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BMA warns of mass retirement after Hutton recommends end to final salary pensions

BMJ 2011; 342 doi: https://doi.org/10.1136/bmj.d1596 (Published 11 March 2011) Cite this as: BMJ 2011;342:d1596
  1. Helen Jaques
  1. 1BMJ

Final salary pensions should be replaced with career average schemes, the normal pension age should increase to at least 65, and employees could be asked pay more in contributions, the final report of the nine month review of public sector pensions has recommended.

The BMA has branded any increase in retirement age for NHS staff “unacceptable.” Hamish Meldrum, chairman of council at the BMA, said, “Doctors in their late twenties who had expected to retire at 60 could now have to work to the state retirement age of 68. Such a sudden leap is particularly unfair given that NHS staff signed up to a significantly revised pension scheme only three years ago.”

The association has warned that any increase in pension age could precipitate mass retirement of senior GPs, the lynchpin of the government’s health reforms, who could take early retirement to avoid being affected by the proposed changes, due to be in place by 2015.

“There would be a real risk of a staff exodus, as doctors in their fifties—many of whom are eligible for voluntary early retirement—consider their futures,” said the BMA. “GPs in particular—despite being central to Government plans for the NHS in England—may be tempted to take 24 hour retirement (an option that allows them to draw a pension while working reduced hours) given the likely total cost of NHS pension scheme membership including their contribution as employers.”

Public sector unions have threatened strike action in response to the reforms. Unison chief Dave Prentis said, “Asking workers to work longer for less is simply not an option. I am sending out a clear message to our 1.4 million members warning them that industrial action is now one big step closer.”

NHS Employers, which represents employees in English trusts, has condemned any possibility of industrial action as “damaging to patient care.” Dean Royles, director of NHS Employers, said: “Any change to the NHS Pension Scheme is a sensitive issue that affects employers, staff, and taxpayers. However, all public sector pension provision must evolve and undergo further change and we are hopeful that the outcome is a modern pension that is fair to all.”

The Independent Public Service Pensions Commission, led by Lord Hutton of Furness, has indicated that existing final salary public service pensions should be replaced by new career average revalued earnings (CARE) schemes by 2015. In addition, the normal pension age, currently 60 for most members of the NHS scheme, should be linked to the state pension age, which is set at 65 for men and is rising to 65 for women but will increase to 66 by 2020 and 68 by 2046.

However, the government will protect benefits accrued under the existing schemes. “Ministers have been clear that the pension promises that have been made must be honoured,” says Lord Hutton in his foreword to the report. “This is important in order to correct the widespread view that pension reform invariably means losing pension rights that have already been accrued.”

Employees could also be asked to pay more in contributions should the cost of public sector pensions to the taxpayer exceed an unspecified fixed cost ceiling.

Andrew Dearden, chairman of the BMA’s Pensions Committee, said, “While there is some reassurance that the pension rights NHS staff have built up over their careers will be protected, we have serious reservations about moves away from a final salary scheme, and will want to look closely at the details of any career average scheme. However, it should be remembered that following a major overhaul in 2008, the NHS scheme is appropriate, fair to both staff and taxpayers, and already subject to rigorous governance and safeguards. A cost sharing scheme protects the taxpayer from future cost increases, and the contributions paid by members currently provide a surplus to the Treasury.”

The proposals come on top of the government’s recent proposal to increase contributions for employees in current public service defined benefit schemes by 3% in April 2011 and changes in the indexing of pensions with inflation, which could mean millions of people would see lower increases to their pensions in retirement.

“The commission takes as given the recent changes to public service pension schemes, including the use of the Consumer Prices Index as the measure of inflation and an imminent rise in employee contributions,” the report acknowledges. “These changes have reduced cost pressures, but have not addressed fundamental longer term structural problems.”

In an initial response the government has explained that it is premature to comment on any specific aspect of this report at this stage but it will now give careful consideration to the recommendations.

The NHS pension scheme is the largest single centrally run occupational pension scheme in Europe, with 1.3 million people currently paying into the scheme, more than 400 000 deferred members, and over 600 000 people currently receiving an NHS pension. The scheme underwent widespread changes in 2008 that increased normal pension age for new staff from 60 to 65 and doctors’ contributions from an average 6% of salary to an average 8.5%—a 30% rise in the cost. In the years up to 2015-16 the NHS pension scheme will provide a surplus to the Treasury (over benefits paid out) of £10.7bn (€12.4bn; $17.2bn).

Notes

Cite this as: BMJ 2011;342:d1596

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