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How pensions are changing

BMA pensions committee chair Dr Andrew Dearden gives an insight into what the Government plans for the NHS pension


I would imagine that all GPs are, like me, rather surprised that only three years after the last major review, the Government has in mind some further serious changes to the NHS Pension Scheme.

The 2008 review of the scheme introduced a later retirement age and a cost-sharing agreement that passed on most of any increased cost – such as from scheme members living longer – to the members. Despite this, the Government is determined to increase contributions further and reduce benefits.

Some changes have already happened. From 1 April 2010, we have already been paying more for our pensions. The Government changed the inflation measure by which pensions in payment are increased and reduced annual and lifetime allowances.

This special report has some useful tips on how to reduce the impact of these changes, but it is clear that we are going to have to fight hard to prevent the Government introducing what amounts to an additional tax on public-sector workers.

Here is an overview of the short- and long-term changes we might see to the NHS pension.

Short-term changes

The reforms in the Health and Social Care Bill are likely to see an increase in private-sector involvement in the NHS, and we may well see some GPs transferred to and employed by private-sector companies.

At present, when a public-sector job is transferred to the private sector the member's pension is protected by something that is referred to as ‘fair deal'. This means that the member must be offered a ‘broadly comparable' pension benefit in the event that their job is transferred.

The Government ran a consultation on fair deal earlier this year and we await the results. However, I think it is reasonable to assume that they have an eye on removing it to ease access to the NHS for private-sector companies and this could of course have major implications – not just for GPs, but also for their staff.

Probably the most serious threat to pensions lies in the proposals outlined in Lord Hutton's Independent Public Service Pension Commission published earlier this year. The Government has taken up Lord Hutton's recommendations on increased contributions with some vigour, and has announced public-sector pension scheme contributions would increase by an average of 3% of pensionable pay over the three years beginning April 2012.

What does this mean for GPs? The tiered contribution system that exists in the NHS Pensions Scheme means the more you earn the higher the percentage contribution you pay. Typically, GPs pay either 7.5% or 8.5% as their employee contribution. GPs are also required to pay their own employer contribution, though of course this is at least part-funded by the global sum payment you receive.

The Government now wishes to increase contributions significantly starting in April of next year. By April 2014, many GPs are likely to be paying a 14.5% employee contribution. The Government is currently consulting (until 21 October) on the first-year increase, and we are asking all BMA members to make their feelings clear on these proposals.

Longer-term changes

Lord Hutton also recommended pension ages should increase and the method of pension accrual should change.

‘Normal pension age' is the age at which the pension can be taken without actuarial reduction, and Lord Hutton recommended this should be aligned with the state pension age. This would immediately increase the normal pension age in any new scheme to 65, and depending on how old you are to 66, 67 or 68, and continue to increase in line with improving longevity.

GPs currently have a method of pension accrual that is based on their total career revalued earnings, but Lord Hutton recommends that in future all members of the NHS Pension Scheme should switch to a career-average revalued earnings scheme.

While we don't have the full details of what this might look like, we do have a fair idea, and it is likely that in future the combination of these proposals will mean that the next generation of GPs could be retiring on pensions worth only half of what those retiring today receive.

What you can do

Please look at the BMA website ( where you will find an interactive modeller, a fuller actuarial document and case studies. We also have suggested text for members to use when writing to their MPs or responding to the current consultation on contribution increases.

Dr Andrew Dearden is chair of the BMA pensions committee and a GP in Cardiff