NHS pensions: make your views heard
The proposed changes to the current NHS pension scheme (NHSPS) are up for discussion by all NHS staff during this month and throughout November.
There is great relief that the most important aspect of the current scheme, the ability to retire at age 60 on full pension, has been retained. However, despite other clear improvements, all is not rosy. With the main battle won, there is a danger GPs may pay less attention to the changes, allowing the remainder to pass through unchallenged. This must not happen. Make your views known.
The following are some things to look out for.
Increased contribution rates
From 2008 it is proposed that personal contributions rates for the vast majority of GPs will increase from 6% to between 6.5% and 8.5% depending on salary. The average salaried GP will therefore pay an extra £1125 gross (£675 net of tax relief) a year and an average GP principal an extra £2775 gross (£1665 net of tax relief) a year.
Clearly this is the price we are being asked to pay for increased longevity. But is this unreasonable? Looking at the private sector, the answer is definitely no. In fact the majority of final salary pension schemes have closed to new entrants. In many cases existing scheme members' future contributions have moved to money-purchase schemes. And now many employees are paying higher contribution rates, often in excess of 8.5%. So increased contribution rates don't seem to be something to fret about.
End of added years scheme
The added years scheme allows years of service to be topped up to a maximum 40 years by age 60 – which is very useful for
doctors who qualify age 24 at earliest. No detail is as yet available about the cost of the proposed replacement scheme from 2008, but no prizes for guessing that this is likely to be more expensive.
Changes to dynamisation
Pensions for salaried GPs in the current scheme will continue to be based on the best of the last three years' salary.
GP partners will remain the only NHS group whose final pension is linked to lifetime earnings (LTE) and not directly related to final salary, as above. This is despite the NHS employers stated wish to move all NHS workers to an LTE basis.
The big change here is that the proposals plan an end to current dynamisation rules. At present, all previous pension contributions are increased annually by the increase in overall GP earnings – very much in our favour over the past three years.
The new deal is for LTE to increase by the retail price index plus 1.5% from 2008. On face value this seems a reasonable change, producing a steady rise in real pension value. However no figures are yet available to show how GP pensions would have fared over the past 30 years if the old and new dynamisation rules are compared. This would have been helpful.
There is now the flexibility for GPs to take a larger lump sum
at retirement (at the expense
of a lower pension), plus a
better deal for any dependants
following death in service and for surviving partners who re-
marry. These are all significant
In the current pension climate it is unlikely that our negotiators could have achieved
a better deal. However, make sure you are fully aware of all the changes and pass your views direct to the BMA or via your LMC.
A subsequent article will look at what action GPs should be taking now in the light of both these proposals and the changes to national pension rules that occurred earlier this year.
John Couch is a GP in Ashford,