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The NHS pension scheme is hardly a tax guzzling monster


Men retiring at 65 can expect to live another 13 years, while women who retire at 60 should live for another 22 years, according to official figures. Even as the state retirement age creeps up, people can still expect to live for years in retirement, especially as life expectancy climbs ever higher.

It is because of this that pensions are vitally important, and precisely why the coalition government’s approach to public sector pensions is so very disheartening.

Somehow politicians have talked themselves into the policy of condemning both private and public sector workers to a cash strapped, retired life of misery. That is the real issue here - not that public sector workers enjoy the remnants of a half decent pension, but that pension provision for those in the private sector is so weak. Politicians need to focus on building up financial security in retirement for all, not stamping on what little decent pension provision still remains for some.

The rhetoric is so ludicrous too. Deputy prime minister Nick Clegg spoke recently about “unreformed gold plated public sector pension pots”, but let’s take a look at the reality of these “gold plated” pensions. Take the average pension for a female NHS worker - it is £5,000. As if that isn’t bad enough, half of all female pensioners who have worked in the NHS actually get a pension of less than £3,500 per year - that’s not so much gold plated as tin plated.

‘Half of all female pensioners who have worked in the health service get a pension of less than £3,500 per year - that’s not so much gold plated as tin plated’

We also seem to hear lots of talk about how the spiralling cost of public sector pensions will end up plunging the public finances deep into the red. Well, let us take a look at just how much of an explosion in the public finances the public sector pension time bomb will cause. Thankfully, we’ve got something to help us: the Pre-Budget Forecast report by the Coalition’s own independent Office for Budget Responsibility (OBR) sets this out in detail. Take a look at Table 5.1 of this lengthy report, for example. This is information from the Treasury’s own
long term forecasts, which are supported by the OBR. We can see that public sector pensions currently cost the taxpayer the equivalent of 1.8 per cent of gross domestic product; the projections show that this rate is predicted to rise to 1.9 per cent over the next 20 years, before returning to 1.8 per cent and then, by 2049/50, falling below current levels to 1.7 per cent of GDP.

In other words, according to the Treasury over the next four decades, the burden of paying for public sector pensions will remain pretty much static and, in fact, end up lower than it is today. So this means no ballooning debt, no mushrooming of costs, no explosion of liabilities - just costs that are steady, predictable and sustainable.

What is more, despite its portrayal as a tax guzzling monster, the NHS pension scheme actually hands billions of pounds over to the taxpayer each year. More is paid into the fund than is paid out to pensioners, and all that surplus goes to the Treasury - thereby helping, not hurting public finances. Far from being the costly gold plated public sector pension of tabloid yore, the NHS scheme is now more like the goose that laid the golden egg.

Next, the public sector pensions are condemned as unreformed. Yet the NHS pension scheme at least has been reformed. The contributions made by NHS workers such as midwives have risen, as has the retirement age, and the taxpayers’ contribution has been capped - if the scheme ever needs more money either NHS employees have to pay more or benefits have to be cut.

Despite its actual modesty, the NHS pension is a vital recruitment and retention tool. At a time of historically high birth numbers in England, we need to not only hire but also keep hold of our midwives - there is no denying that the NHS pension still helps to draw people into the profession and keep them there.

I hope that all this is seen and recognised by Labour former cabinet minister John Hutton, who will head up the new public sector pensions commission. More importantly, I hope that Mr Hutton flags up the bigger issue of ensuring private sector workers have some security in retirement too.

This may not happen of course after the recent news that the government wishes to change how inflation is calculated for private pensions, with the effect of cutting their value. This is all the wrong way round. We must work out how we can boost rather than cut retirement income.

With men and women set to enjoy years of retirement after a lifetime of work, we need them to have a decent pension - not only so they can enjoy what remains of their life, but also so they do not grow increasingly dependent upon the state.

Politicians have talked themselves into a policy corner, where the only way out is to gut what remains of public sector pension schemes. We now need them to see what they have done and instead reverse this whole debate, so it becomes one about ensuring a decent pension in retirement for all workers.

About the author

Cathy Warwick CBE is general secretary of the Royal College of Midwives


Readers' comments (4)

  • This is obviously true for health care workers other than Midwives, and it is good to see the facts.

    Sadly this government policy is about getting the staff employed by private organisations with reduced terms, conditions and pensions, and not by the NHS, to save, very little.

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  • Hold on, how come women can retire earlier and live longer? EQUALITY MY ARSE!

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  • Totally agree with Cathy. The government have done a sterling job at convincing the government that public sector workers are a huge financial burden, and seek to remove their only hope of being financially independent from the state - at least in retirement.

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  • I agree with Louise a very good article by Cathy Warwick.

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