“Sexy-Cash” is back – with tPR’s blessing?

 

 

Some years back, the then pensions minister Steve Webb waved a Boots’ pension offer in the faces of a bemused NAPF audience and berated “sexy-cash pension offers”. Boots were offering staff cash inducements to leave a pension scheme for short-term gain (sexy-cash). I wrote about it at time.

Like all Steve’s great lines, there was a whiff of sensationalism about this and I heard people in my row grumbling  that it “wasn’t as simple as that”. It was- and the business of cash inducements as a means of enhancing transfer values quickly feel out of favour. Political risk counts for a lot when you are running a large UK corporation.


 

Now “sexy-cash” is back, this time the victims of short-term inducements are nurses who Oxleas NHS Foundation Trust are recruiting with a “pension free”accelerated transfer option.

Nursing agencies are able to offer more in take home pay than the NHS – although this comes at the expense of other benefits the NHS provides such as pension, training, supervision and career development.

We have created a new pay offering, which is open to all band 5 nurses at Oxleas and will allow the choice of taking either the standard NHS pay scheme, or one that has an enhanced rate of pay, which when combined with additional pay for unsocial hours, will equal the pay offered by many agencies.

Accessing this offer means you would not be a member of the NHS pension scheme, we will instead be paying you directly the money that we would have paid into the NHS Pension Scheme on your behalf.

Apart from not having an NHS pension, there are no other differences with a standard NHS job. You would have the same entitlements to annual leave, sick pay, and training and you can change your mind and move between the two pay offers at any time. We also offer a third pension option which allows you to join the National Employment Savings Trust (or NEST) pension scheme.

It’s a straight cash for pensions offer. The FT hasn’t wasted any time in getting to the heart of the matter. An Oxleas spokes person tells them

We acknowledge that many nurses have different priorities and needs at different times in their lives

This has all the logic of the “victimless crime”!

Large pension schemes work on the basis of everyone being “in”. If the only time people are in , is when they’re homing in on retirement, not only do they get a fraction of the pension, but they deprive others of the benefits of their contributions when they are young.

As the offer brutally shows, relative to not offering a pension (the agency model) nurses are giving up a lot of sexy-cash. But targeting the cash-strapped youth with such inducements is even worse than what Boots did, it really rips up the rule book on financial prudence, calls into question the basis of the NHS pension scheme and discredits auto-enrolment.

I’m really pleased to see Paul Moloney standing up to being counted on this. Paul’s quoted telling the FT

The Pension Regulator’s own guidance quotes an example of a clear-cut breach of automatic enrolment legislation, as an employer offering higher pay as an incentive to leave an auto-enrolment scheme

He’s right. The Pension Regulator argue that Oxleas’ offer is a form of flexible benefits -that’s tosh!

If any of the 1.8m employers staging auto-enrolment were allowed to offer higher take homes in return for opting out of auto-enrolment, we’d see opt-out rates soar. And those people who opted out of a 1% contribution, would be even happier when their decision was vindicated when contribution levels quadruple in a couple of years’ time!

Like the NHS scheme, auto-enrolment works because we’re all in, not just those whose employers don’t run sexy-cash flexible benefit schemes.

So. like Paul , I have no truck with the Pension Regulator’s statement

Where the employer has no vested interest in the individual’s decision, it (a salary alternative) would not constitute inducement…

Employers will do everything they can to manage their business’ profitably for the short-term. That’s why most employers don’t think about pensions – thinking about the long-term benefit for staff is not in the DNA of those with short-term KPIs.

Given half a chance, most employers will walk away from pensions and pension auto-enrolment, in favour of short-term gain.

It is up to Government to stop that happening and it is up to the Pensions Regulator in particular, to be clear that swapping pension for cash cannot be right. Whatever super subtle lawyer in the Pensions Regulator thinks that Flex-Benefits can be structured to avoid auto-enrolment ought to be hauled into Ros Altmann’s office right now and be given a proper dressing down.

Thank fully , more powerful and eloquent voices than mine, or Paul Moloney’s are speaking out agains this unspeakable  rubbish from tPR. Step forward the FT and step forward Steve Webb, quoted on twitter

NHS cash deals to staff to opt out of pension “fundamentally undermines principles of auto-enrolment”

But perhaps we should leave the final word to the Pensions Regulator – quoting from the Employer Guidance notes to AE.

  1. It is important that any entitled worker’s or jobholder’s decision to opt out of, or leave, their current pension scheme should be taken freely and without being influenced by the employer.

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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