New pension contributions deal could hit doctors harder

The Department of Health has announced a new offer on increases in pension contributions that extends the protection for NHS employees who earn the least by proposing a bigger hike for higher earning staff.

The threshold under which employees will not be subject to an increase in pension contributions in 2012-13 has been raised from £15 000 to £26 557, encompassing an extra 530 000 NHS staff.

However, employees earning between £26 558 and £110 273 will face a higher contributions increase than initially outlined in the Department of Health’s earlier consultation. Those earning between £48 983 and £69 931 a year will be hit the hardest with a 2.4 percentage point increase in pension contributions compared with a 2.0 percentage point increase in the consultation held between July and October this year.

The initial consultation on pension contribution increases for NHS staff proposed a 1.2 percentage point increase in contributions in 2012-13 for employees earning £26 558-£48 982, a 2.0 percentage point increase for those on £48 983-£69 931 a year, and a 2.3 percentage point increase for those earning £69 932-£110 273.

The new deal on pension contributions proposes a 1.5 percentage point increase in contributions for employees earning £26 558-£48 982 and a 2.4 percentage point increase both for staff on £48 983-£69 931 and for those earning £69 932-£110 273.

As a result a doctor on £60 000 a year will be paying an additional £72 a month into the NHS pension scheme after tax relief in 2012-13 compared with £60 extra a month as set out in the original proposals.

Senior doctors earning more than £110 273 a year will be subject to a 2.4 percentage point increase in pension contributions, as per the Department of Health’s earlier consultation.

These changes will still deliver the same overall level of savings of £530m in 2012-13, the Department of Health has said. The tax relief benefit received by higher earners will offset the higher contributions increase set out in the new plans, it adds, so that an employee earning £60 000 would no longer contribute less as a proportion of their salary towards their pension than someone earning £15 000.

The BMA has described the further pensions contributions hike as “unjustified” given that the NHS pension scheme was overhauled only three years ago and is delivering a surplus of billions to the Treasury. “The majority of staff would be even worse off under this change,” said Hamish Meldrum, chairman of council at the BMA. “The announcement of an even steeper hike will intensify the anger they are already feeling.”

“The government claims to want to reach a solution via dialogue,” he added. “If that’s the case it’s ridiculous that it can announce a proposal like this without raising it in negotiations.”

These changes alone will not be enough to ensure that NHS pensions are affordable in the long term, health secretary Andrew Lansley has said. “We are continuing to discuss wider changes to pensions with trades unions and hope to reach an agreement by the end of the year,” he said.

Proposals for employee pension contributions in 2013-14 and 2014-15 and other changes after the Hutton review will be subject of further discussion with trades unions. At the conclusion of negotiations, the BMA will seek its members’ views on whether or not they think the offer available is acceptable and, if not, what action, including industrial action, they would be prepared to take to defend their pensions.