Sunday 24 June 2012

John’s Blog No. 81 – Pensions - NHS

There is an alternative open to doctors and nurses in their dispute with the Government over their pensions and that is a breakaway pension scheme or to propose the privatisation of the existing scheme. On the State proposed changes, they would be better off and these exist within BUPA and other private schemes.
The Government is entrenched in its present proposals and its reaction to the strike action shows a degree of panic, with wild statements from the Health Secretary and the Prime Minister designed to promote envy and obtain Public antagonism against the alleged “gold plated schemes”.
Since my last blog, I have also been attempting to check the Health Secretary’s claims which do not make sense or add up and have sent an email requesting support figures. At best they appear misleading, at worst wrong and the nearest I can get is to assume the £84bn given is the total pension liability for doctors.
This is almost a third of the total NHS liability and 7% of the total Public Sector pension liability, which seems high and must be split between working and retired, at most £42bn to retired; to the £17bn doctors contribution must be added Employers and SERP’s rebate, bringing this up to the same £42bn.
Increasing doctor’s contribution from 8.5% to 14.5% will give the Treasury a £12bn profit, added to the annual existing £2bn plus the additional contributions from other staff. If all contributions were put away as personal savings and invested, then existing contributions could be halved for the same replacement pension values, with considerable savings to DoH, no population increase worries and considerable investment funds.
This suggests an abysmal failure to understand even the basics of contributory pension schemes or even basic mathematics within DoH or the Government, with a taxation based approach where contributions are discarded and facts distorted.
It would appear that the Government is not fit or capable of running a contributory pension scheme and the only real solution would be an Independent Pension Trust. Contributions from members SERPs and the State Employers would be paid directly to the Trust and at the present contribution level between 19 to 21% is more than adequate to meet existing pension agreements even with the worst over 65 population levels.
This could be set up as in the USA, or even under the BMA and SRN auspices, as a Super Trust and could possibly extend to include all NHS staff. The NHS is the strongest of all the Public Sector pension schemes, with the last OBR report giving a surplus of £2bn before any of the proposed changes and therefore in the best position for such a change, with major benefits to members and large savings to the State.
The withdrawal of labour is abhorrent to doctors and nurses and strikes are not popular, however the threat of withdrawal of contributions could have a much greater impact. The Government is completely dependent on contributions to meet the pension payments
It has been stated that existing terms will be honoured for the next ten years, those outside that period have nothing to lose by requesting a statement of their position either as a frozen pension or a lump sum transfer.
These could be collated by the BMA to establish the overall position, either for negotiation or the basis of an independent scheme, which could be established over the available ten year transition period. Studies show that this would be perfectly feasible, particularly if the existing pension burden is lost.
The State would find it difficult to find the substantial sums involved in the current liability if contributions ceased and there were major withdrawals from the scheme and some form of independent scheme would generally be regarded as fair and sensible. There is also the major question of the legality of the present “pay as you go” scheme, which clearly is a misuse of member’s contributions.
There is little evidence that the BMA has used these approaches or taken scheme legality action, also Private schemes must show adequate funds to meet liabilities, why shouldn’t the State?
There is another problem facing the Government in the NHS and that is the increasing dependency on agency doctors and nurses, their current approach will make it more attractive to leave the service, becoming self-employed or emigrating, the latter is already occurring with new doctors.
Faced with 14.5% contributions and working until age 68 and probably 70 and understaffed, working in the NHS directly would not be attractive, The use of agency staff is extremely expensive, unattractive , unreliable, and difficult to manage. It is therefore essential that working in the NHS is made worthwhile
Satisfactory pension provision is an important part of employment today; contributions must be treated as member’s personal savings, give good returns and be flexible with freedom of choice on amounts saved, retirement age, with member’s involvement in decisions on wealth redistribution, investment etc.
(Note I must apologise for an error in the last blog; PS pension liability should be £1200bn not £1800bn giving 4% return at £48bn (now corrected)).

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