Nobody writes about the NHS pension scheme and you don’t see it featuring in PLSA and other pension events.
That is because it generates precious little profit for the private sector. So here is a brief description (thanks Wiki).
The NHS Pension Scheme is a pension scheme for people who work for the English NHS and NHS Wales. It is administered by the NHS Business Services Authority, a special health authority of the Department of Health of the United Kingdom. The NHS Pension Scheme was created in 1948.
The NHS Pension Scheme is made up of the 1995/2008 Scheme and the 2015 Scheme. From 1 April 2015 all new joiners, without previous scheme membership, join the 2015 Scheme automatically. Members prior to 1 April 2015 retain rights to remain in the 1995 or 2008 section of the existing scheme.
The NHS Pension Scheme has 1.35 million members and 650,000 members actively contributing.
The benefits and conditions vary according to the type of worker and the dates of their service; from 2008 the “Normal Retirement Age” changed from 60 years to 65 years while the proportion of pay upon which a pension is based was increased. The benefits are index-linked and guaranteed. They are based on final salary (members who joined before 1 April 2008) or average salary (members who joined after 1 April 2008) and years of membership of the scheme. There are no administration costs. Members can increase their contributions if they wish to get larger benefits (within certain limits).
As of 2016, the tiered employee contribution rates start at a 5% rate increasing in 7 steps to 14.5% on income above £111,337.
If the NHS pension scheme was funded, it would be the largest funded pension in Britain, it might even rival the mighty CALPRS in the States to be the largest funded pension in the world. But it isn’t funded and therefore doesn’t trouble the asset management scorecard.
To the lay-reader, a pension scheme that serves 1.35m of the UK population would deserve considerable attention – but the UK pension industry has but one master – the fund management industry.
Which is why bottom-up engagement is more likely than top-down debate. It is why the most vigorous discussions on the NHS scheme (and by extension all state sponsored unfunded pensions) are on social media.
Pension problems for doctors is a problem for the NHS
We should not confuse the apathy of the pension (fund management) industry toward the NHS pension scheme with its potential consequences for the nation’s health service and the nation’s health. As Nitin Arora points out in his blog (published alongside this), the issues Doctors have need immediate address.
The problem the NHS has is that we have most consultants working ~20% more than full time, with anything over 10PA being non-pensionable; and lots of departments rely on consultants doing extra lists.This is not conducive to efficient tax planning for individuals.
When people realise that their extra 20k of income results in a 12k tax bill, and potentially 3-5k of ‘scheme pays’ they may elect to stop doing this extra work.
Nitin call for action is deliberately targeted at people who care about the health service, whether within or without.
We as custodians of the NHS need to look at the bigger picture, and alert the government to the impending crisis. The taper, AA and LTA together, are going to drive an already demoralised workforce to cut working time. At this time of an overstretched health service, and staff shortages, this would be a disaster.
Why the NHS is not the USS
There is no crisis of funding at the NHS Pension Scheme, there is no question that the NHS pension scheme will close for future accrual, there are no arguments to be found about self-sufficiency. This is because the balance between Government funding (via taxation) and member contributions is maintained by the Government Actuary without the usual hullabaloo around investment strategy.
The business of the NHS pension scheme is in providing pensions and this singular intent is recognised by its members, I am not aware of any substantial challenge to the Scheme (though clearly there is an issue around the provision of support for members in the decisions they now have to take.
The issues around the NHS pension scheme relate to tax. The suspicion is that the already burdensome membership cost to higher earning members is increased further by progressive taxation . We are used to the pension system robbing the poor to pay the rich – (the regressive alternative), but with the taxation of high-earners pension increases running at as much as 67.5%, there are now serious reasons for Doctors do the “hokey” – the member’s phrase for going “in-out” of the scheme as tax liabilities dictate.
The main difference between USS and NHS is that the NHS is making membership untenable for members while UUK argues that USS membership is untenable to employers.
Giving members a voice.
What I find interesting about the eruption of interest in the NHS Pension Scheme – is that it is happening on twitter. Twitter also provided the platform for debate on USS and Facebook was the platform members of the British Steel Pension Scheme (BSPS) use to understand their “time to choose”.
What is interesting is the attitude of the unions to the mobilisation of their members in these self-help groups (and threads). At BSPS, there was no involvement, at USS, the UCU has been heavily involved in the debate, we have yet to see the extent to which the BMA and other NHS unions will encourage the debate on an open platform or try to confine it to in-house publications and forums.
In my view, social media has become the forum where pension policymakers have most to learn. If I was HMRC or the Treasury (especially GAD) , I would be exploring the different views expressed on the threads that Nitin Arora and others have created.
We have yet to explore the full functionality of social media in assessing opinion. Polls can play an important part in this and are as yet virtually unused as a way of testing the water.
What social media has is scope and – using a limited number of hashtags, social media can provide scope and immediacy to conversations that demand quick and decisive conclusions.
So I look forward to the NHS Pension Scheme debate being conducted in public, as it is today. It is far more healthy for doctors and other members to share their grievances with a wider audience, than be confined to the pages of Pulse.