000 would not normally be subject to tax as it would if the additional pension were purchased by the individual.  Generally where a contribution is made into a tax exempt pension scheme (such as the NHSPS) then the amount will not be subject to tax.  The rules are, however, complex and individuals may wish to visit the HMRC guidance below for a comprehensive explanation of whether an amount paid in "additional pension" will be subject to taxation. http://www.hmrc.gov.uk/manuals/eimanual/EIM13735.htm 

Can my employer buy Additional Pension (AP) at any time? 

Your employer can apply to buy AP at any time up to the date of your MAR.  AP cannot be bought after you have left the NHS.

Will my employer be able to buy enough AP to completely offset the reduction of my early retirement benefits?

NHS Scheme early retirement benefits are reduced according to how early you take them.  The reduction is biggest at age 50 and much smaller at age 59.  AP can be bought in units of £250, up to a maximum of £5,000.  The cost depends on the amount of AP you buy and your age at the time of purchase.  Remember though that the charges for AP assume scheme members will retire at normal retirement age.  This means that the AP will be reduced, according to the age at which you take MAR.  Your employer will be able to help you work out how much AP your MAR lump sum would buy.

For example: 

An employee who is a member of the 1995 Section with 20 years scheme membership and pensionable pay of £40,000 would receive a pension of £10,000 if they retired at 60. Their MAR payment would be 10 months pay: £33,330. If they chose to take the MAR scheme at the age of 58 their payment would be actuarially reduced (due to early retirement) by 11%. Their pension would therefore be reduced to £8,900. 

If the employee requested that their employer buy them AP of £1,500, this AP would also be subject to the actuarial reduction for early retirement of 11% and would therefore be reduced to £1,335. 

However, when added to their total pension of £8,900. this would offset the actuarial reduction and provide a total pension of £10,235. It would therefore give them a greater pension amount than the £10,000 they would receive if they did not take early retirement. The cost of buying £1500 of additional pension is £28,980 for a 58 year old. Their employer could buy £1,500 additional pension for the employee and pay a net MAR payment of £4,350. 

The NHS Pensions Scheme Guide should allow employees to calculate the impact of the actuarial reduction for early retirement on their pension amount. The NHS Pensions website has a section on buying additional pension which will be useful for employees to reference - it includes an additional pension calculator.

In light of complexity around using MAR to offset the loss of benefits due to Early Retirement, anyone considering this option may want to take independent financial advice before proceeding. 

Please note: Outside of MARS it is open to employers to offer employees "Retirement in the Interest of the Efficiency of the Service". This is covered under section 16 of Agenda for Change. 

Annual leave 

Employees may have leave outstanding, what happens to their leave if they are successful? 

Employees should be asked to use any outstanding leave during their notice period. If this is not possible due to operational requirements they should be paid in lieu for any outstanding annual leave due at the last day of service, provided this has been agreed with their line manager prior to their resignation date being finalised. 

Re-employment 

Can employees return to work for the same organisation/NHS if they leave under MARs? 

It would be for local determination regarding the period that the employer wished to restrict an employee, leaving under MARS, from returning to work for the employer. This would be subject to the repayment requirements as set out below. 

The purpose of the MARS payment is to compensate employees for loss of employment. Employees who leave the NHS under MARS would not be re-employed under normal circumstances by the NHS in England, in the same or a different post, before a period of 1 month has elapsed. If an individual does return to the NHS within a month they would be required to repay any MARS payment in full.

Where an employee returns to work for the NHS in England within 6 months and before the expiry date of the period for which they have been compensated (as measured in equivalent months/part-months salary), then an employee would be required to repay any un-expired element of their compensation. This would be reduced to take account of any appointment to a lower grade and reflect net salary. The compromise agreement should specify the requirement to repay monies in such circumstances and may provide for a period of repayment.

Recording leavers on ESR 

How should leavers under a MARS be recorded in the Electronic Staff Record (ESR)? Three new fields have been developed in ESR to record leavers under MARS. 

These are as follows: 

Mutually agreed Resignation - National scheme with Repayment 

Mutually agreed Resignation - Local scheme with Repayment 

Organisations will need to select the appropriate field when recording the reason for leaving related to a MARS payment accordingly.

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