This is a text of a letter Sir George recently received from the Secretary of State for Health.
BMA industrial action
As you may be aware, next Thursday 21 June doctors will take industrial action organised by the British Medical Association (BMA).
The BMA has called for industrial action because it believes that the Government’s proposed pension reforms, which will see doctors earn a pension of £68,000 a year if they work until 68, are not fair.
Given that patients in your constituency will be affected, I am writing to you to let you know what action the BMA is taking, the level of potential disruption which might be caused as a result, and what steps both the NHS and the Government are taking to ensure the inconvenience and harm to patients are minimised. I have also included some facts on pension reform as an annex, to help you answer questions from your constituents.
On 21 June, doctors will not undertake any ‘elective’ work which can be planned in advance. This includes work in hospitals – such as planned operations – and in GP surgeries, such as pre-booked appointments. Doctors will be in work for emergency and urgent procedures. Although it is our understanding that the action represents a strike – because it entails a withdrawal of labour – the action will not entail doctors not being at their place of work.
Although the strike will, therefore, not be as serious for patients as if doctors did not attend work at all, there will nonetheless potentially be a serious adverse impact on patient care. Every day, the NHS carries out some 30,000 operation, 58,000 diagnostic test and 200,000 outpatient appointments – all of which are planned. It carries out 1.2 million routine GP appointments. If all doctors chose to strike on 21 June, therefore, almost 1.5 million patients would see their care disrupted on the day, with many hundreds of thousands more affected as these operations and appointments are rescheduled in the days and weeks following the action.
Give the potential severity, the NHS and the Government are following a robust and well-rehearsed contingency plans to minimise the impact on patient care.
We are clear that above all it is the responsibility of doctors to tell their employer the NHS as soon as possible of their intention to strike or otherwise on 21 June, so that the care of patients need can be organised accordingly. I am sure that all colleagues will agree.
I continue to stress to the BMA that we have agreed, through negotiation, an excellent pension deal; the action will offer no benefit and I advise the BMA, as the opposition have also done, to think again.
As ever, I am happy to answer any questions you may have.
Andrew Lansley CBE
NHS pensions – important facts
1. Pension reform is required because people are living longer. Today, a 60-year-old doctor retiring can expect to enjoy 29 years of retirement. This means drawing a pension 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 9 years would cost approximately £440,000 and the extra cost is picked up by the taxpayer.
2. The 2008 reforms to the NHS pensions are not enough. Despite raising the pension age to 65 for future members, the 2008 reforms did not allow the cost 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 have to pay for the increasing time existing pension scheme members can expect o spend in retirement, with only a limited contribution made by members in the form of higher contributions before retirement.
3. The current scheme is not financially sustainable. The government pays pensions from the public finances. Currently, the contributions received into the NHS pension scheme are greater than the cost of benefits paid out to retired members, creating a “£2 billion positive cash flow that some describe as a ‘surplus’. All this means is that the cost of future pension’s entitlement being built up is greater than those being paid out at the moment. It reflects the fact 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 the NHS workforce growth reaches a plateau and a generation of members reach retirement.
4. The reforms still provide 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. Compare this with a newly qualified doctor joining the reformed scheme after 2015. He can expect a pension of over £53,000 at the age of 65 (the normal pension age for new joiners) or a pension of around £68,000 a year at his state pension age of 68.
5. Doctor’s pensions will still be amongst the highest in the public sector. They will also be significantly higher than the vast majority of the working population. The average NHS pension is £7,300 a year.
6. The NHS pension scheme will remain one of the best available. An inflation-proof pension of £68,000 a year would require a pension pot of nearly £2 million in the private sector. Most taxpayers will have to work longer and contribute more for their pensions with no hope of getting benefits as good.
7. Most staff do not have to work until their state pension age in order to get the same level pension expected under existing arrangements. For the same pension and lump sum, the average 40-year-old consultant would only need to work an extra two and a half years and a 24-year-old starting out on their medical career a little after the age of 66. Those who can expect to live longer are being asked to work longer.
8. Higher paid NHS staffs do not pay an unreasonable amount for their pension. Doctors contribute a similar proportion of their salary as other NHS staff on much more modest incomes but usually achieve better benefits. Tax relief on pension contributions means that from April 2012, a consultant earning over £110,000 would contribute 6.54% of their salary after tax relief (9.9% before tax relief) whilst a nurse earning a quarter of that would pay 6.4% after tax relief.
9. The closest to retirement will see no change. All NHS staff within 10 years of their pension age will remain in the current scheme. Limited protection will be provided to staff who are outside this group but within 13.5 years of their pension age. This means around 35% of the NHS workforce will see no or little impact on their pension arrangements. All staff will have the pension that they have accrued by 2015 fully protected.
10. Pension reform affects all public servants not just NHS staff. Pensions are one element of wider remunerations packages that, of course, vary between different sectors. For example, the average salary of a civil servant is around £23,000 a year, for a nurse it is around £31,000 and for a secondary school teacher £36,000. Civil servants pay lower contribution rate towards their pension compared with other public servants. However pay levels for civil servants have always taken this into account.