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Warning Treasury raid on NHS pensions will cost jobs

Job losses and cuts to NHS services will be the “inevitable” result of a government attempt to raid public sector pensions, according to a joint wanting from health service employers and unions.

Around £2.5bn in unexpected costs will be landed on health service organisations under plans by the Treasury to change the way the NHS Pension scheme is valued.

Both unions and NHS employers have reacted with shock at the level of increased costs and warned it would lead to reductions in services and could even threaten the sustainability of the NHS Pension Scheme in the long-term.

The changes come as the government looks to re-value the pension scheme before 2015 when changes come into force under the Public Sector Pensions Act. The changes will see NHS employees pay higher contributions, work longer and get a career average pension instead of a final salary scheme.

Now the government has issued changes to the way the pension scheme is valued, which will mean NHS trusts will have to pay tens of millions of pounds more from next year.

The NHS Employers organisation has estimated the cost of these changes at £1.7bn and when the government’s single tier pension comes into force in April 2016 – 12 months earlier than planned – it will add a further £800m to the pensions price tag.

Christina McAnea, head of health at Unison and chair of the NHS staffside council, said the proposals were “ludicrous”.

“This is another way for the government to take money out of the NHS and the notion of the NHS budget being protected is completely exposed by this,” she said. “Unless employers receive funding from the government this shortfall will mean cuts in services and job losses or employers will be forced to come after pay, terms and conditions again.”

Pledging to fight the plans alongside NHS Employers, Ms McAnea warned: “There is nothing left to squeeze out of the NHS. The Treasury has suggested these changes with no justification or rationale.”

Under the plans, the Treasury is increasing the notional long-term earnings growth assumption for staff by half a percentage point. It will rise from 4.25% to 4.75% annually. The long-term earnings assumption helps to calculate the expected costs of the pension scheme going forward.

Ministers also propose adding half a percentage point onto the discount rate. This is used to calculate the costs of meeting future liabilities of the pension expressed in – or discounted to − 2013 prices.

It is currently based on the consumer price index measure of inflation plus 3%, but the Treasury wants this to rise to 3.5%.

These two changes do not impact on individual staff, but NHS Employers said the extra costs would mean trusts having to save tens of millions of pounds extra.

A spokesman for NHS Employers said: “These are draft regulations but, if unchanged, the additional costs of around £2.5bn from 2015, calculated by independent actuaries, would be unaffordable for the NHS. Many patient services would be affected and staff job losses would be inevitable.

“The NHS has strained for several years to maintain coherent planning despite a string of changes and pressures. This potential increase in pension costs, unexpected as it is, would be the most difficult to recover from.”

Jon Skewes, director of policy at the Royal College of Midwives, said the “inexplicable” decision by ministers would “put increased pressure on already stretched NHS finances negatively affecting patient care and service delivery”.

He added: “We ask ministers to stop tinkering with the calculations and rethink their proposal. Attempts to undermine the pension scheme will result in more and more hard working NHS staff losing confidence in their pension and will opt out of the scheme.”

A Treasury spokesman said: “Valuations are extremely complex and it will take several months to gather all the necessary data, including scheme membership information, and complete the calculations.

“It is not possible to accurately predict this valuation until the process is complete and any attempts are pure speculation,” he said.

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Readers' comments (37)

  • Sorry, is it just me or can anyone else tell me where the government got this mandate to socially engineer worse conditions for health care workers?

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  • I have opted out of my pension for three years I would rather have 2 extra holidays with the money per year

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  • i have worked for in the nhs for almost 37 years. Each pay deal over this time was based on a better pension for nurses as governments of the day suggested they could not actually pay nurses what they were worth. I now have to work until i am 66 to get my state pension and face being paid less occupational pension when i am finally allowed to retire because the government is going to raid the nhs pension fund. how about raiding MP's pension fund.

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  • MP's never make cuts for themselves and live off the backs of the tax payer and abuse their expenses. We've heard them say that they are a "special case" and that's why they never have any pay freezes or cuts. Why don't they cut back like the rest of us after all no one would die if there were fewer of them.
    There should be more managers on the NHS who have relevant backgrounds instead of business ones after all the NHS is about people isn't it?

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  • Anonymous | 2-Aug-2013 1:35 pm

    NHS management is now a closed shop whose recruitment to their ranks is in the hands of Human Remains (HR) and not in those of clinical departmental heads who see prospective candidates as a benefit to their clinical team who will compliment and advance their own interests centred round the needs of patients and ways to deliver excellence in care. they do not want clinical managers from other branches and who may even have outside NHS experience which could benefit the organisation and strenthen their teams and who are also excellent hands on practitioners whose main values and skills are firmly focussed on the needs of patients. there is too much of a risk to them of upsetting their status quo!

    As for MPs and even NHS managers and CEOs, I am not sure why the are considered 'special cases'?

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  • this tory govt wont stop until the nhs is finished for good

    there is no level that these greedy eton mafia wont stoop

    wake up nurses you need to vote in 2 years time to get these idiots out or its all finished and you can kiss your pension goodbye!!!!!!

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  • Anonymous | 2-Aug-2013 2:47 pm

    Two years is too long to wait before taking action. We need to do something now. Nothing short of striking will have any effect.

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  • I agree the government will not stop until the NHS is totally dismantled and is privatized. Thank god i am about to retire, with my pension intact. I really feel for all the hard working and dedicated staff out there who will affected by this news. Will not further quick thinking staff also take the bull by the horns and apply for their retirement aged 55yr before 2015?? (i do hope so) therefore loosing more nurses on wards and departments? heaven knows the shortage is already publicly documented, when will the government and all parties wake up and see sense!!!!

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  • tinkerbell

    will this affect people who could retire now but haven't taken their pension yet and continue working?

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  • Why doesn't Cameron do the correct and decent thing and claw back the £billions robbed from this nation by bankers, MPs and fly by night businessmen instead of selling off public assets to his friends, restricting the pay, pensions and imposing crushing taxes on those least able to afford it?

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  • Tink, if you click on this link
    It takes you to a document that shows you how it'll affect you depending on your age and what type of pension you have, how many years in etc.
    NHS Employers website has a good summary and there a separate sections for staff side.

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  • Another ploy to disgrace the nursing profession, and to portray nurses as pension-grabbing rather than wanting more staff to improve patient care. The government know exactly what they are doing.

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  • Anonymously 8.46 I am 55 now and planning on retiring just before Christmas next year mainly because I'm worried that the pensions will be worth less soon. I can't believe they are expecting nurses to work until 65 or whatever. I know there are a lot retiring at our place next year too and everyone I speak to has had enough. Even the nurses in there 20's are knackered and needing time off sick.

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  • I recall that RCN members could not be bothered voting on the pensions issue!

    Crocodile tears now are useless!

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  • tinkerbell

    The Nobody | 2-Aug-2013 11:47 pm

    thanks Nobody, will do. Bit concerned as I have MHO status and could have retired last year at 55 but haven't always paid into the pension (foolish some would say but when I was younger seemed light years away) and don't want to lose what I've paid for already as can't afford to retire yet but still want to continue in my current post anyway as still able to function plus they no longer offer the option to retire and return to post on less hours as I understand it, that particular choice finished just before I was due to retire, but if these changes mean I will lose what pension I have paid into then I would rather retire now before these changes and find another job.
    I'm rambling now, so will stop, as I haven't got a clue how it all works so will check your link as suggested.

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  • This just goes some way to proving the rumours that three of the big American Health Insurance companies are waiting in the wings to take over the NHS. The stumbling block is the amount of pension provision they would have to take on. This proposal would take that away or at least make it manageable. If the Tories get back in two years time it's goodbye NHS. Thankfully in November 2015 I can leave. Before if i can get my pension early.

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  • To those who are lucky enough to be able to retire now or in the near future: if I were you I'd take your money while its still there. You can always continue to work and probably would be able to remain in your current post.

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  • michael stone

    This is presumably another typical move by this goverment, who don't really like the concept of plebs having enough money to be able to resist being exploited - cynical on my part perhaps, and not everyone's position, but my overall feeling.

    As an aside, is there a new healthcare term I need to get up to speed on ?

    "according to a joint wanting from health service employers and unions"

    This 'wanting' - it's that word I'm unfamiliar with, in that sentence construction (it could perhaps mean issuing a warning about something in the context of a desire: i.e. 'we are warning you about this and we don't want you to do it').

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  • Are the MPs / government not elective public service workers. They should also have there pensions raided. What happened about there pay rise, which received press for a week but nothing has been heard since. All for one, one for all.

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  • I am 44, have worked in the NHS for 13 years and opted out of the pension scheme 3 years ago. Reading between the lines of the various changes being made over the past few years, I had already decided that erosion of our pensions and privatisation of the health service was at the heart of government policy. The unions seem disinterested, the majority of the workforce is so busy struggling to maintain a service that they don't have time to worry about this stuff. My colleagues think I am mad but by the time I am old enough to retire, if I survive the physical demands of my job, the benefits would be minimal and I doubt I'll be in any fit state to enjoy it anyway. I would not advise anyone new to the NHS to opt into our pension, save the money you would pay and invest it!!! As an aside I no longer pay anything to the union either, I work hard and keep my money safe.

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