PensionsJul 21 2022

Govt urged to tackle NHS pensions amid staff retention fears

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Govt urged to tackle NHS pensions amid staff retention fears
Credit: Pexels/EVG Kowalievska

The government has been encouraged to address NHS pensions in order to tackle staff retention issues, following the announcement of a sub-inflation pay rise of 4.5 per cent for eligible dentists and doctors.

The Department of Health and Social Care also published proposed uplifts to NHS Pension Scheme member contribution tier thresholds from October 2022.

According to a consultation published on July 19, most thresholds have been increased by £1,400, with the changes expected to lower contribution rates for 40 per cent of members. Contributions will, however, increase for members in the bottom three tiers of the scheme.

In the meantime, the Review Body on Doctors’ and Dentists’ Remuneration urged the government to review NHS staff pensions, with staff retention a key concern. The NHS Business Services Authority reported a 35 per cent surge in retirement applications in the spring.

“While it is not our role to make explicit recommendations for pensions, it is clear […] that the recruitment and retention of senior doctors and dentists is being influenced by these issues, and therefore we would once again underline the importance of them being addressed,” the DDRB said.

Government encouraged to consider BMA proposals

The ways NHS pensions are structured and taxed have been central to concerns about staff retention and retirements. The number of general medical practitioners to take voluntary early retirement rose to 704 in the 2020-21 period compared with 596 in the prior window, against voluntary early retirements of 605 in 2018-19.

The DDRB cited Hospital Consultants and Specialists Association concerns over the retention of senior doctors, with the HCSA saying that the percentage of doctors that it had surveyed who said they had made definite plans to leave had increased from 20 per cent to 29 per cent between 2020-21 and 2021-22.

Meanwhile, NHS Digital figures show that between April 2020 and March 2021, of those doctors and dentists that reported their reasons for leaving the hospital and community health sector, retirement was the third most likely reason for leaving.

In July, MPs called for a tax-unregistered NHS scheme as part of a push to stop early retirements and financial penalties falling on NHS staff.

“One of the biggest threats to the retention of the most senior and experienced NHS staff is the punitive and unfair interplay between long-standing government pension taxation policies and the NHS Pension Scheme,” Conservative MP Dan Poulter told parliament. 

Economic secretary to the Treasury Richard Fuller responded that it would be “hard to justify” further government support for doctors in the current climate.

The issue has been compounded by the ending of special coronavirus pandemic protections in March, which had encouraged recently retired staff to return to service. 

In January, Quilter predicted that more than 7,000 staff affected by the ending of the protections, which allowed retirees to return without incurring pension penalties, could elect to retire as a result.

The McCloud remedy, meanwhile, will create an additional retention risk covering 265,000 non-medical staff aged over 55, the NHS Pay Review Body noted.

The DDRB welcomed the government’s proposal to lift contribution thresholds, observing that this would probably help to avoid situations of staff members losing money as a result of their pay uplift moving them into a different contribution tier.

However, it called on the government to consider ideas put forward by the British Medical Association that could see changes to NHS pensions.

“We would note that the BMA included a number of proposals for changes to the pension scheme that would in their view address some of these issues, including the rolling out of recycling of unused employer contribution more widely, though we also heard of some disadvantages of this approach,” it said.

Pensions recycling involves passing on unused employers’ pension contributions to an opted-out member of the pension scheme as part of their total reward. BMA members voted for its introduction to the NHS Pension Scheme in June.

Rising contributions could pose problems for some staff

The government announced a 4.5 per cent pay rise for eligible doctors and dentists on July 19, along with an increase of £1,400 for at least 1mn staff.

Quilter NHS pensions specialist Graham Crossley said: “While some may view [the] NHS pay review as a 4.5 per cent increase in pay, it is, in effect, a significant real terms pay cut for healthcare workers. 

“I fear this could have a catastrophic effect on workforce retention in the NHS at the worst time. This will be a further catalyst for older healthcare workers to simply retire early, as their pension will reduce if they keep working, and younger doctors are more likely to consider moving to other countries where their skills are more valued.”

Cost of living pressures loom over the mooted changes to the scheme’s contribution structure, meanwhile. The new structure will be phased in, both to help ensure the scheme’s affordability and soften the blow from contribution rises to take-home pay.

“The risk of staff leaving the scheme is compounded by the change in the NHS pension contribution structure,” the NHS Pay Review Body warned.

“Staff in the bottom three tiers will see their contributions increase, which combined with the increases in the cost of living, could lead to even more staff leaving the scheme.”

The body urged NHS England and NHS Improvement to accelerate the rollout of its ‘pension response unit’ outreach initiative with staff ahead of the contribution changes.

Following the government’s pay announcement, BMA consultants committee chair Dr Vishal Sharma said: “Due to the absurdity of the government’s current pensions rules, the NHS already faces a possible exodus of its most senior and most experienced doctors.

“The government has shown just how out of touch it is with doctors on the frontline by making the situation much worse. It also shows just how ignorant they are of the consequences to patient care if pay and pension cuts further drive consultants out of the NHS.”

Alex Janiaud is deputy editor at Pensions Expert, FTAdviser's sister publication