The claim

“It’s not just about doctors – it’s also about the nurses and the physiotherapists and everybody else in the pension scheme, who are also being asked to pay a lot more for their pensions and they’re getting less back for it.”
Dr Tom Dolphin, British Medical Association, 18 January 2012

Cathy Newman checks it out

Ministers have repeatedly claimed that their reforms to public sector pensions will spare the worst-off. That’s been disputed by the British Medical Association, which is threatening to go on strike. The union, which represents GPs and hospital consultants, says the changes won’t just hit its wealthiest members hard, but low-paid NHS workers too. The FactCheck team has been finding out who’s right.

The analysis

Working out who will be hit hardest by the changes is a tricky business. There are a number of calculator tools and case studies available online, but most of them have been designed either by the government or the unions.

Independent pensions consultant John Ralfe has now produced the most comprehensive independent analysis yet of how changes to the NHS scheme will affect various health workers.

There’s no dispute that most public workers will end up paying more and working longer under the government’s proposals.

The BMA says that in itself is wrong because the deal agreed in 2008 should have been the final word. They say the current scheme is sustainable because £2bn a year more is paid into the scheme than is paid out to members at the moment.

Mr Ralfe, the former head of corporate finance at Boots, says the money being paid out now doesn’t tell us anything about what we will need to pay out in twenty or thirty years’ time as the young NHS workers of today approach retirement.

He said: “It is a nonsense to say that the NHS pensions contribute to the exchequer, which looks at past pension promises. The correct way of looking at pension costs is to say how much has to be put aside today to meet pensions being promised today.”

If you accept that there needs to be some reform to head off the threat of spiralling future costs thanks to Britain’s ageing population, the next question is: how should the burden should be shared?

Doctor’s pensions now

GPs’ pensions are calculated according to their average earnings over the course of their career, but for consultants (hospital doctors), it’s the final salary that matters.

That’s an arrangement that suits both kinds of doctor, as GPs tend to get into higher wage bands earlier but earn lower final salaries, while consultants start off more slowly before getting earning big money later on in their career.

But there are big differences in the overall generosity of the different kinds of pension – and the contributions made by the taxpayer.

According to Mr Ralfe, a GP currently gets a pension equivalent to 33.5 per cent of salary, slightly more than the average NHS worker. The taxpayer stumps up about 25 per cent of salary and the rest is topped up by employees’ contributions – 8.5 per cent of salary for GPs and 6 per cent for other NHS workers like nurses.

With consultants, the overall generosity of the pension is 48.5 per cent of final earnings, and the share of that contributed by the taxpayer rises to a “whopping” 40 per cent of salary.

So pensions for hospital doctors are currently about 50 per cent more generous than hospital staff like nurses as well as GPs.

Mr Ralfe says that a consultant retiring aged 60 after 35 years on the median average salary of £120,000 would get a pension of £52,500 a year plus a cash lump sum of £157,500. The equivalent cost of buying this pension in the private sector? Around £1.6m.

What about after the changes?

The government wants to start calculating all NHS pensions on the basis of career average earnings, rather than final salary. It also wants staff to work longer in line with changes to the state pension age.

And there will be increased employee contributions on a sliding scale for all staff who earn more than £26,557.

In return, NHS workers are being offered a more generous “accrual rate”, the amount earned each year. That will rise from as little as 1/80th of salary [plus a cash lump sum of three times the annual pension], depending on the individual scheme, to 1/54th. Most of the phases will be phased in from 2015 and people within ten years of retirement will see no change.

For GPs and other NHS workers, the reforms will make very little difference to the generosity of their final pensions, but the cost to the taxpayer will fall from 25 per cent of salary to 17.5 per cent of salary for GPs and 23 per cent for other workers. Scheme members will have to work longer and pay more to make up the shortfall.

But the overall value of hospital doctors’ pensions will plummet from 48.5 per cent of salary to 32 per cent, with the cost to the taxpayer more than halved, falling from 40 per cent to 17.5 per cent of salary.

Contrast that with the average NHS worker who, according to Mr Ralfe, will actually see the value of their pension go up very slightly (from 31 to 32 per cent), while having to pay an extra 3 per cent of salary and having to work slightly longer – contrary to Mr Dolphin’s words on Channel 4 News last week.

All of this begs the question of who the BMA is fighting for – its lowest or highest-earning members? If Mr Ralfe’s analysis is correct, consultants have the most to lose while GPs, like other NHS workers, have relatively little to complain about.

That’s why Mr Ralfe suggests that a move to a career-average scheme must be the fairest kind of reform for most NHS workers, and opposing such a move suggest that the BMA is motivated more by protecting the interests of the highest-earning hospital doctors.

He concludes: “The current final salary for Hospital doctors, worth 40 per cent of salary, is undoubtedly extremely generous, half as much again as the rest of the NHS, including GPs.

“Because of the complexity, and lack of understanding,  of pensions, this major part of their overall remuneration is disguised. If the BMA believes the overall remuneration of hospital doctors should not be reduced, rather than holding out against the pension reforms, it should make the case for higher, and transparent, basic salaries.”

Cathy Newman’s verdict

So the BMA’s wrong to say nurses are paying more into their pensions but getting less in return, according to John Ralfe. They’ll get the same or slightly extra. Hospital doctors stand to lose the most – but as the average consultant receives a pension of more than £50,000 a year, plus a six-figure lump sum, they might not get much public sympathy.

The analysis by Patrick Worrall. Data supplied by John Ralfe Consulting (www.johnralfe.com)