Pension: is it fair consultants should pay more?

I am struggling to equate the political direction over NHS pensions with any semblance of fairness.

True, hospital consultants are in a difficult position. Consultants are typically included amongst those described as ‘high earners’. But let’s take a look at the facts. After 12 to 15 years of training they begin a consultant career on £74,500 a year. It is only after 19 years that they reach the top of the scale at £100,400.

Relative to other professional classes this does not seem highly paid to me. The final salary figure could be higher were it not for the fact that their pay has been frozen for two years; take home pay has been further reduced by hefty increases in tax, National Insurance contributions and (guess what) pension contributions.

Estimates coming from the Treasury suggest that under Danny Alexander’s fair deal pension reform, consultants can expect to pay a further £3,600 in pension contributions every year and work longer to reap benefits far less than those promised when they joined the scheme.

Is this really fair? The government line is that pensions for those less well paid should be protected. In other words they should be subsidised by those earning more. This differential philosophy is akin to saying that those who earn less should therefore pay less for a gallon of petrol, a loaf of bread, a motor vehicle and its vehicle excise duty. These cost the same irrespective of income. So what’s the difference between any of these and a pension?

I do not disagree with Hamish Meldrum, chair of BMA council, who argued recently on the Today Programme that this pension reform is a stealth tax. But it is more, much more than that.

Pension contributions are proposed to increase according to salary – but the product being purchased is exactly the same. Simply put, the pension product provides 1/80ths or 1/60ths of salary per year worked. The differential contribution is manifestly unfair – the product is the same; it simply costs more if you are defined as a ‘high earner’.

To make matters worse these high earners only reach the top end of the salary scale towards the end of their careers – career average for them is quite different than career average for those whose salary is flat rate and not subject to threshold increases only once every five years.

The government may well be relying on the public mood, fuelled by misinformation and spin, that it is wrong for ‘high earners’ to reap high rewards at the tax payers’ expense. I think the public is more mature than that. The NHS scheme is in very healthy surplus, it was amended only three years ago in light of actuarial and Treasury forecasts, and passed the tests of fairness.

The public may not understand the finer points – but that will not mean that the public will be blind to the damage these pension reforms will have on their NHS.

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2 Responses to “Pension: is it fair consultants should pay more?”

  1. IanatPHP says:

    The salary of £100,400pa puts a consultant in the richest 0.11% of the World’s population according to http://www.globalrichlist.com.

    At the moment, HMG/NHS contribute most towards the largest pensions – the poor are already subsidising the consultant pensions. Even after the changes, salary under £15K, employer contribution £2,100pa, for salary of £130K, employer contribution £18,200. (http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/documents/digitalasset/dh_128799.pdf).

    I think perhaps they could afford a little bit more, don’t you?

  2. Peter says:

    As the rate of contributions increases and the benefits accrued reduce, it may well mean that more and more consultants and GPs opt out of the NHS pension scheme in favour of either private pensions or direct investment in the stock-market.
    This will have an adverse effect on the “affordability” of the NHS pension scheme , which currently provide a surplus of £2 Billion to the exchequer. Increased contributions are merely an increased tax, particularly at a time where there is a 3 year pay freeze in effect

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