Government to increase retirement age and axe final salary pensions

Authors: Helen Jaques 

Publication date:  18 Jun 2011


The government has laid out plans to increase the retirement age for public sector employees and replace final salary pensions with career average schemes.

The chief secretary to the Treasury, Danny Alexander, has confirmed that the age at which public sector workers will be able to draw their pensions will rise to 66 by 2020, in line with changes to the private sector retirement age.

Staff in the public sector will be moved to career average schemes, as suggested by Lord Hutton in his review of public sector pensions earlier this year, although benefits accrued under existing final salary schemes will be protected.

Pension contributions will also rise by an average of 3.2% between 2012 and 2014, with the highest paid public sector employees such as consultants and GPs paying up to 5% more. The BMA has predicted that some doctors could contribute up to 15.5% of their pay to the NHS pension scheme under these plans (BMJ Careers 13 Apr, http://careers.bmj.com/careers/advice/view-article.html?id=20002582).

The government insists that the new deal is “by far the best that is likely to be on the table for years to come” and is necessary given spending cuts and rising life expectancy.

“We are all living longer. That means more years spent in work, as well as in retirement. To keep the best pensions in the country, public sector workers will have to contribute more,” said Mr Alexander in a speech to the think tank the Institute for Public Policy Research.

“An increase in the normal pension age would be unacceptable,” a spokesperson for the BMA has said. “A doctor in their late twenties who had expected to retire at 60 could now have to work until they are 68. Such a sudden leap is particularly unfair when you consider that NHS staff signed up to a radically overhauled pension scheme only three years ago.”

Doctors have already seen their pension contributions increase from an average 6% of salary to an average 8.5% following a review in 2008, the spokesperson added. “Doctors pay among the most in the public sector for their pensions, and are likely to be particularly badly affected by further increases, with many seeing their contributions double. Essentially doctors are being told to pay twice as much for a far worse pension.”

Mr Alexander warned unions that striking over the changes would be “a colossal mistake.” He said, “A strike now might be in the interests of the union’s boss, but it is not in the interests of its members.”

Consultants and junior doctors have already voted in support of protest up to and including industrial action to prevent changes to their pensions at their annual branch of practice conferences (BMJ Careers 25 Mar, http://careers.bmj.com/careers/advice/view-article.html?id=20002342; 17 May, http://careers.bmj.com/careers/advice/view-article.html?id=20002984), although general practitioners stopped short of mandating such measures at the local medical committees conference last week (14 Jun, http://careers.bmj.com/careers/advice/view-article.html?id=20003344).

The issue will be debated again at the BMA’s annual representative meeting at the end of the month, when motions questioning the fairness of increasing the normal pension age for NHS staff and switching from final salary to career average schemes will be up for debate (BMJ Careers 7 Jun, http://careers.bmj.com/careers/advice/view-article.html?id=20003242).

Helen Jaques news reporter BMJ Careers

 hjaques@bmj.com

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