Pensions Review update
April 2006
NHS Pension Review.
The review of NHS pensions across the UK continues to try and seek agreement between the NHS trades unions and employers. The focus of the discussions is now firmly on the cost of pension provision and how this is increasing due to demographic and pay reform pressures. It is looking increasingly likely that contribution rates may need to be raised to help meet the cost of the scheme. NHS unions continue to work in partnership and are insisting that employers (and/or Government) meet the cost of pay reform pressures that have arisen from the recent pay deals for GPs, consultants and through Agenda for Change. The protection of benefits for existing members (including current normal pension ages) agreed last October is not under threat. New entrants will join a new scheme with a normal pension age of 65 when it is finally agreed.
It is anticipated that a further consultation period will occur over the summer.
Redundancy, Ill Health and Injury Benefit Reviews.
Parallel reviews of redundancy, ill health, and injury benefit provisions have commenced to ensure that these areas are compliant with forthcoming age discrimination legislation.
Whilst not completely pension related there is an obvious link and the BMA pensions department is working closely with all crafts, regional services and the national offices to ensure that information is shared.
24 Hour 'retirement' now possible for practitioners.
Following a review of the regulations by the NHS Pension Agency in light of changing tax legislation, GPs are now able to ‘retire’ from all NHS posts for a minimum of 24 hours to trigger their pension and then return to work again (subject to being re-employed or re-admitted to the partnership). Like all other doctors, they must work no more than 16 hours a week in the first month following the break and the onus will be on them to prove this.
Anyone considering this should also consider issues such as how partnerships will handle this. Single-handed GPs will need to resign their contracts when they retire so should seek a legally binding agreement with their trusts to be re-awarded the contract when they return.
Remember also that once in receipt of an NHS pension you cannot normally continue to contribute to the NHS Pension scheme.
BMA members can access the weblink at
Pension taxation issues.
New tax rules came into force in April that allow greater pension saving for most people. Aimed at simplifying the taxation of pensions, these new rules replace 8 different sets of previous legislation. This is still a very complex area and transitional matters (including protection for those who may exceed the new allowance levels) are creating many enquiries for pensions and taxation specialists. The BMA has a factsheet for members at
The NHS Pension Scheme has changed very little to meet the minimum legislative requirements but these will continue to be assessed during the ongoing NHS Pension Review. One point to note is that anyone with a Money Purchase Additional Voluntary Contribution fund will be able to take up to 25% of this as tax free cash at retirement. University Superannuation Scheme has made more changes available depending on the employers attitude. See their website for details
New job, new country? Don’t forget your pension!
Doctors are reminded that if they move to a new position in a different nation within the UK (e.g. moving from Wales to Scotland) they need to formally apply to transfer their pension to the new scheme for that nation. (England and Wales share the same scheme so transfers are not required for moves between these nations.)
Historically the various pension agencies have had a relaxed attitude to the 12 month timescale laid down in the regulations, but we are seeing a much firmer approach being taken recently, particularly in Scotland.
Any doctor who has moved countries should check that their pension records have been transferred, (if that is their wish) and apply to have them moved if this has not yet occurred. The BMA pensions department may help members who experience any problems.
Dynamising Factors for GP Pensions.
The BMA is continuing to press for the release of the 2003/2004 final dynamising factor. This figure is urgently needed to uplift the pensions of those who have retired since 1 April 2003 and is long overdue. The 2004/2005 final factor should also be available shortly.
Consultants staged pay award – pension consideration.
The staging of this years pay award for consultants with 1% being applicable from 1 April 2006 and a further 1.2% from 1 November means that consultants retiring in the period between now and 31 October 2007 will have their pensionable pay calculated as a composite figure based on all the various rates of pay applicable over the period.
For example,
A consultant on the top of the pay grade who plans to retire on 31 March 2007 will have 7 months pay at £94,706 plus 5 months at £95,831, a composite pensionable pay figure of £95,174.
If this is applied to 40 years pensionable service the resultant pension is;
40 x £95,174 = £47,587 plus a lump sum of £142,761
80
If the full recommended pay award had been made at 1 April the pension would be based on £95,831 pensionable pay and the resulting pension would be
£47,915.50 plus lump sum of £143,746.50
This creates an initial loss of lump sum of £985.50 plus an annual loss of income of £328.50.