Posts Tagged ‘Pensions’

Leak reveals plans to slash consultant ‘costs’

By Mike Broad - 10th February 2010 1:41 pm

Foundation trusts want to stop clinical excellence awards; slash SPAs for existing and newly appointed consultants; cap pensions for higher earners and remove pensionable items; and freeze increments on incremental pay progression.

These are the provocative proposals of a leaked Foundation Trust Network (FTN) paper, which is part of the influential NHS Confederation. It’s a response to the health secretary Andy Burnham’s commitment, in December, to exploring with unions “whether we could offer frontline staff an employment guarantee locally or regionally in return for flexibility, mobility and sustained pay restraint”.

The leaked paper, obtained by public sector union Unison, seeks to identify areas for savings, warning that NHS funding could be worse that currently predicted. Flexibility and mobility are being sought because of the intention to move up to 40% of activity from secondary care into community services.

Certain proposals within the document are underlined in red. These indicate key priorities including freezing increments on incremental pay progression for two to three years; stopping CEAs; and, reducing SPAs for newly appointed consultants to one “to enable them to develop clinical skills”.

Other non-red line proposals include capping the pensions of those earning over £100,000, and removing pensionable items such as CEAs and London weighting. On programmed activities, foundation trusts are urged to reduce SPAs for existing consultants from 2.5 to 1.5 or 1 if possible. 

The FTN also calls for the NHS to make it clear that not every trainee will be offered employment from now on.

Stephen Campion, chief executive of the HCSA, said: “This leaked document shows how the boom years have turned to bust. What we need is a lot more honesty and a lot less secrecy.

“The tragedy of the NHS at the moment is that ministers are fuelling public expectations in the run up to a general election whilst NHS management is trying to figure out which services and staff they must cut to balance the books. In a service that has always depended on trust and goodwill, this paper may well destroy more than money can buy.”

In response to the health secretary’s question on being able to offer staff an employment guarantee, the FTN is non committal. It says: “The group believed that the flexibilities outlined above were now a requirement for managing the fiscal realities but that even with these it would not be possible to give job guarantees.

“In reality many of the factors that will determine the shape of future health and social care services are not under the control of providers but will be determined by commissioning decisions around pathways and competition in service provision.”

The BMA has circulated advice to its local negotiating committees on the FTN paper, describing the proposals as a ‘serious threat to the terms and conditions of service’.

While reassuring LNCs that it is a speculative discussion paper and not policy, the BMA says LNCs should not negotiate on the issues and oppose them where necessary.

On CEAs, the union says: ‘Cutting CEAs would mean a major cut to overall consultant remuneration and will impact on pensions. It must be opposed firmly in all trusts. We suggest that where this is proposed, the LNC should decline to negotiate any changes until they are negotiated nationally.’

On SPAs it says: ‘The 2003 contract makes it clear that consultants should be allocated appropriate SPA time in their job plans to enable them to carry out a range of non-clinical duties. As such a blanket reduction of SPA is inappropriate as job plans must be agreed with individual consultants.’

There are 125 foundation trusts in the NHS, representing about half of all acute trusts.

Read the leaked Foundation Trust Network’s document in full.

Tags: , , ,
Posted in Hospital Dr News | 1 Comment »

FTN paper on cutting consultant’s terms & conditions

By Mike Broad - 1:15 pm

This is the full text of the Foundation Trust Network (FTN) document leaked to Unison and then run originally in The Guardian:

1. Introduction

In July 2009 FTN undertook a survey of members to examine their priorities for reform of the agenda for change programme. In light of the QIPP programme and the economic realities facing the NHS over the next several years, with a number of member organisations we re-visited the topic of workforce flexibilities as a key part of foundation trust strategies for managing risk and service reconfigurations.

There is now widespread recognition that:  

• Cash will reduce in service (15-20 billion) with no third year commitment from treasury to even flat cash - so the situation could get worse than currently predicted.

• Non-pay costs are rising faster than general inflation and NI contributions at around £500m.

• The commissioning aim will be to take 30-40% activity out of secondary sector.

• There is no allowance in tariff for pay - so real reduction in funding pay bill that will not be made up by using natural wastage.

• Even using full natural wastage only produces 2.9% but will not give the shape of workforce and skill mix required to sustain patient services in new configurations.

• Redundancies are likely to be needed with the best case option being local voluntary agreements.

2. Changes Foundation Trust Employers Wish DH to Pursue

Below is the list of changes foundation trusts want to see to workforce conditions in order to sustain patient services together with an indication of the key priorities (Red Line - note that Hospital Dr has italicised these instead):

• Reform to the need to seek Treasury approval for voluntary redundancy schemes

• Negotiate redundancy payments in 12ths to ensure that the duty to mitigate losses can be implemented if employment achieved quickly in another NHS body. This would create an incentive to move quickly.

• Reduce the number of pay points on A4C Bands (Red Line).

• Change Schedule k so that staff members are not able to opt back in to Agenda for Change having accepted local arrangements.

• Freeze increments on incremental pay progression for 2/3 years. Then change increments to two points - one for learners one for experienced staff (Red line).

• Agency staff - refresh the guidance and PASA agreements to drive down unreasonable costs of agency staff. Recognise that some agency (1%) will be needed. DH to review immigration requirements as these have had considerable impact on availability of quality, medical locums.

• Sick pay - 6 months full/6 months half pay unlikely to be able to negotiate change. So, local robust sick management needed. However, change sick pay so that plain rates are paid for sick pay (Red Line).

• Either abolish or extend the time (7am to 10pm) for plain rate payment on basis that many staff chose to work nights (Red line).

• End permanent injury allowance and potentially temporary injury allowance.

• Make clear NHS will not be able to offer employment to every trainee – national review of commissions.

• Tackle regulatory demands for continual expansion of statutory training: plus DH to create more e-learning products.

• Stop clinical excellence awards (Red line).

• New consultants - reduce SPAs for newly appointed consultants to enable them to develop clinical skills - suggested 9/1 (Red Line).

• Existing Consultants - reduce SPAs from 2.5 to 1.5 or 1 (if possible).

• Pensionable items - review all including London rating and CEAs.

• Stop recruitment & retention premium for all staff.

• Cap pensions for higher earners (over £100k: easier to do as part of a whole public sector review of pensions) and look at removal of other pensionable items such as London weighting and CEAs.

3. Agreed Foundation Trust Network Position on Guarantees

In our working group there was some discussion of how FTN should respond on behalf of the foundation trust community to any request for guarantees on jobs. The Group believed that the flexibilities outlined above were now a requirement for managing the fiscal realities but that even with these it would not be possible to give job guarantees. In reality, many of the factors that will determine the shape of future health and social care services are not under the control of providers but will be determined by commissioning decisions around pathways and competition in service provision.

The statement below was approved:

“Foundation Trusts do not believe that, in the economic climate and given the system and reconfiguration challenges they are facing, it will be possible to offer any guarantees that compulsory redundancies will not be required. However, all Foundation Trusts will want to fulfil their responsibilities as good employers in supporting staff to find suitable alternative employment in partnership with the local health economy as a whole.”

FTN January 2010

Tags: , , ,
Posted in Features | No Comments »

Threatened squeeze on pensions a “false alarm”

By Francesca Robinson - 1st January 2010 6:56 pm

Consultants can still look forward to a decent pension despite the prospect of a trivial pay rise in 2010. 

This is the message from the BMA after Chancellor Alistair Darling caused alarm by saying that he intended to squeeze public sector pensions.

Darling announced in the pre-budget report that he would set a ceiling of 14% on employer contributions.

“Public pensions need to be broadly in line with those offered in the private sector. So by 2012 contributions by the state to public service pensions for teachers, local government, NHS and the civil service will be capped - saving around £1bn a year,” he said.

But Dr Andrew Dearden, chair of the BMA pensions committee, accused Darling of making political capital.

He said there was already an agreement in place that NHS employers’ contributions to the NHS pension scheme would be capped at 14% from April 2008. This had been set up following a regular review of the scheme.

“There are no funding issues with the NHS pension scheme,” he said. ”There is a cost sharing agreement which means any future cost increases to the NHS scheme will be borne exclusively by the members - not by employers, the taxpayer or the government. If costs rise members will decide to either pay more in contributions or accept a decrease in their benefits.”

He said the Chancellor failed to admit that NHS employees has actually contributed more to the scheme than it had paid out in the last five years.

A spokesman for the NHS pension scheme said that in 2008/09 it had received a total income of more than £7.7bn and paid out over £5.6bn resulting in a surplus in excess of £2.1bn.

“It’s a bit rich for a politician to stand up and say - ‘This is terrible’ - when in fact NHS workers are lending the government several billion pounds a year. At the moment we are not anticipating the need for any increases in contributions before 2012,” said Dearden.

A spokesman for the Treasury confirmed that a cap on employers’ contributions of 14% had been agreed with the BMA a couple of years ago. He explained that there was now more information about longevity calculated from population projection figures which meant that the agreed cap would kick in.

“We have recognised that this will mean slightly less spending (for the government) that would otherwise have happened from 2012/2013 onwards,” he said. But he added that this would not occur “for a good few years”.

Tags:
Posted in Hospital Dr News | 3 Comments »

Start early when it comes to financial planning

By Justine Roberts - 11th December 2009 10:19 am

The start of a doctor’s career is unlikely to be a time where long term financial planning is at the top of the to-do list, however putting simple planning measures in place early can make a tremendous difference to longer term financial well being.

Doctors will begin their careers in different positions financially although some degree of debt is likely to feature for most. Once working, initial advice is to use some of this income to pay off debt and build up a solid base financially through short term savings. Cash ISA investments are ideal for this, they are tax free and from next tax year allow saving of up to £5,100 in each tax year.

A solid financial base is especially important in the current climate with lending restrictions meaning a substantial deposit is necessary to gain good terms for a mortgage.

The second consideration is protection, protecting oneself financially from the impact of ill health and protecting any financial dependants from the financial impact of premature death. All forms of health related cover is expensive whether this is income protection or critical illness. The costs of these covers increase the older one is when the cover is taken out. For this reason making proper provision early in a career will save a significant amount of money in the long term.

Income Protection provides a replacement income in the event of ill health and can be tied in to coordinate for when the NHS sick pay ceases. Doctors taking out income protection should be wary; many policies are arranged on a “reviewable basis” which means the insurer can increase premiums throughout a doctor’s career. These policies are generally cheaper at outset but are false economy in the longer term. A “guaranteed” policy ensures a known cost through life.

If disposable income is available, long term saving and pensions are at their most effective if they have time to grow. A rule of thumb for pension planning is that for every five years planning is deferred the amount that has to be invested is doubled. Even a small commitment in the early years can make a tremendous difference.

For savings the ideal vehicle is an equity ISA, this provides a tax efficient exposure to the stock market. For pensions, personal pensions provide flexibility to stop contributions if necessary as circumstances and commitments change and the additional pension from the NHS route provides a certain return, however aren’t as flexible.

Following these simple planning rules early in a doctor’s career will save money in the long term.

Justine Roberts is a director of Medical & Financial Ltd and can be contacted on 01400 250525 or at justine@medicalandfinancial.com

Tags: ,
Posted in Money Matters | No Comments »

Chancellor wrong to cap NHS pay, says BMA

BMA News - 10th December 2009 1:31 pm

Chancellor Alistair Darling is making a ‘grave error’ in demanding a cap on public sector pay, the BMA has warned.

In his pre-budget report, Darling said the government was determined to protect frontline services and sustain the improvement delivered over the past decade.

But he declared that for the two years from 2011 he would seek to ensure all public sector pay rises were capped at 1%.

BMA council chairman Hamish Meldrum welcomed the commitment to protect frontline NHS services.

And he agreed that it was important the NHS was not crippled by spending cuts that would undermine patient care.

But he warned: “It is a grave error to penalise hard working NHS staff - who have already delivered efficiency savings of £10bn - with arbitrary caps on their pay.

“The government could have instead made real savings by slashing their bureaucratic and wasteful market based policies.”

Darling announced contributions by the state to public sector pension schemes, including the NHS pension scheme, will be capped by 2012. Public sector workers will make a greater contribution with those earning more than £100,000 a year paying more.

Read more at BMA News.

Tags: ,
Posted in News From The Web | No Comments »

Eight tips on planning a comfortable retirement

By Simon Dickerson - 20th August 2009 2:36 pm

The NHS pension scheme continues to be one of the best pension schemes available, providing a pension and a lump sum at retirement, along with spouses and dependents benefits. The scheme is heavily subsidised by the NHS which contributes 14% of pensionable pay into the scheme.

These benefits form the foundation of pension planning; however with many consultants having significant private income it is important to consider other arrangements to supplement the basic pension. Consequently there are important decisions to make when considering how best to boost pension provision.

1. Start early. For every five years of delay in funding a personal pension future premiums should be doubled. Eventual benefits and the cost of these benefits is dependant as much on the amount of time invested as the amount invested.

2. Consider your options. Pension planning can take many forms. Buying additional pension benefits through the NHS, personal or stakeholder pensions, investing in property or utilising other investments. Look at your own personal circumstances to decide what is right for you and take advice.

3. Review regularly. Review your existing provisions at least annually. As income, family circumstances, personal requirements or legislation change it is important to ensure plans in place remain appropriate. Contributions should be increased in line with increased earnings over time. It is easy for income to rise over time and for pension contributions to be left behind.

4. Compare charges and performance. Pension charges have reduced over the years, so keeping abreast of how competitive your pension is with respect to charges and performance is imperative.

5. Diversify. Ensure that you don’t have all your eggs in one basket. Retirement planning doesn’t have to mean pensions. Pensions provide the most tax efficient route to plan towards retirement but are not without restrictions. Investing into ISA’s, may not give the same tax benefits at outset but generally is tax free at retirement and allows access to greater capital sums at retirement than one would normally get from a pension.

6. Tax implications. Consider both you and your spouse’s tax status now and in retirement. Having all income in retirement from one spouse is unlikely to be tax efficient. Try and equalise incomes to ensure that both partners make best use of any tax allowances.

7. Be Realistic. It is often necessary to invest 15% of income or more to enjoy a financially secure retirement. For consultants working privately it costs approximately 20% of taxable private earnings to replicate the benefits that the NHS pension scheme offers.

8. If you can’t retire when you want to, aim to retire later. Normal retirement age for the NHS pension scheme is 60, retiring sooner than this can prove to be very expensive as benefits are reduced. For consultants working beyond 60 there are few reasons not to take pension benefits. Any increased benefits for working beyond 60 are overshadowed by the pension income that could have been received and has been lost.

● Simon Dickerson is a director of Medical & Financial, which provides independent financial consultancy to doctors. Contact him at simon@medicalandfinancial.com, or visit www.medicalandfinancial.com for more information.

Tags: ,
Posted in Money Matters | No Comments »

Pros and cons of Additional Pension scheme

By Justine Roberts - 4th June 2009 5:12 pm

Most consultants who have worked in the NHS will be aware of the Added Years scheme, which was replaced by the Additional Pension scheme in April last year.

The Additional Pension scheme offers considerably more choice and flexibility than the Added Years scheme. Benefits are purchased in tranches of £250 up to a maximum additional pension of £5,000 per annum. These benefits are index linked each year. There is no automatic tax-free lump sum; however this can be taken by commuting part of the pension.

The benefits purchased are known from outset. The cost of purchasing is fixed for the first four years, after this they are subject to a regular review where costs may be increased. It is possible to purchase benefits in one of two ways, either through a lump sum payment or via a monthly payment plan. If payments are made monthly the member can choose to pay over any period up to 20 years, although payments must cease by normal retirement.

It is significantly cheaper to purchase benefits via a lump sum. As an example, a 45 year-old-male doctor, purchasing £1,000 per annum in extra pension, would pay a total of £19,872 if he chose to pay over the 15 years until retirement. If those same benefits were purchased as a lump sum the cost would be £12,880.

Unlike Added Years, under the Additional Pension scheme a consultant has the option to choose not to purchase periphery benefits that would not get used. For example, a pension can be purchased without spouses benefits if these are not appropriate. The new scheme also differentiates between male and females. Although this does make benefits more expensive for female applicants.

It isn’t all good news however. As predicted the cost of the new scheme is significantly greater. A 40-year-old male will pay in the region of 6% more for the same benefits under the new scheme, and a 50-year-old male closer to 14% more. The cost for female doctors is greater still.

Spouse and dependant benefits are also reduced. Added Years provide spouse and dependant’s pensions, but the new scheme has an additional charge to add on these benefits.

So, the Additional Pension scheme is significantly more flexible than its predecessor but the downside is the cost. For many the old scheme was expensive, but the new scheme is more expensive still.

However, in times of investment uncertainty the guarantees provided will be attractive to many.

● Justine Roberts is a director of Medical & Financial, which provides independent financial consultancy to doctors. Contact her at Justine@medicalandfinancial.com, or visit www.medicalandfinancial.com for more information.

Tags:
Posted in Money Matters | No Comments »

High earners affected by pension changes

By Justine Roberts - 23rd April 2009 1:33 pm

The recent budget and its impact on pensions is a good place to start for the Money Matters blog. Many consultants will be affected by the changes to tax relief on pension contributions made on or after 6 April 2011. Although the Chancellor, Alistair Darling, hasn’t got rid of higher rate tax relief on pensions completely, he has made far reaching and sweeping changes which will affect consultants earning over £150,000. 

It is intended to restrict tax relief for those earning over £150,000, with a gradual tapering down of relief, so that anyone earning over £180,000 will only receive basic rate tax relief on contributions. There will be no advantage in increasing investment between now and 2011 as these new rules would apply immediately for those whose income now, or in the previous two tax years, was more than £150,000 and who make any changes from their normal pattern of contributions or the normal way they accrue benefits. This is designed to remove any advantage of increasing pension contributions prior to 6 April 2011.

More investigation is needed to establish the full impact of the small print, especially with regard to how this will affect NHS pension contributions and added years. There is no doubt that these sweeping new measures will affect a lot of consultants and their pension planning from 2011 onwards.

For those earning less than the thresholds above there will still be the ability to claim 40% tax relief on pension contributions, so now is the time to consider boosting contributions before higher rate tax relief gets removed completely. Pension planning has always been a tax advantageous way of saving for retirement, as 25% of the fund can be taken free of tax prior to the residual fund being used to fund an income in retirement. A quick example can show how tax effective pensions are. Tax relief on contributions at 40% and the ability to claim back 25% of the fund tax free at retirement makes pensions a must for higher rate tax payers. A fund of £100,000 will effectively only cost the investor £35,000. This is only looking at the contributions made and not considering any growth in the fund.

Investing in pensions does not necessarily mean taking risk with the funds. Investing into a cash fund is low risk, whilst still taking advantage of the tax allowances for higher rate tax payers, whilst they are still available. The additional pension scheme through the NHS, which replaced added years last year, is also a low risk option, whilet still benefitting from tax advantages.

We will cover the pros and cons of different pension planning routes in future blogs and provide updates on the changes announced in the budget as soon as we can.

● Justine Roberts is a director of Medical and Financial, which provides independent financial consultancy to doctors. Contact her at Justine@medicalandfinancial.com, or visit www.medicalandfinancial.com for more information.

Tags:
Posted in Money Matters | No Comments »