Doctors Hit By £200,000 Pension Changes

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Doctors demonstrating for the National Health Service at an annual meeting of the British Medical Association
Doctors demonstrating for the National Health Service at an annual meeting of the British Medical Association

Changes to public sector pensions could mean doctors paying over £200,000 more over the course of their careers for a worse deal on retirement, research commissioned by the BMA showed yesterday.

The BMA commissioned actuaries to examine the potential impact of Department of Health proposals to increase the amount NHS staff pay for their pensions.

Under the plans, a doctor currently contributing 8.5 per cent of salary would contribute 10.9 per cent by 2012, and possibly as much as 14.5 per cent by 2014.

The modelling calculates the additional contributions doctors would need to make over the course of their careers.

A junior doctor currently aged 25 pursuing a typical career as a GP and retiring at the future state pension age of 68, could have to make additional contributions of over £230,000 between now and retirement.

The researchers also modelled the impact of the proposals put forward by Lord Hutton in his review of public sector pensions, such as a further increase in the normal retirement age and a move from final salary to career average schemes. The government is expected to set out specific plans based on Lord Hutton’s recommendations in Autumn 2011.

The modelling indicates that a doctor currently aged 25, retiring as a consultant at the age of 60 could receive a pension around £19,000 lower than the final salary pension they would receive under current arrangements.

Similarly, a GP currently aged 25 retiring at the age of 60 would receive a pension around £20,000 lower under a ‘new look’ public service pension.

Dr Hamish Meldrum, Chairman of Council at the BMA, said: ‘These are unjustifiable changes to a financially healthy pension scheme which has only recently been thoroughly overhauled.

‘This isn’t about affordability, it’s about the Treasury looking for yet another quick hit from public sector workers.’

The modelling also looks at the impact of the decision, already implemented, to increase pensions payments in line with the Consumer Price Index (CPI) rather than the Retail Price Index.

A doctor retiring at the age of 65 could be worse off under the CPI by £2,000 a year at the age of 70, and by a total of £124,500 by the age of 85.

‘Doctors pursuing a career as a consultant or a GP will have to pay significantly higher contributions in return for a much reduced pension at retirement’, the paper concludes.

Dr Meldrum added: ‘The BMA, working with other bodies representing NHS workers, will be robustly challenging these unnecessary changes to the NHS scheme.’

Doctors’ leaders in Northern Ireland have demanded that the Northern Ireland Assembly state its intention on public pensions and whether proposed changes to the NHS scheme in England and Wales will apply to health service workers in the north.

• SCRAP PFI SAYS UNISON

UNISON is calling on the government to ditch the Private Finance Initiative (PFI), after a House of Commons Treasury Committee warning over the long-term cost to the taxpayer.

MP’s agreed with the public sector union over the poor value for money provided by PFI. The committee is concerned that government departments are encouraged to make bad investments because of the initial low cost of the projects.

Unison is demanding the government make the projects cheaper by funding them publicly.

Unison general secretary Dave Prentis said yesterday: ‘The Committee have confirmed what we know is true – PFI is a waste of cash.

‘Government incentives and short-term gain are being put before the long-term pain.

‘PFI is a huge burden on the public sector and has cost taxpayers billions over the odds. The huge PFI debts hospitals have run up have played a major part in the cuts being made to staff and treatments.

‘Despite criticising PFI in opposition, the Tories pushed for it in power, signing off many new projects. Money that should be re-invested in providing better services goes straight into the profits of greedy business.

‘The government must listen to the facts and finally ditch PFI.’

As well as admitting the PFI is poor value for money, the Treasury select committee published the total PFI liabilities.

The Treasury Select Committee concluded: ‘Private Finance Initiative (PFI) funding for new infrastructure, such as schools and hospitals, does not provide taxpayers with good value for money and stricter criteria should be introduced to govern its use.’

The Committee’s report said that the long-term expense of PFI deals were now much higher than other forms of borrowing and the taxpayer bears the burden.

It added: ‘The average cost of capital for a low risk PFI project is over 8%, double that of government gilts. Analysis commissioned by the Committee suggests that paying off a PFI debt of £1bn may cost taxpayers the same as paying off a direct government debt of £1.7bn.