Pension contributions are set to double for high earning doctors

Authors: Helen Jaques 

Publication date:  22 Jul 2011

The government has signalled its intention to increase pension contributions for public sector staff by up to six percentage points by 2014-15 in a bid to save £2.8bn a year.

Under the proposals put forward by the Treasury this week, high earners will face an increase in pension contributions of up to 2.4 percentage points in 2012-13 and a maximum rise of six percentage points by 2014-15. There will be no contribution rises for people earning less than £15 000 and a maximum 1.5 percentage point rise by 2014-15 for those earning up to £21 000.

An increase in contributions of six percentage points could mean that “many” doctors would be paying around twice as much for what is likely to be a worse pension, the BMA has said. Doctors already pay on average 8.5% of their salary into the NHS pension scheme.

The Treasury will consult on contribution increases for members of the NHS pension scheme separately from talks on other public sector schemes. Scheme specific discussions will start at the end of this month and will deliver initial proposals by the end of October in time for implementation by April 2012.

The BMA has welcomed the plans to hold discussions on a scheme by scheme basis. “We’ve always argued that the NHS scheme needs to be looked at separately, given the size of the surplus it’s currently delivering to the Treasury and the fact that it underwent a major overhaul only three years ago,” said a spokesperson. The NHS pension scheme will provide a surplus to the Treasury (over benefits paid out) of £10.7bn between now and 2015-16.

However, all options remain on the table during consultation on the NHS scheme, including rejecting any changes suggested by the Department of Health, says Andy Blake, head of pensions at the BMA. “Our position on this is that we see this as entering into scheme specific negotiations with no preconditions,” he says. “We haven’t actually agreed to any of the changes so far, and it may well be the case that at the end of this process we reject what the Department of Health is putting forward.”

On top of the contribution increase the government has signalled that it will increase the retirement age for public sector workers in line with the state pension age and replace final salary pensions with career average schemes, as recommended by John Hutton in his review of public sector pensions earlier this year (BMJ Careers, 11 Mar, [Link] ).

“The government and the TUC [Trades Union Congress] have held a series of constructive meetings to discuss public service pension reform and have now agreed that to further inform the discussions on Lord Hutton’s recommendations, there should be scheme level discussions alongside the central process already established,” said the chief secretary to the Treasury, Danny Alexander.

Helen Jaques news reporter BMJ Careers

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