Cookie policy notice

By continuing to use this site you agree to our cookies policy below:
Since 26 May 2011, the law now states that cookies on websites can ony be used with your specific consent. Cookies allow us to ensure that you enjoy the best browsing experience.

This site is intended for health professionals only

At the heart of general practice since 1960

PCT is forcing me to practise in a 'shed'

How shake-up would affect all age groups

With the publication of the NHS pensions review GPs at last have a chance to see how their pensions might be affected ­ we look at the implications of the main proposals

Key changes have been proposed to NHS pension arrangements. With the exception of the increase in full pension age, the proposals suggest many improvements and offer one important reassurance ­ preservation of benefits.

But it is important to recognise that, although full pension at 65 rather than 60 is essentially a done deal, the changes are proposals only.

Improvements

The following are a selection of the more important suggested improvements as they affect GPs.

·Existing scheme members can choose whether to opt in to the new scheme or stay with the old one until 2013. At this stage all members must then join the new scheme. This is important for GPs planning retire up to the end of 2012 as, assuming they are retiring at 55-60, the old scheme will be more beneficial. It should also benefit GPs planning to retire at age 60 but who will

not reach this age until a few years after 2013.

·The accrual rate for GPs may rise to around 1.87 per cent (currently 1.4 per cent for principals). This will benefit GPs retiring at age 65 compared with the old scheme.

·It is recommended that the lump-sum calculation changes from three times the annual pension to commutation of pension (part of the 1.87 per cent accrual rate allows for this). This will provide more individual flexibility. Up to 25 per cent of the pension value (calculated at 20 times the pension after commutation) can be taken as a lump sum.

·Flexible retirement is recommended. This would mean a GP could start drawing their pension or part-pension and continue to work with no break in service. It would also allow a wind-down to retirement with part-time working and little or no loss of income. Re-employment would also continue to be pensionable, unlike now.

·For those diehards who retire after 65, their pensions would be actuarially enhanced.

·In the event of a member's death in service, the survivor benefits will be given to all partners including same sex, unregistered and unmarried. Also the death-in-service lump sum for those couples with no dependants will increase from twice to three times the annual pensionable (superannuable) income. This is worth an extra £75,000 for the average GP.

·The initial enhanced widow/widowers' pension will be paid for six months regardless of whether there are any dependants. At present this is only paid for three months if there are no dependants and six months if there are.

Preservation of benefits

Many GPs whose planned retirement was after 2012 have been worried that they would lose considerably after compulsory entry into the new scheme. This has been so much the case that some have been predicting a retirement stampede in the lead up to 2013.

The review gives clear reassurance, stating: 'No existing scheme member will have to work to 65 to achieve the same pension they could have had at 60....NHS staff who intend to retire after 2013 will have their pension rights up to 2013 protected under existing terms. This means that service for existing NHS staff up until 2013 will be payable on retirement after age 60 without reduction.'

So those who will be 60 in the few years after 2012 will face little loss of pension at 60 as only a few service years will count under the new scheme.

Although not stated, the implication is also that 'old' NHS pension service for retirement between age 55 and 60 will be actuarially reduced under the current rules, not the new ones. Only service from 2013 will face a higher reduction.

Added years and AVCs

The review has raised the dilemma of the desire of staff to increase their pensions versus the wishes of the Government to limit the amount of guaranteed pension via added years. Also the current added years scheme is not flexible; it should be possible to vary the contributions.

There is also a wish that AVCs should continue, but the NHSAVC providers are keen that only one of them gets the contract! They argue that pension industry safeguards should prevent an Equitable Life situation recurring.

No decision has been made and views are invited. It is clear that the days of the old added years scheme are numbered, and given the Government's desire to reduce costs many would say any new scheme is unlikely to be as good as the current one. Anyone thinking of pension enhancement should seriously consider the present added years scheme with some urgency as it may not be around after April 1, 2006. As always, take expert pensions advice first.

Ill-health retirement

With a move to retirement at 65, the numbers of ill-health retirements are expected to rise. There is currently little or no integration between employers and the NHS Pensions Agency (NHSPA). It is suggested this should change so that active management, to both prevent ill-heath and manage existing ill-health, can occur.

The review talks about alternative posts for staff that are not totally incapable of working. It is difficult to see how this could apply to GPs. For GPs and their staff this also implies an effective primary care occupational health service, something that is currently a long way off. Watch this space!

Dynamising a potential problem

Dynamising is absolutely crucial for GPs and has not yet been resolved. Dynamising increases past years' income to be more representatives of today's income. One suggested possibility is that, if all NHS staff move on to a similar career earnings-based pension (currently all except GP principals are on final salary pensions), a common dynamising factor may be applied to all.

GPs would almost certainly suffer if this happened as traditionally our earnings have risen more rapidly. If we are going to respond to the review, it must include a demand for GPs to be dynamised separately.

The new scheme certainly offers some improvements in benefits and flexibility, especially around retirement time. The price is reflected in a lower total pension/lump sum package if retirement at 60 remains the average.

GPs retiring in the next eight years are unaffected by this and those in the next eight to 15 years by bearable amounts. Younger GPs will need to address the issue of extra pension funding more closely to optimise post-retirement income if retirement at 60 or younger is their aim.

For those GPs who wish to make comments on the proposals the full document (which includes a response form) and summary can be downloaded from either the BMA or NHS Employers' websites.

How figures may stack up under the new scheme

It is important to realise that items such as accrual rates are not yet agreed. The following examples are therefore hypothetical at present. But it is interesting to see how the figures may stack up. We are assuming here an accrual rate of 1.87 per cent under the new scheme (the figure the review uses in its examples). All figures are based on current prices, as if retirement were occurring now. Increases in dynamising factors to take into account Q&O and enhanced services have not been factored in as exact figures are not yet known. Increases from rising seniority have not been factored in.

Full-time GP principal

age 53

Planned retirement at 60

in 2012

Will have 36 years service by age 60

Average dynamised superannuable income

£75,000 p.a.

Estimated annual pension

£37,800 p.a. and lump sum of £113,400

Comment

Will not be affected by new scheme

Full-time GP principal age 48

Planned retirement at 60 in 2017

Will have 36 years service by age 60

Average dynamised superannuable income £75,000 p.a.

Proportion of pension from old scheme is

31 years ­ estimated pension from this is £32,550 p.a. with lump sum £97,650

Proportion of pension from new scheme is five years ­ estimated pension from this is £7,012 less 27 per cent (actuarial reduction as retiring at 60 not 65) = £5,119 p.a. assuming no extra lump sum taken

Total pension therefore £37,669 with lump sum of £97,650

Under old scheme this would have been £37,800 p.a. and lump sum of £113,400

Comment

Minimal difference in pension at age 60 with £15,750 less lump sum

Full-time principal age 35

Planned retirement at 60 in 2030

Will have 36 years NHS service by age 60, 11 under old scheme and 25 under new scheme

Average dynamised superannuable income £75,000 p.a.

Proportion of pension from old scheme is

11 years ­ estimated pension from this is £11,550 p.a. with lump sum £34,650

Proportion of pension from new scheme is 25 years ­ estimated pension from this is £35,062 less 27 per cent (actuarial reduction as retiring at 60 not 65) = £25,595 p.a. assuming no extra lump sum taken

Total pension therefore £37,145 with lump sum of £34,650

Under old scheme this would have been £37,800 p.a. and lump sum of £113,400

Subject to 25 per cent limit part of new scheme could be commuted to lump sum (£12 for every £1 of pension given up)

Comment

Final pension slightly lower than old

scheme but lump sum much lower; however, this GP could commute part of

his pension to raise lump sum

Rate this article 

Click to rate

  • 1 star out of 5
  • 2 stars out of 5
  • 3 stars out of 5
  • 4 stars out of 5
  • 5 stars out of 5

0 out of 5 stars

Have your say