Hutton Report on NHS Pensions – Pay More, Work Longer, Get Less

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2011 Health Care Service Group Conference
22 March 2011

Conference notes the withdrawal of motion 29 on pensions which means that there is nothing on Conference agenda to allow debate on crucial matters relating to NHS pensions.

This motion highlights concerns around a number of the proposals in the Independent Public Service Pensions Commissions final report (the Hutton report) published on 10 March 2011.

The Tory led Government has already announced that part of the cut in funding to the NHS will be paid for by increasing the level of contributions made by members of the NHS Pension Scheme (NHSPS). This will mean that for all pension scheme members earning above a proposed low pay threshold, contributions will increase by 50% to 100%. The Government is forcing schemes to decide on new contribution bands by June 2011 with the first increases coming in April 2012.

The Government has also changed the way pensions for those who leave the NHS and those in receipt of pensions payments are to be increased in relation to inflation. From now on schemes will use the Consumer Prices Index (CPI) which many statisticians do not believe fully reflect inflation increases. This April pensions will increase by a third less than if they had gone up in line with the Retail Prices Index (RPI).

On 3 March 2011 the Government also announced a consultation on the future of ‘Fair Deal’ including an option to end it. Fair Deal requires private contractors to provide staff transferred from the NHS with a pension scheme comparable to the NHSPS. Ending Fair Deal could undermine the NHS Staff Passport and pose a further attack on NHS workers pension rights when faced with transfer to the private sector.

And now the Hutton report proposes to change the future structure of Public Sector Pension schemes. The key recommendation in the report is that Final Salary schemes should, in the future, be replaced by Career Average schemes. Hutton, in making this recommendation, ignores the fact that the NHS Pension Scheme was renegotiated in 2006-7 to make sure it was affordable and sustainable.

In the previous NHS Pension review UNISON argued strongly against Career Average schemes highlighting that such schemes are not appropriate for the NHS career progression structure. As a result scheme members voted in line with this view and retained the final salary option. If there is a move to a Career Average scheme it must not be used as a means to cut costs. Pension benefits must be up-rated in line with average wage increases up to the point of retirement.

A further recommendation is for the scheme retirement age to be aligned with changes to the State Pension Age which means that, in the worst case, a retirement age of 68 for NHS staff. If adopted this would mean that the retirement age of nearly everyone would increase to 66 for future service. For those who opted to stay in the section retaining a retirement age of 60 and age 55 for those protected under special class status would be particularly hard hit.

In the event that these changes were implemented it would raise issues about the validity of the NHS Pensions Choice exercise already underway in England and Wales and completed in Scotland and Northern Ireland.

Hutton has recommended that there is a ceiling imposed on the total cost of public service schemes. The government has already consulted on changing the discount rate assumption in the NHS Pension Scheme which if reduced would lead to a significant increase in the current cost. If this unnecessary increase in cost was borne by current scheme members as well as the cost of all the other changes this would be the final straw for many members.

All these changes and proposals are caused by the financial crisis not the viability of the NHSPS. UNISON believes that the previous reforms negotiated in 2006-7 secured the future of the scheme. The Government is using the crises caused by the bankers to cut back Public Sector Pension schemes so that they no longer provide pensions that are value for money or in some cases not even able to guarantee members can retire above poverty.

Conference calls upon the Health Service Group Executive to:

1)campaign to defend the NHS Pension scheme including the retention of the final salary scheme, RPI uprating, current retirement age and Fair Deal for existing and new staff;

2)liaise with and assist regions/branches in building capacity for taking action to defend the NHS Pension scheme up to and including ballot for lawful national industrial action;

3)work with and campaign alongside other NHS trade unions

4)raise the issue of pensions choice at the NHS PS Governance Group.

5)fully support UNISON’s ‘Protect Our Pensions’ Campaign;

6)encourage health branches to appoint pensions champions and contacts;

7)To seek the re-opening of the ‘Choices’ exercise in the event of significantly reformed new scheme being imposed by the Government.