Posts Tagged ‘Pensions’

“Pensions are sustainable and value for money”

By Mike Broad - 30th July 2010 8:46 am

The NHS pension scheme is sustainable and represents value for money for the public, the BMA has told an independent commission into public sector pensions.

The BMA points out that the NHS scheme is financed by employees and employers rather than taxpayers, and in recent years has provided a surplus to the Treasury.

Its submission also reminds the commission that the scheme for NHS staff in England and Wales was recently subject to a major review. In 2008 the normal pension age for new staff increased from 60 to 65, employers’ contributions were capped, and contributions from doctors increased by up to 2.5%. GP members of the scheme also pay employer contributions of 14%.

Dr Andrew Dearden, chairman of the BMA’s pensions committee, said: “Pensions for NHS staff are by no means a drain on the taxpayer - they represent a fair deal for staff and value for money for the public. We understand the need to keep the NHS scheme fair and sustainable in the long term, which is why we accepted the major changes recommended by the review in 2008.

“NHS pensions play a vital part in recruiting and retaining a high quality workforce in future, and we hope they will continue to do so in future.”

The commission, chaired by former Labour minister Lord Hutton, has been tasked with assessing the growing gap between public and private sector pensions provision, the need for fairness across the workforce and how risk should be shared between the taxpayer and the employee.

There are no plans to undermine existing accrued pension rights, but the commission is expected to recommend how pensions can be made “sustainable and affordable in the long-term”.

In its submission, the HCSA pointed out that doctors’ pensions were already suffering. “From April 2010 no increase was awarded to consultants - in advance of the announced ‘public sector pay freeze’ that will affect our members for the two years from April 2011.

“Similarly, the level of Clinical Excellence Awards were not increased this April. Consultants therefore face a freeze on pensionable pay for three years.”

The HCSA also countered rumours. “We would oppose a reduction in the annual maximum contribution allowed. Suggestions are that this could be reduced to £30,000 or £45,000.

“With the NHS pension scheme in surplus we do not see the justification presently for any review of, or increase in, contribution rates. As ‘high earners’ HCSA members contribute more in real monetary terms to the cost of the pension scheme due to the tiered contributions basis in place since April 2008.”

The commission will publish its final report in time for the 2011 Budget.

Deputy Prime Minister Nick Clegg recently criticised “unreformed gold plated” public sector pensions, as new figures show spending on them will more than double by 2014/15.

The Office for Budget Responsibility says the taxpayer cost is set to rise from £4bn to £9bn.

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Commission says public sector pensions need reform

BBC Health - 7th July 2010 9:24 am

Public sector pensions cost twice as much as previously thought and require radical reform, a commission has concluded.

These pensions are worth an average of 40% of a salary, with an increasing burden falling on taxpayers to pay.

Only half of the pension comes from contributions from workers (6%) and employers (14%), the Public Sector Pensions Commission said.

In a strongly worded report that included a series of recommendations for changing the system, the commission said that “justice and good economics” meant that pension costs should be covered by employee and employer rather than future taxpayers.

But the TUC argued the commission was set up by private sector employers.

Read more at BBC Health.

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What’s happening to consultant pay in your trust?

By Mike Broad - 6th July 2010 10:03 am

I like my local hospital in Norwich. When I’ve accessed its services, I’ve been happy with the results.

However, I was disappointed by a recent communication. I received a letter and a glossy brochure asking me to become ‘a member’ of the trust.

By being a member I would receive regular updates about the work of the trust, be invited to events and be able to vote in governors.

Public engagement with health services is important, but there are ways and means. In this digital age, they shouldn’t be spending a fortune on paper-based communication with thousands of patients.

A different department in the hospital is currently leaning on consultants to compromise their pay. Consultants are being asked to drop half a PA in pay, while still doing the same work, or accept a 5% pay cut for a year.

They’re just proposals at the moment but it’s surprising how many consultants appear willing to consider it.

I’d tell the management to get stuffed until they stop wasting money on recruiting ‘members’ and the like. I’m sure potential members would agree.

Elsewhere news is filtering through of other tough measures. The level of Clinical Excellence Awards is to be frozen until 2013. As they’re pensionable, this is another blow to consultants’ long-term financial security.

And there’s lots of conjecture around pension reform and whether consultants will have to pay a one-off levy to maintain their current benefits.

Is it fair that while consultant pay is frozen for three years local trusts try to guilt their doctors into accepting additional arbitrary cuts? Surely the answers lie in more efficient services.

And it’s so self-defeating when it comes to productivity. One imagines that many consultants, who may never have done any private practice, are considering it now.

Depressing times. If it is to be resisted, we need to start collating what is happening around the country to consultant pay and benefits.

If your trust has made controversial proposals take the opportunity to name and shame them below - you can post anonymously.

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Crisis will follow NHS pension meddling

By Mike Broad - 29th June 2010 3:29 pm

The BMA has vowed at its annual representatives meeting to protect doctors’ pension scheme as a government commission starts examining the reform of public sector pensions.

Chancellor George Osborne announced a review of public sector pensions during the Emergency Budget, and is believed to be keen to extend the retirement age to 66 by 2016.

Dr Mark Porter, chair of the BMA’s consultants committee, called on the government to stand by the pension agreement reached in 2008.

In that agreement, higher earners pay more into their pensions and employers’ contributions will be capped at 14% of pensionable earnings.

Porter said that in recent years the NHS pension scheme has paid surpluses to the Treasury.

“The incomings of the pension scheme are now fixed with a two-year pay freeze. The outgoings are not fixed - over those two years the pension payments will rise in line with the cost and prices index, expected by the Treasury to be a 4% increase in those two years. So, incomings are static, and outgoings are rising.

“Let’s be clear - the greatest threat to the stability of the pension scheme is the government itself.”

The BMA’s strong stance follows rumours that the government is considering charging higher earning public sector professionals a one-off levy - of between £10,000 and £20,000 - to maintain their pension benefits. Trust chief executives are currently seeking advice on its implications.

The BMA feels that the NHS pension is in a strong position relative to other public sector pension schemes, such as the civil service and military, which have earlier retirement ages and lower employee contributions.

Dr Hamish Meldrum, chair of BMA council, was equally uncompromising on the issue of pensions.

“Only two years ago, we reached agreement which raised the age of retirement to 65, capped the contributions of the government, increased contributions by the higher paid and put the NHS scheme on a sensible and affordable footing for the future.

“I am not someone who easily resorts to threats, but I warn the government - in a spirit of cooperation and being helpful - if you really want a crisis in the NHS, start meddling with the NHS pension scheme.”

In the Emergency Budget, Osborne also announced that doctors would not receive a pay rise in the next two years.

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Spirit of co-operation could falter over pensions

By Mike Broad - 28th June 2010 12:00 pm

I’m at the BMA’s Annual Representatives Meeting in sunny Brighton. It’s a beautiful day and there’s a stunning view over the beach and the pier from the press room.

However, the 500 or so faithful members who’ve turned up are dutifully sat downstairs in a rather gloomy conference hall.

From my elevated position above the promenade I can see the odd one making a break for the beach but they’re being surprisingly dedicated to the cause.

That’s probably because there’s much to discuss - not least the threats to doctors’ pay and terms and conditions. As you’ll be aware, last week, Chancellor George Osborne pledged to freeze public sector pay for the next two years in his emergency budget.

Dr Hamish Meldrum, chair of BMA council, gave his big speech earlier. A key theme was the new spirit of cooperation between the coalition government and the union. He agreed with the government’s decision-making on the revalidation postponement, on seeking to reduce bureaucracy, cutting waste, streamlining management, and saying they want to put doctors in control.

However, while promising to be “reasonable and responsible in our pay demands”, he warned that doctors would “not be made the scapegoats for failures of speculators and marketers”.

In a direct message to the government Meldrum said “don’t underestimate us when it comes to protecting doctors’ jobs and pensions. On these, I will not be reasonable if, being reasonable means accepting cuts in the number of doctors or reneging on the recently agreed, revised pension arrangements for staff”.

He pointed to BMA research which suggests cuts are already being made to staffing numbers round the country. He described this as “madness”.

Rumours abound that doctors’ pensions are going to suffer following Osborne’s claim that public sector pensions will be reformed. One rumour is that doctors will have to pay a large one-off levy - in the region of £20,000 - next year to maintain their pension benefits.

It’s widely believed that the government will put back retirement age to 66 by 2016.

The BMA, however, feels that the NHS pension is in better shape than others within the public sector, such as the civil service and military. They claim doctors contribute more and retire later, and the NHS scheme should provide the model for other public pension schemes to follow.

Meldrum said: “Only two years ago, we reached agreement which raised the age of retirement to 65, capped the contributions of the government, increased contributions by the higher paid and put the NHS scheme on a sensible and affordable footing for the future.

“I am not someone who easily resorts to threats, but I warn the government - in a spirit of cooperation and being helpful - if you really want a crisis in the NHS, start meddling with the NHS pension scheme.”

I knew the love-in with the coalition government wouldn’t last long.

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Pay and pensions compromised by the Budget

By Francesca Robinson - 24th June 2010 8:10 am

Salaried NHS doctors face a two year pay freeze and a pensions shake-up as part of a raft of austerity measures announced in this week’s Emergency Budget.

But higher earning doctors who provide private health services through their own companies will benefit from a reduction in corporation tax.

There will be a review of the public sector pension system to report in time for next year’s Budget. One immediate cost saving measure however announced by chancellor George Osborne is that public service pensions will rise in line with the consumer prices index rather than the, generally higher, retail price index.

Doctors’ leaders delivered muted condemnation of the pay freeze, aware that this will hit four million other lower paid public sector workers much harder than medics. The move will save taxpayers £3.3 billion a year.

BMA council chairman Dr Hamish Meldrum, said: “Doctors understand that these are difficult times and we accept the need to be reasonable and responsible about future pay rises. However, we are seriously concerned that the chancellor has overridden the whole negotiation process between the BMA and the independent review body.”

He pledged that the BMA would fight to protect the value of current and future pensions, pointing out that the NHS scheme had already undergone a major review in 2008.

Stephen Campion, chief executive of the Hospital Consultants and Specialists Association, said: “The two year pay freeze will be disappointing for those affected by it including hospital consultants who in the last three years have been hit by ever increasing national insurance hikes as well as a pay freeze last year. But one has to be pragmatic and say that this comes as no great surprise.”

He also criticised the lack of clarity on the state pension and the announcement that the government would accelerate the date when the state pension age will be raised to 66. This could be as early as 2016.

“The chancellor left a lot of ifs and buts about pensions hanging in the air. The budget was disappointing more for what was not said than was said,” said Campion.

Vanessa Sanders, a director at the accountancy firm Stanbridge Associates said the budget had not made things worse for higher earning medics who have already taken a big hit this financial year losing their personal allowance and being required to pay a 50% rate of income tax.

She advised any doctors with a lucrative private practice to incorporate if they have not already done so to take advantage of the lowest ever rates of corporation tax.

The good news for higher earners includes:

• Corporation tax: for consultants who have incorporated - from 1 April 2011 corporation tax for small companies will be cut from 21% to 20%. Corporation tax for large companies (with profits in excess of £300,000) will be cut from 28% to 27% next year and by 1% for the next three years to 24%.

• Entrepreneurs’ Relief: has been protected - from 23 June 2010, the lifetime limit of gains, which can benefit from ER, and are therefore taxed at 10%, is increased from £2m to £5m. This will benefit doctors who have a private practice or are sole traders who are thinking of disposing of their business or assets following the cessation of a business.

• For consultants who have furnished holiday lettings: the FHL rules will not be withdrawn from April 2010 as previously planned. The government will consult over the summer about plans to change the regime from April 2011. FHL remains a potential alternative tax advantageous investment.

• Higher earners’ pensions: the government will look at alternatives to pension tax relief restrictions for high earners. The current administration believes that reducing pensions tax relief for those that earn £150,000 or more (which was proposed by Labour) would bring “significant” complications to the system. Reducing the annual allowance might be a more preferable option.

Check out your pay scales.

Read more on what the City thought of the Budget.

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Harnessing the benefits of the independent sector - a briefing

By Mike Broad - 30th April 2010 11:57 am

NHS Partners Network, which represents independent sector health organisations, has launched a briefing document entitled Harnessing the benefits of the independent sector: priorities for the next government.

The document claims that the independent sector is uniquely placed to help develop innovative approaches to healthcare that drive quality and patient satisfaction up, increase productivity, and thus ensure that the unprecedented funding pressures on the NHS do not lead to a decline in quality.

But NHSPN demands that the process of market reform instituted during the Blair government needs revitalisation. The following is a summary of the changes that NHSPN believes are needed:

1. Publication of comparative quality data to support choice

All the main political parties are committed to improving patient information. NHS Choices website should be run by an independent organisation, and multiple sources of information should be encouraged.

The first published outputs from the independent sector’s data benchmarking project will be launched this summer. It is also important that data collected by the Department of Health itself is made fully available. It is wrong that data collected by the government, at considerable expense to the providers, should be withheld from the public and from analysts who can help the public make sense of it.

2. Abandon the preferred provider policy and require periodic competitive challenge

The government’s preferred provider policy is anti-competitive. The principle of value for money should be the overriding one guiding NHS commissioners. Any willing provider who meets NHS standards should be eligible.

There should be a commitment that, over appropriate periods of time, all NHS services should be exposed to competitive challenge so as to ensure that opportunities for maximising value and embracing innovation are not overlooked.

The provider market is still underdeveloped. This should be objectively recognised and reflected in practice, but not abused or used as an excuse for restricting the use of competition.

There will be circumstances when taking a broader view of alternative ways in which services can be provided may well result in there being a wider pool of potential providers than is at first apparent.

Commissioners need to be more aware that the surest way of demonstrating they have secured best value is by using open, non-discriminatory tendering processes wherever practical.

3. Create a level playing field

With increasing pressure on tariffs, and the likelihood of some form of renewed price competition in the future, resolving the major outstanding level playing field issues is a strategic necessity if independent sector and investor participation in the NHS is to be sustainable.

Independent economic analysis has established that the independent sector currently has to operate with a cost disadvantage of around 14% relative to public sector providers. The NHS pension scheme is the biggest problem. Unless this aspect of the playing field is levelled it is likely that over time the pitch will become unplayable for the independent sector.

A substantial part of the pension costs are carried by central government not by NHS provider organisations themselves. This puts the public sector at a competitive advantage over the independent sector.

To deal with this it will be necessary to ensure that public sector bidders are assessed on the basis of their full cost to the taxpayer. This might be done either by increasing the percentage of their pension costs which they have to bear directly or by applying a ‘shadow’ weighting factor which forces commissioners into making a truer comparison when assessing bids.

Internal accounting and cost allocation is weak within the NHS. Full cost allocation and accounting should be enforced.

4. Putting the NHS competition regime and the Cooperation and Competition Panel onto a statutory basis

The CCP has no statutory powers or legal teeth and can only make recommendations, and in recent months it has become clear that its rules can be rewritten by its sponsors.

The CCP needs to have teeth and become independent of political influence. A firmly established regime for managed competition has emerged as one of the vital reforms needed if investors are to be persuaded to the UK NHS market.

5. Establish proportionate, even-handed regulation

The Care Quality Commission must regulate the independent sector to the same standards and proportionality of all types of provider.

6. Build a new relationship with GPs

GPs will face an increasing conflict of interest. Inherent in the GP model is a perpetuation of commissioner-provider integration, rather than the split which is generally seen as beneficial for healthcare systems.

GP practices that scale up to carry out broader commissioning functions will become more dominant in their local markets, thus reducing patient choice, making market entry more difficult and further reinforcing their advantages. And the GP contract fails to incentivise them to drive change.

There will need to be a new GP contract which incentivises change and high performance, with corresponding measures of quality, thus recognising that the structure of primary care needs to move with the times.

The OFT should look into the changing nature of the GP market and consider what changes might be appropriate to avoid excessive market dominance and reduce barriers to entry.

7. Simplify contracting arrangements

There is a need for simpler, more proportionate contracts for services that genuinely differ from the core NHS circumstances. Problems include disproportionate requirements, models perpetuating historic delivery patterns, undeliverable insurance requirements and failure to recognise the position of national providers operating across multiple trusts.

8. Promote the adoption of new technologies to provide advice and assistance to patients

Increased financial pressures on the NHS mean that it is important that individuals actively manage their health and adopt healthy behaviours. New communication channels need to be harnessed that can catalyse action in the public and private sector experience drawn upon.

Read the full briefing.

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Trusts will cut hospital doctor jobs, Tories claim

By Mike Broad - 27th April 2010 9:41 am

The Conservatives claim that NHS trusts are planning to cut the jobs of 651 hospital doctors in England over the coming years.

Andrew Lansley, shadow health secretary, said the evidence makes a mockery of the government’s claims to be protecting frontline NHS spending.

Half of the trusts that responded to the freedom of information requests said they were planning reductions in the numbers of full-time equivalent doctors and nurses.

The proposals would see 2050 fewer nursing roles across England. NHS West Midlands said it would be shedding 922 nurses by 2014.

The information obtained by the Conservatives on the numbers of full-time equivalent doctors and nurses is based on freedom of information requests to 169 hospital trusts. Of those, 47 trusts responded with data for two or more financial years.

Lansley said: “Under Labour the number of managers has risen five times faster than the number of nurses. We will cut NHS bureaucracy by a third and we will make sure frontline patient care comes first.”

Meanwhile, addressing nurses at the Royal College of Nursing’s annual conference, the Prime Minister pledged to protect NHS staff pensions.

He won a standing ovation after heaping praise on nurses’ role in the NHS and promising to protect frontline investment in the NHS and not impose a public sector pay freeze.

He said: “You can’t protect the NHS and not include those that work in it. You work hard for your pensions, you deserve your pensions. So we will stick to the plans we have announced. Your pensions are safe with us.”

Also addressing the Royal College of Nursing congress, Lib Dem leader Nick Clegg guaranteed that money saved through an ambitious cost-cutting programme would be ploughed back into the health service “penny for penny, pound for pound”.

The Lib Dems intend to cut PCT management and administration costs, saving £800 million a year, scrap strategic health authorities, saving £140 million a year, and slash  the Department of Health in half, saving £100 million a year.

He also argued that both the GP and consultant contracts had been “poorly negotiated with no benefit for patients” and would be replaced.

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New tax changes for higher earning doctors

By Justine Roberts - 21st April 2010 11:05 am

We are in a new tax year and are shortly to have a new government in power. We do not know who it will be, but in many respects it is going to make little difference. There are already a raft of tax changes that have just taken place at the start of this tax year or will commence at the beginning of the next tax year.

Any new government is able to reverse tax increases or stop them being implemented, but pragmatically this isn’t going to happen. With the economy in such massive debt any tax increase that can be blamed on a former government will not be changed as any new government will need to raise extra finance anyway!

The major headline grabbing change is the introduction of a new higher rate tax band of 50% for all those who have taxable income over £150,000. Perhaps as important but lesser known is the changes to pension tax reliefs.

Many of the changes to pension tax relief do not come into effect for a further year. However, it is easy for any doctor making pension arrangements to fall foul of these rules early.

From 6 April 2011 anyone with ‘total’ earnings over £150,000 will no longer receive full higher rate tax relief on pension contributions. A doctor earning £130,000 in the NHS will have a total income under this assessment of £159,250 after all pension contributions are added back in, meaning that higher rate relief is in part lost.

When these rules were introduced there were also ‘transitional rules’ that came into being to ensure that higher earners did not make large pension contributions in this tax year in order to avoid the rules.

So what does this mean to a doctor?

All doctors earning over £150,000 will from the beginning of the next tax year lose higher rate tax relief on pension contributions. This applies to the NHS superannuation plus any added years, additional pensions, AVCs or personal pension arrangements.

It is therefore in the best interests of doctors who find themselves in this situation to cease any additional pension planning from the beginning of the 2011/2012 tax year. There is no point making a pension contribution that only receives basic rate tax relief to then have to pay higher rate when it is received in retirement.

Doctors who currently earn over £130,000 should be very careful about making any additional pension arrangements from now. It is highly likely that higher rate tax relief will be declined on any new arrangements that are made.

With the changes in taxation taking place we will all pay more in tax, however higher earning doctors should be especially careful with their pension arrangements as they could well prove to be more expensive and less tax efficient than expected.

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

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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.

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