With an outmoded pension scheme for the NHS, Niall Dickson, chief executive of the NHS Confederation, looks at options for updating it.
This week in Parliament, Paul Masterton MP summed up the pension issue succinctly when he said: “It is ludicrous if we face a situation where the pension system is acting as a disincentive and effectively forcing consultants to choose between working for nothing and patient care.”
Of all the workforce issues, it is clear the draconian changes to the pensions’ annual allowance and taper is one of the most significant facing providers.
Already we can see that senior medical staff are offering less discretionary time and reducing their hours - others are reluctant to take on additional work or to apply for promotion, and too many are taking early retirement. We can ill afford to lose this resource.
The NHS Confederation (through NHS Employers) has already taken some steps to mitigate the impact of these changes, in particular through the application of the lower, tapered annual allowance limit which applies to the highest earners.
We have also made local clinical excellence awards non-pensionable and extended the scheme pays option, which allows staff to ask the scheme to pay their tax charge to HMRC in return for a lower pension in retirement.
Time for more fundamental reform
The need for more far-reaching reform is recognised in the People Plan, but it will need the backing of the Secretary of State and, crucially, the Treasury. The case for relieving pressure on higher earners is not an easy one to make, but when critical front-line services are at stake, it should be possible at least to remove or reduce clear disincentives.
At the very least, there needs to be more flexibility for staff about how much they put in and thus how much pension they will earn.
NHS Employers is developing proposals to introduce something akin to the 50/50 approach taken in the local government scheme, where scheme members can choose to pay half the contribution rate in return for half the value of pension benefits. NHS Employers believes introducing scheme flexibilities will ensure the NHS Pension Scheme remains an attractive and valuable benefit for all staff. This should help retention across the workforce - we hope we can secure trade union support and Treasury approval.
The other idea being floated is to develop a national agreement, which would give doctors and perhaps other senior staff the ability to receive salary in lieu of the employer’s pension contributions.
We can see how such an agreement across the NHS might help alongside the 50/50 reform of the scheme. However, as things stand, it would carry a financial cost to employers as tariff payments are linked employer pension contributions.
We also need to be careful that we do not inadvertently encourage groups of employees including doctors to opt out of the NHS pension scheme, which would not be in their longer-term interests and could undermine the scheme’s viability. Ideally, we would wish to introduce flexibilities that will benefit all staff groups.
Niall Dickson is chief executive of the NHS Confederation. Follow him and the Confederation on Twitter @NHSC_Niall, @nhsconfed
Visit the pay and reward section of NHS Employer website here.