The statement follows countless comments from unions and others who oppose the pension changes and insist that the government is carrying out the reforms for ideological reasons and not financial ones.
The British Medical Association said that wholesale changes to an already reformed NHS pension scheme could not be justified.
Pointing out that the global economic situation had changed significantly since 2008 with major pressures on public and private finances, the department said that the Hutton Review concluded that current public service pensions were unsustainable.
Pension reform is necessary because people are living longer, the department said. Today, a 60-year-old doctor retiring can expect to enjoy 29 years of retirement. This means drawing a pension for almost the same time as they worked for the NHS – 36 years. In contrast, a doctor retiring at 60 in 1984 could only expect to enjoy 20 years of retirement. Both would have paid similar amounts for their pension but the extra nine years would cost around £440,000 and the extra cost was picked up by the taxpayer.
So the 2008 reforms to NHS pensions were not enough, DH said. Despite raising the pension age to 65 for future members, the reforms didn’t allow the costs of increases in longevity to be managed fairly or sustainably. The agreement allowed members to remain in their existing arrangements with a pension age of 55 or 60, despite the improvements in longevity from which they had benefited. Future generations of NHS workers and taxpayers would then have to pay for the increasing time existing pension scheme members could expect to spend in retirement, with only a limited contribution made by members in the form of higher contributions before retirement.
“The contributions received into the NHS pensions scheme are greater than the cost of benefits paid out to retired members, creating a £2bn positive cash flow that some describe as a ‘surplus’,” the statement said. “All this means is that the cost of future pension entitlements being built up is greater than those being paid out at the moment. It reflects the fact that the size of the NHS workforce has been growing over the last decade. It does not mean that the scheme is financially sustainable. The current gap between contributions made and benefits paid out is set to disappear by 2016 as NHS workforce growth reaches a plateau and a generation of members reach retirement.”
DH also claimed that the reforms still provided an excellent pension. The current NHS pension scheme provides the average full time consultant retiring at 60 with a pension of over £43,000 a year for life and a tax free lump sum of around £135,000. But a newly qualified doctor joining the reformed scheme after 2015 could expect a pension of over £53,000 at age 65 (the normal pension age for new joiners) or a pension of around £68,000 a year at his state pension age of 68.
Also, doctors’ pensions will still be among the highest in the public sector and significantly higher than the vast majority of the working population, the department said, quoting the average NHS pension as being around £7,300 a year.
DH also pointed out that even with the reforms, the NHS pension scheme would still be one of the best available, with a private sector worker needing a pension pot of nearly £2m to get an inflation-proof pension of £68,000 a year.
Also, higher paid NHS staff don’t pay an unreasonable amount for their pension, those closest to retirement will see no change, and pension reform affects all public servants not just NHS staff.
Dr Hamish Meldrum, chairman of council at the British Medical Association, said: “Doctors feel let down by the government’s unwillingness to find a fairer approach to the latest pension changes and its refusal to acknowledge the major reforms of 2008 that made the NHS scheme sustainable in the long term. We are not seeking preferential treatment but fair treatment. The government’s wholesale changes to an already reformed NHS pension scheme cannot be justified.”