Reports have indicated that both health and education will be squeezed by over £1 billion due to the way that public sector pensions are funded.
The revelation forms part of the recent budget, but the devastating impact on the NHS has generally escaped media headlines.
It comes after George Osborne announced in the Budget that employers would have to contribute more to pensions for NHS staff, teachers and the police.
Osborne has claimed that individual pensions will not be affected by the plans, but it is clear that the NHS will be seriously impacted.
The Treasury indicated that employers have three years to get ready for the changes and would be helped by low inflation.
While several departments will be affected by this new provision, the health service arguably faces the biggest challenges.
Figures acquired by the Liberal Democrats indicate that the NHS will be forced to find over £650 million annually in order to fund the new arrangements.
Some ministers have apparently asked for clarification over how the changes would impact on their budgets.
However, there is no current indication that the extra cost involved will be taken on board by the Treasury department.
Liberal Democrat leader Tim Farron suggested that these critical cuts were being implemented covertly, and with the intention of hiding the implications from the general public.
Farron asserted that the decision would ultimately reduce spending on teachers, doctors, nurses and the police.
“It will mean the NHS, it will mean schools, it will mean the armed forces, it will mean the police. It takes that money directly out of the front line of those services,” Farron commented.
In addition to this fundamental criticism, Farron also voiced his belief that the courts do not serve any form of justifiable economic purpose.
Farron instead suggested that targets imposed by Osborne are wholly unnecessary, and that the self-imposed goal of a budget surplus simply makes slashing public services even more intolerable.
Treasury officials defended the plan, and suggested that Britain’s overall economic health is at stake.
“We’re committed to regular revaluation to ensure public sector pension costs are met. The Budget announcement means employers have three years to prepare and we think they should be well placed to absorb extra cost of contributions – especially because inflationary pressures are significantly lower than expected when budgets were set at spending review.”
Osborne has already faced criticism for cuts to some disability payments and questions over whether he would hit his fiscal targets in the aftermath of his recent budget.
An NHS Trust has been referred to a regulator following apparent breaches over pension policy.
It was reported last month that the health service had offered nurses a pay deal which encouraged them to swap pension rights for cash.
And now the NHS Pensions Board has made a formal referral to the Pension Regulator with regard to Oxleas NHS Trust in south-east London.
Concerns had previously been raised with the board regarding the Oxleas deal, which ensures that nurses can obtain a higher salary if they choose to opt out of the NHS pension scheme.
Oxleas commened that “we have previously received confirmation from the Pensions Regulator that our actions do not constitute inducement [to give up a pension] and are lawful.”
The scheme would seem to be in breach of pension regulation, which suggests that the decision to opt out of any such financial arrangement should be taken independently.
It is suggested in this case that nurses have been unduly influenced by the employer.
Commenting on the issue, Rachel Court, chair of the NHS Pensions Board, was of the opinion that Oxleas has a significant case to answer.
“The board recognises the challenges that trusts such as Oxleas face in competing with agencies when seeking to recruit staff. However, the board considers that the offer that has been made does meet the criteria for being considered an inducement, since there are reasonable grounds for considering its sole purpose to be to encourage staff to opt out of the NHS Pension Scheme in return for an additional salary payment.”
Court also believed that the issue could potentially impact upon other trusts and wider NHS policy.
“Given this, and also the potential wider implications should such offers proliferate, the board feels that there are grounds to ask the regulator to investigate this matter further.”
The Union responding to the claims of the Pension Board have stated that they believe that the NHS trust in question did have a financial motivation for this scheme.
All NHS Trusts in fact have a process in place for increasing national pay rates, without inducing staff to leave the pension scheme.
Paul Moloney, a representative for the Society and College of Radiographers and member of the NHS Pension Board, pointed out that the regulator may not be privy to this particular morsel of insight.
“This is information that we do not believe the regulator has seen, let alone taken into account. It is therefore wrong to say that Oxleas had no financial incentive in doing what they have done.”
Responding to the accusations, the Oxleas Trust was adamant that it had not behaved inappropriately.
“We are aiming to give staff a choice of reward packages which cost the same amount to us as an organisation. We have introduced this because we want to encourage back to the NHS qualified nurses who have already chosen to work for agencies.”
The regulator has indicated that it will make a decision once it has acquired all of the requisite information.
A leading pensions campaigner has suggested that employers are needlessly enticing staff out of pension provisions, following recent revelations related to an NHS trust.
Investigations are underway regarding the plans being carried out by Oxleas NHS Foundation Trust, which reportedly offered nurses cash in order to give up their pension rights.
Ros Altmann said her officials were investigating concerns that nursing recruits at Oxleas were being offered a salary boost to opt out of the NHS scheme.
It seems that the NHS Pensions Board is currently investigating referring plans back to the NHS regulator, despite the scheme seemingly having been approved previously.
Unions have expressed the opinion that the trust is likely to be breaching rules relating to the use of inducements, in order to entice nurses to quit pensions that have been automatically enrolled at the time of the initial employment.
Commenting on the issue, Altmann emphasised the importance of this issue.
“[This scheme] would undermine the whole thrust of the new pensions system we are developing. This new system relies on as many people as possible building up private pensions to supplement the base level of state support.”
Altmann added that the move went against the fundamental ethos of the enrolment scheme.
“The intention of the auto enrolment programme is clear — employers must make it as easy as possible for staff to save in a pension at work, with the help of their employer, and there are clear legal requirements that the employer must not entice them to opt out.”
Altmann is of the opinion that the NHS pension scheme is hugely valuable to staff, and it should certainly be considered vastly more important and worthwhile than the minimum contributions paid into an auto-enrolment scheme.
Steve Webb, the former pensions minister, was similarly scathing about the deal, and suggested that staff were being misled by the authorities.
“If this is a loophole in the rules around automatic enrolment, then it needs to be closed as a matter of urgency. The message needs to go out loud and clear to employers that they are expected to put their workers into a pension, not bribe them to opt out”.
The deal in question enables newly qualified nurses to choose between standard pay and pension, or taking higher pay if pension rights are waived.
But there are massive question marks over whether the scheme should be considered right and legal.
Unions are particularly concerned that the deal is simply motivated by expense saving motivations, as the need to make massive efficiency savings across the NHS becomes more prominent.
The recent news that the NHS is already £2.3 billion in the red for the financial year will only exacerbate this tendency.
Senior staff in the NHS have suggested that a raft of family doctors, surgeons and other experienced medical professionals could quite the health service owing to pension-related issues.
The NHS has been forced to place a limit on the amount of pension savings available to employees, and it is feared that this could lead to many members of staff deciding to take early retirement.
This could be particularly debilitating considering that the health service and government is already effectively in dispute with both junior doctors and nurses.
Figures indicate that a significant number of senior doctors, along with many other high earners in the public sector, will breach the £1 million limit on what savers can amass in their pensions during their working lives without being taxed.
This figure has recently been lowered from £1.25 million. Doctors that exceed this limit will be charged 55 per cent tax when their pensions are ultimately withdrawn.
Considering the change in regulations, it is believed that many doctors are opting out of pension saving altogether, with others seriously considering early retirement.
Andrea Hester, assistant director of pensions and reward, with NHS Employers, suggested that the NHS as an organisation is already aware of the extent to which this will impact on the health service.
“Employers in the public sector know that some staff will be concerned or even unaware about the tax changes and will want information to help them understand how it might affect them. NHS staff are a vast public investment, so educating them to the impact of tax changes can be a wise investment if it helps to reassure and retain them.”
While the Treasury believes that the new legislation will only impact upon the top four per cent of wealthiest pension savers, it is nonetheless predicted that many doctors could abandon the NHS as a result of this decision.
A survey by the British Medical Association last year has already indicated that as many as 35 per cent of GPs could retire within the next five years.
And discontent with their existence in what is an increasingly financially challenged NHS was central to this statistic.
Dr David Bailey, chairman of the pensions committee with the BMA, indicated his belief that many doctors are assessing the NHS on the basis of this new tax alteration.
“These tax changes could worsen the GP crisis. An awful lot of doctors aged 55 and higher are looking very seriously at what their position is because the tax changes are going to seriously impact them.”
Considering the commitment required in order to qualify to practice medicine in the first place, it is clear that the NHS could suffer from a massive shortage of doctors in the coming years.