GPs greatly value their pensions – and rightly so. If a GP were to purchase an annuity to pay for the average pension of £49,000 and £147,000 lump sum, they would need a pension pot of £2m. It is therefore entirely reasonable that they want to understand the implications of any changes to their pensions.
There has been much debate about the proposed NHS pension scheme. However, I believe the decision by the BMA to reject the heads of agreement, recognised by trade unions including the BMA in December as the best to be achieved by negotiation, is misguided and confusing to the public. In rejecting the agreement, the BMA argued that the move to career-average pensions for all, higher pension ages and increased contributions were unfair.
GPs, of course, already have a career-average scheme. Our proposed career-average NHS pension scheme has an accrual rate of 1/54th, with past earnings revalued in line with the consumer price index plus 1.5% per annum. This is almost identical to the career-average arrangements available for GPs in the current 2008 scheme.
Pension reform is necessary because people are living longer, healthier lives – at least in part thanks to GPs themselves.
Lord Hutton recommended that in future the normal pension age of public-sector schemes should be linked to the national state pension age. Today’s 60-year-old male doctor can expect on average to draw his pension for 29 years, compared with 20 years for a doctor who retired in 1984. These extra years would cost about £440,000. Today’s 24-year-old female doctor could expect to receive her pension on average for 28 years after state pension age.
Our proposals are proportionate and fair – it is clearly unsustainable to expect that pension scheme members in their late 20s, expected to live into their mid-90s, should be able to draw their pension in full at 60.
GPs already working longer
In 2010 there were 2,300 GPs working in the NHS aged between 60 and 65 and a further 1,300 aged over 65. GPs have always worked flexibly in their 60s, often through 24-hour retirement. Tomorrow’s GPs and those in the 2008 scheme will be able to take partial retirement, reducing their hours and drawing some pension, while continuing to build up their pension as they work.
The impact of these changes will be gradual. No GP will have to work to 68 unless they wish to and, if they do, most can expect to receive a larger pension. Some 31% of GPs are over 50 and will see no change to their pension age. A further 11% are within 13 years and five months of the pension age and will be given partial protection.
Pension earned up until 2015 will be protected for all. This means a 40-year-old GP would only need to work until he or she is 61 years and three months old to get the same £49,000 pension, and a 24-year-old only need work until 64 years and eight months. Admittedly, GPs will see an increase in their pension contributions, but this is reasonable given the improvements in longevity.
In total, we are asking NHS staff to pay an average of 3.2% extra in contributions by 2015. It is only fair that higher earners pay higher contributions while they benefit from the protection of accrued rights, and receive higher benefits relative to those on lower or middle incomes. The contribution rates for years two and three have yet to be decided, but next year those earning over £48,957 will pay an additional 2.4%. After tax relief this is only an extra 1.44%, very similar to the increase for middle earners. Currently, after tax relief, the highest earners in the NHS pay 5.1% and middle earners 5.2%.
BMA Council meets on Saturday to decide on options for balloting on industrial action. I echo what Andrew Lansley wrote to Dr Hamish Meldrum after the rejection of the heads of agreement: there is no justification for industrial action. It would harm patients. No concessions will be won through industrial action.
I want to see GPs and other NHS staff properly rewarded – they dedicate their lives to treating us. Our proposal means GPs will continue to receive pensions that are among the highest in the public or private sectors and will continue to see an excellent rate of return on pension contributions.
This is a significantly improved offer, which most unions agree is the best that can be achieved through negotiation. I urge GPs to recognise that this offer is fair.
Simon Burns is minister of state for the Department of Health