Sustainable pensions are undermined by Treasury plans

“I believe introducing sustainable arrangements… are essential if the NHS Pension Scheme is to retain its place at the heart of the reward package for NHS staff”. So said Andrew Lansley in December 2011.

‘These reforms appear to be part of the deficit reduction strategy’

Mr Lansley, for all his faults, apparently made the Treasury very aware of the potential impact of pension reform on the NHS. The final deal for employees − while a significant step down from previous arrangements − would still be considered attractive by most. But now Treasury proposals create a new threat to the scheme.

The Treasury’s plans for NHS pensions could saddle the service with a £2.5bn annual bill. This would, in effect, be a cut in the NHS budget. No new funds would arrive with this requirement, organisations employing staff with NHS pensions would have to meet the costs from existing resources.

Threat to the ‘ring fence’

The transfer of NHS spending to an integrated care budget can at least be defended on the basis that some services would be clinical and a joined up approach with social care is what most of the public want.

These reforms are designed to raise revenue above what is required to meet the cost of the scheme and appear to be part of the deficit reduction strategy − something the NHS was meant to be protected from.

‘The government should abandon its proposals or explain why it is prepared to risk the place of NHS pensions’

The direct consequence of the changes would be twofold: the increased use of staff not eligible for an NHS pension and an attempt to cut the workforce through reductions in the range of services offered.

Eye-watering numbers

However, neither is a get out of jail free card. Increased scrutiny means it is much harder to simply abandon the provision of services. Privatisation can offer cost benefits − but many deals rightly require new providers to take on existing NHS staff with pension rights intact.

A more significant threat comes to the scheme itself. HSJ’s survey of NHS HR directors revealed a widely held view that reformed Agenda for Change terms still place unsustainable financial demands on employers. Add in an eye-watering 18 per cent pension contribution per employee and the whole edifice of centrally agreed NHS remuneration may begin to be fatally undermined.

The government should abandon its proposals or explain why it is prepared to risk the place of NHS pensions “at the heart of the reward package for staff”.