Consultation on draft Regulations - NHS Pension
Scheme, Additional Voluntary Contributions and
Injury Benefits (Amendment) Regulations 2013
Response from the British Medical Association
About the British Medical Association (BMA)
The BMA is the doctors’ professional organisation established to look after the professional and
personal needs of our members. The BMA represents doctors in all branches of medicine all
over the UK. We are a voluntary association with over two-thirds of practicing UK doctors in
membership and an independent trade union dedicated to protecting individual members and
the collective interests of doctors.
Health and Social Care Act 2012
Locum practitioners
The Department of Health is proposing to transfer the cost of employers’ locum superannuation
into General Medical Services (GMS) Global Sum payments. This would mean that those
contractors operating under the national GMS contract would have responsibility for paying
these costs.
The BMA suggests that the money currently in primary care organisation (PCO) administered
funds to cover this cost should be reinvested in the Global Sum Equivalent (not via the Global
Sum only), as this is a straightforward cost to practices, with no element of profit.
We would further suggest that the implementation be delayed a year to ensure that any risks to
locum doctors of moving from the current situation (where approximately two hundred PCOs
pay the employer’s contribution, as opposed to approximately nine thousand practices in
England and Wales) are fully evaluated with an impact assessment and guidance for practices
on the mechanisms for making payments.
This would also allow time to assess the level of investment for locums used in PMS practices
and how the transfer of these costs would be handled. We would also wish to see clear guidance
on the means for individual locum doctors to assure themselves that such payments have been
correctly made, and within the time limit that is required under the current regulations.
From TSC papers on GMS outturns for year ending April 2012 we see that £782,000 was paid in
Wales and approximately £7.5 million in England (figures in respect of GMS only, so presumably
as much as another £5-6 million for PMS locums). This suggests total payments are slightly
above the £10 million originally suggested, although the difficulty of obtaining accurate PMS
figures obscures the picture.
The BMA is concerned that the proposals have been rushed, with little regard shown for the
security of pension contributions of locum doctors. We also feel that it will be impossible for
practices to take on locums whilst taking on additional CCG responsibilities if the cost of the
locum is not fully covered; clearly in the current climate it would be unreasonable to expect
practices to bear any of the risk of increasing costs to facilitate engagement.
We would also like suggest that, as the governments (via NHSCB in England) are effectively
divesting themselves of responsibility for these payments, then we would like to see locum
practitioners given the same rights to sickness benefit and death in service benefits as Type 2
practitioners.
Practitioner income
The BMA feels that the change in regulations represents an opportunity to review practitioner
income. The consultation suggests that amendments are to be made to allow CCG work to be
covered, but we would also ask for further clarity on other aspects of work, for example work
undertaken by a GP for a local authority or in educational roles.
Member contribution rates
The BMA is disappointed that the Government has gone back on the 2008 negotiated reforms
that were already yielding large savings for taxpayers and were estimated to reduce the future
costs to taxpayers of public sector pensions over the period to 2060 by £67 billion.
The decision in June 2010 to switch the indexation of public sector pensions from the RPI to the
CPI further lowered the value of public sector pensions, resulting in an estimated cumulative
saving to HM Treasury of £250 billion by 2060. The scale of these savings makes further radical
reform unnecessary.
The current ‘blanket’ approach to change ignores the varying stages of reform and different
funding profiles of the public sector pension schemes, and particularly the NHS Pension Scheme.
Requiring each individual scheme to deliver an average 3.2 percentage point increase in
contributions, to be phased in over three years from April 2012, disregards their differing
histories of contribution increases and is inevitably unfair to some schemes.
There are big disparities in the proportion of the overall scheme benefits that members fund in
the different public service pension schemes. For example, after April 2015, NHS staff will
overall fund almost double the proportion of their scheme’s future benefits compared with civil
servants. Contribution rate tiers are higher and steeper for NHS Pension Scheme members.
Under current plans, by April 2015, the NHS scheme will have seven tiers of contributions with
a top rate of 14.5%, while the indicative contribution rates for the Principal Civil Service Scheme
have four tiers with a top rate of 9%.
From 2015, there will be an even greater variation in the proportionate cost of accruing benefits
between NHS staff on different salaries. Taking tax relief into account, from 2015, the
proportion of their salaries that top earners in the NHS Pension Scheme will pay into their
pensions will be 2.2 times that of the lowest earners; before the latest reforms, the contribution
rate (post tax relief) for the highest earners was 1.3 times that of the lowest.
The BMA urges the UK Government to tackle unfairness in public sector pensions, particularly
towards the NHS Pension Scheme, now and for the longer term by reducing the
disproportionate impact of the 2012-13 to 2014-15 increases on the upper tiers of employee
contributions in the NHS Pension Scheme by capping the upper tiers of NHS staff contributions
at the April 2012 levels.
This would mean that, overall - the NHS Pension Scheme would not achieve the blanket target of
an average increase of 3.2 percentage points in staff contributions over three years that has
been set by the Government across all public sector schemes. If the top three tiers were capped,
the scheme would fall short of its target by 0.6% of pensionable pay by 2014-15 or £232 million
per annum. However, the savings from the RPI to CPI indexation change will far outweigh this
figure. It should also be noted that BMA members will be paying increased contributions due to
the planned removal of contracting out and GP partners (as employers of practice staff) will face
further increased costs as they will lose the employer contracting out rebate.
There will be an increase in average member contributions from 6.6% to 9.8% of total
pensionable pay in the NHS Pension Scheme over the three years to 2014-15. However, the
impact on higher paid staff will be much greater. Indicative contributions rates published in the
Proposed Final Agreement show that members with pensionable pay of £49,000 and over
(around 150,000 scheme members) will see a 6.0 percentage point increase in their gross
contribution rates, with the highest earners paying 14.5% of gross earnings from 2014-15.
This means that between 2007-08 and 2014-15 doctors will see a rise in their contribution rates
of 108% (for someone earning around £49,000), 125% (for someone earning around £70,000)
and 142% (for those earning above £110,000), at the same time that the scheme value has
dropped for many.
Given the fixed requirement of a 3.2 percentage point increase in scheme average contributions
by 2014-15, any moves to address the disparity in the return on pension contributions would
mean flattening the contributions tiers. This would be more appropriate for a career average
revalued earnings (CARE) scheme. As acknowledged in Lord Hutton’s Final Report, once a
scheme design changes from final salary to CARE, the original justification for tiered
contributions becomes less valid. This is because the removal of the final salary link ends the
discrepancy between the benefits for higher and lower earners.
The Hutton report went on to argue there were other reasons why tiered contributions
remained appropriate. “In general higher earners have a higher life expectancy and so may
receive a pension for a longer time than those with lower earnings,” it said. However, the data
put forward as evidence on mortality and pension benefits did not cover public sector (or NHS)
pensions and the highest pension benefit band considered in the analysis had a lower threshold
of £13,000 a year for men and considerably lower for women.
Separately, evidence was cited to illustrate a higher opt-out rate at the lowest salaries and
increasing participation in pension saving with increasing salary, but this effect flattened out at
higher earnings levels above around £30,000. The BMA accepts the general principle that the
lowest paid NHS staff should be encouraged by scheme design to join the pension scheme. It
also accepts that tiering is appropriate within a CARE system at the gross level to recognise
higher rate tax relief. However, the steep tiering that is being phased into the new CARE scheme
is completely unjustified.
Steep tiers in contributions in a CARE scheme also discriminate against part-time employed
staff, as the contribution rate relates to the equivalent full-time salary rather than actual salary.
This means a member of staff on a higher salary band working three days a week would pay
significantly more for the same pension as a member of staff on a lower salary band working full
time.
The funding restrictions set by the Government for the future funding of public sector pensions
are largely arbitrary, and the latest reforms pay little regard to the actual funding position of the
NHS Pension Scheme or the 2008 changes to the scheme. As this analysis demonstrates, this is
creating and embedding big disparities for and within the public sector, especially in relation to
the NHS Pension Scheme.
This is particularly significant given the publication in September 2012 of the Public Service
Pensions Bill, which is intended to provide a common legislative framework for all public sector
pension schemes.
This is the ideal opportunity to create a fairer approach across public sector pensions, rather
than entrench the disparities. It is important for the future sustainability of public sector
schemes, that they remain sufficiently attractive to both lower earners and higher earners.
Meanwhile, the huge savings the Government has achieved by switching the indexation of public
sector pensions from the Retail Price Index (RPI) to the Consumer Price Index (CPI), on top of
savings already being realised by the 2007-08 pension reforms, could provide some flexibility
with how the latest reforms are taken forward from this point.
Injury Benefits
The BMA has been represented on the UK Partnership Review of NHS Injury Benefits since
2009. The Review was intended to ensure that the NHS Injury Benefits regulations continue to
be fit for purpose.
The objectives of the review were originally agreed as follows:
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To agree joint recommendations to revise Injury Benefits arrangements in the NHS;
To consider options for the replication of the Injury Benefit arrangements for those who
are transferred outside the NHS;
To agree recommendations which are fully costed and administratively feasible.
However, the review partners were unable to agree the extent of revision necessary to make the
scheme fit for purpose. In order to ensure some level of provision for employees who are
injured in the course of their NHS duties the review partners agreed joint recommendations for
a new Injury Allowance scheme.
The BMA understands that the NHS Injury Benefits scheme is not widely utilised by qualifying
NHS staff/practitioners. We believe that many qualifying staff are not aware of the schemes
existence. Indeed, this is supported by our own experience in dealing with ill health retirement
applications where a work place injury may have occurred.
Our concerns are as follows:
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The review was never intended to remove coverage from categories of NHS
staff/practitioners currently covered by the scheme. Coverage currently applies to
individuals listed in Regulation 3 of the 1998 Injury Benefits regulations (as amended).
Our concern relates to doctors working in Primary Care (GPs and Salaried GPs) and
doctors holding Honorary NHS contracts who will not be covered by the new
arrangement. A similar risk may exist for doctors employed on local contracts where
the scheme is not included in their terms and conditions of service. It is our view that
the scheme should cover all NHS staff/practitioners currently included and also groups
excluded from the current arrangements, for example GP locums.
Moving from a statutory basis to one where eligibility is determined by individual
contractual arrangements poses an increased risk for doctors. We believe reliance on
individual employers to include the Injury Allowance in individual contracts is a
significant step back from the current position.
Doctors who incur a serious work related injury will be in a significantly worse financial
position, as payment of the new Injury Allowance will cease after a maximum of 12
months, or on termination of employment if earlier.
Reliance will now be placed on injured NHS staff/practitioners pursuing claims for
personal injury. We believe this will act as a barrier to pursuing a legitimate claim.
Potential loss of impartiality in the review of unsuccessful applications. Whilst
applicants for TIA and PIB are able to appeal to the Pensions Ombudsman for an
independent review of their claim, applicants for the Injury Allowance will have to rely
on local grievance procedures.
While we welcome the protection afforded by the sunset clause and the review partners
intention that take up for the scheme will be increased as a result of the Injury Allowance being
included in terms and conditions of service, the BMA has significant concerns over the proposed
changes.
Auto-enrolment
The BMA understands that From 1 October 2012, Department of Work and Pensions (DWP)
legislation requires the automatic enrolment of workers into an occupational pension scheme,
to encourage and enable low to moderate earners to save more for their retirement.
Whilst we welcome any move to improve pensions for the lower paid, there are also
consequences for other groups. For example, an ever increasing number of doctors are finding it
necessary to opt-out of further pension accrual to avoid being affected by the recently reduced
Annual Allowance and Lifetime Allowance limits. Such members have generally done so on the
basis of independent financial advice and therefore we suggest that either those members are
exempted from the auto-enrolment process, or at the very least that they receive at least 6
months notice of their auto-enrolment date so that they can make arrangements to avoid any
further Annual Allowance or Lifetime Allowance charges.
Redundancy
The BMA is concerned by the following statement in the explanatory notes:
“To better reflect this entitlement in scheme regulations, amending regulations 8 and 38 insert a
requirement that on application for redundancy benefits, the employer certifies that entitlement to
an NHS redundancy pension is provided for in that member's terms and conditions of
employment.”
In asking for this to be certified, individuals whose employers have pursued local contracts
could find themselves without entitlement to use their redundancy payment to fund for the
unreduced pension. The BMA would therefore suggest that this option remains and is made
explicit in the regulations.
Contact
Andy Blake, BMA Pensions Department
BMA House
Tavistock Square
London, WC1H 9JP
Tel. 020 7383 6419
ablake@bma.org.uk