I don’t claim to any expertise about the changes to the NHS pension scheme resulting in the launch of a new arrangement from 2015 into which some doctors were rudely transferred and some gently transitioned.
We are told it is not as generous as the previous incarnation and the BMA is arguing that giving older folk a gentler transition was age discrimination. This is now a matter for the courts and not a matter I have any wish to give an opinion on. Any case that relies on age discrimination is a difficult one and in pensions – where it is all about age- we risk the legal niceties getting in the way of common sense.
This is what common sense tells me
Government is in a very difficult position about it’s unfunded pension liabilities. It relies on the Government Actuary for advice on liabilities and from its various economic forecasting unites to understand our capacity to keep meeting the bills.
The bill for the NHS pension scheme pensions will keep on coming , just as will revenue from taxation. Pensions are potentially infinite – or as the market says – open-ended.
And these Government paid pensions are fungible, that is the money that passes through the hands of pensioners passes back into the Treasury through taxation. Pensioners spending drives our gross domestic product and provided the trajectory is positive, we are able to afford to improve pensions over time. Or so you would think.
But demographics changes all that and for the past 75 years (since we stopped fighting each other) Britain and other Western Economies have learned to grow old in peace. We have learned how to keep ourselves alive and we now pursue long-life as an end in itself.
Funding this new found hunger to live longer frightens Governments , especially as we are not reproducing as we did, the dependency ratio between young workers and elderly retirees is higher than ever. Governments , in such circumstances are liable to panic. So we have seen drastic cuts in state pensions from the mid – eighties the abandonment of the principle of a state earnings related pension altogether. It has only been recently, with the “triple-lock”, that we have seen any upward adjustment to the long-term decline in state provision.
It is in the context of several decades of state pension funk, that the NHS trimmed its future pension promises in 2015.
Prudence or panic?
The decisions to cut pension benefits can always be justified as “prudent”. But they don’t necessarily turn out that way. The chief complaint of doctors is that the rules surrounding their pension contributions make it economically unviable for them to do work , the pay for which is not pensioned.
Such unforeseen consequences are common , in 2012 Unilever had its first and only strike in response to pension cuts, hundreds of thousands of students were undertaught last year when academics withdrew their labour. The impact of such non-productivity is felt by everyone eventually.
I fear that there is increasingly a resignation among ordinary working people that their pensions will be diminished and a reluctance to stand up for pension rights. This results from a guilt among those who do have a good pensions deal, that they really shouldn’t be moaning. The new standard for pension provision is minimum contributions to workplace pensions. If you get more than standard you are in no position to moan.
I fear we are setting the bar too low and we have panicked people into believing in a kind of pension austerity that is not for them or the country. Panic and prudence are two sides to the same coin.
So what of the BMA and the doctors?
The BMA would do well to keep itself well away from the Judges and MPs and firemen – all or which are special cases.
The NHS pension scheme is huge and doctors are just one group of members. When we hear that expectations for us living ever longer are diminishing, then we should be asking, why is the NHS pension scheme reducing its benefits? When we consider that real wage growth for most of the members of the NHS has been negative in the last decade, we need to ask that question harder.
When Doctors consider the extra taxation applied to them through the AA, LTA and the Taper, they may well ask – why are we paying so much more for less?
And if a scheme as big as NHSPS is asked those kind of questions, then it won’t be long before other large schemes are also questioned. The JEP inquiry into the valuation of the USS scheme may not be the last to fundamentally the strategic direction of our large pension schemes.