This blog applies to people in the NHS pension scheme (for whom the problems with pension taxation are most acute) – but it also applies to anyone in the armed forces, the civil service, teachers, judges, fire and policemen. It’s a problem created out of the immutable problems of public and private sector pay, of tax subsidies and of the widening gap between the retirement prospects of those looking forward to a pension (an income for life) and a pot of money to spend with pension freedom.
I say immutable because, unless we work to a single system of second pillar pension benefits, there are going to be winners and losers in all this and the various inequalities , cross-subsidies and vagaries are ambiguous, they can be read either way.
Over the weekend , while riding trains around Sri Lanka, my mobile merrily pinged away with the tweets of at last count 73 contributing doctors all keen to participate in a debate on the lifetime and annual allowances for their pension entitlement.
It is clear that doctors aren’t happy with their lot -this tweet is typical of the tone of the conversation.
Thanks to the system, we live a very normal basic life with no luxury despite salaries of £80-100k! Even this is being compromised annually with a 5-10% erosion of our disposable incomes.
Trust me, the breaking point is imminent.
— Rami Muhammed Fikri (@DrRamiMFikri) March 3, 2019
The debate is febrile because pension contributions are rising and so are the tax-bills for those with high earnings , high pension entitlements and substantial increases in those entitlements year on year. The debate is also febrile because of the lack of expertise available to doctors to sort out problems they see as not of their making. Their is also distrust of the expertise that is available and a perception that advisers are more interested in their own pockets than their clients.
What would you suggest?
As we saw here, most of the Professionals engaged in discussions (and I’m very grateful to you guys for engaging) didn’t actually know all the crap that’s in the NHSP small print
I wonder if the BMA should be doing pension education study days?
— Nitin Arora (@aroradrn) March 3, 2019
Added to this is a reluctance , even among well paid doctors and consultants to pay the going rate for truly independent financial advice (which is clearly not seen as on a par with other professional services – legal/accountancy for instance).
Doctors no different from anyone else! Do Thet trust their unions to lay on VFM? Would they prefer to pay less for DIY decision trees? Or are they expecting too much for nothing?
— Pension Plowman (@henryhtapper) March 3, 2019
Immutable but bearable?
I would mind against taking a dim view of public service pensions. They are unfunded (other then the MP , LGPS and a few other specialist schemes), they are efficient and they are well governed.
What we are seeing with doctors is a an awakening of interest in a subject that till now, they need have little interest in. This is because resources are finite and Government needs to trim the cost to the taxpayer of what others see as disportionate pension benefits.
The attempts to put everything on a single footing have so far failed (pensions simplification 2006 being the last).
Going forward we will have to consider the consequences of the pensions debate in a broader context that includes both funded and unfunded second pillar pensions.
This will be part of the pensions map that we intend to draw for the pensions industry.
For most pension experts, who are in hock to the fund management industry, public sector pensions are of no commercial interest, but if we are to avoid a wider breakdown in trust in pensions, we must answer the questions of health professionals and those in the wider world of public sector schemes.
I look forward to posting blogs from those impacted by the various changes to public sector pensions and their taxation in coming days.