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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