NHS Pension Scheme is affordable and sustainable

The NHS Pension Scheme has been the subject of much debate over recent months with discussions focusing on the cost to the taxpayer while conjuring up images of NHS staff retiring in the lap of luxury. But three-quarters of retired NHS staff receive an annual pension of less than £15,000, and half receive less than £4,000.

Despite the recent bad press on public sector pensions, the revised NHS Pension Scheme represents good value for employers, staff and taxpayers. It is fair, affordable and, perhaps most importantly, sustainable in the short- and the long-term.

Provision of essential services continues to be vital, particularly during a recession. It is more important now than ever before that the NHS retains its highly skilled workforce because the loss of staff is expensive, disrupts patient care and damages morale. This, in turn, affects the quality of services.

Improving efficiency in the NHS will be brought about by employing the right staff who are highly motivated and talented. The NHS Pension Scheme enables employers to offer a secure final salary pension as an increasingly important part of the employment package to help attract the correct number and skill-mix of staff.

The NHS workforce contributes to the long-term growth of the UK economy through health, science, education and technology industries. This includes experienced frontline staff as well as the many other people who every day make a difference to the patient experience as well as to clinical outcomes.

Regular review

Having a sustainable NHS Pension Scheme is vital to these aims. A revised scheme was agreed in 2007 by NHS Employers and the health trade unions, and this ensures that the scheme continues to meet the needs of a modern NHS and its staff while remaining fair and affordable.

Young people today, in all sectors, are facing the prospect of working until they are aged 70 or more. Looking after staff as they approach the end of their career has always been a matter of good employment practice and the NHS Constitution makes it a commitment.

Part of this is recognising the need to support staff as they prepare for the transition from work to retirement. The revised scheme gives staff greater choice and allows them to extend their working life in a flexible way to suit their individual circumstances. Often this means staff are able to work at a lower grade or on fewer hours without damaging their pension savings. In return, talented and experienced staff stay in the service for longer.

Changes to the pension scheme also mean that the employers’ contribution, which is paid by the taxpayer, is capped so that risk in the long term is contained. Every four years, the employee contribution will be re-evaluated to ensure the rates and benefits structure is funded adequately by the scheme’s members.

The review of the NHS Pension Scheme demonstrated that staff were willing to increase their contributions to ensure adequate provision for their retirement. Under the revised scheme, employees share the risk of future costs of benefits, and contributions and benefits may vary.

The number of staff working in the NHS who contribute to the pension scheme has increased significantly since 2000 as the service has grown to meet the needs of healthcare today. This has offset the costs incurred by the number of people retiring and drawing a pension from the scheme.

There has been much debate about the pros and cons of a defined contribution vs a defined benefit, or final salary, scheme. Moving to a defined contribution scheme now in the NHS would not save the taxpayer money. In fact, it jeopardises the cost sharing with employees, the main way in which risk is managed in the scheme.

To meet the future challenge of sustainability, the NHS Pension Scheme has gone through its most fundamental change since its inception in 1948. The scheme needs continuous review to meet the needs of the largest section of the public sector workforce in the context of a challenging global healthcare labour market. NHS Employers will represent employers’ views in this debate to ensure that their voice is heard.

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