Pensions Costs Rise For NHS Staff And Teachers

Health workers and teachers face a hike in pension contributions of as much as 42% on top-end salaries as a result of a deal struck between the government and unions.

Finance Minister Tom McCabe yesterday announced the rise in payments which will affect 130,000 NHS staff. Some 70,000 active members of the Scottish teachers’ pension scheme will also see a rise in contributions.

The deal will ensure that Scottish public-sector workers have their final-salary schemes protected, at a time when many private-sector pension schemes have been shifting away from such commitments to future pensioners to less generous schemes.

Health service staff and teachers also have their retirement age protected at 60, though the detail of the new deal could make it attractive for some of them to remain at work for five years longer. A small number of health service staff, in particular those who joined before 1995, will continue to retire at 55.

After April this year, new entrants into the nation’s staffrooms will join a scheme that means working until retirement at 65. New NHS workers will also face a longer working life from early next year, when they will come into line with the pensions arrangements also being altered in England and Wales.

Scotland’s teachers will see pension contributions rise from 6% to 6.4% of salaries, meaning only £110 more in deductions a year for a middle-ranking teacher on a £28,000 salary.

The deal is more complex for 130,000 NHS staff. It means lower-paid employees on less than £15,100 will continue to pay 5% of their pay in pension contributions. In some cases, clerical workers below that threshold will see a cut from 6% to 5% in payroll deductions. The increases will affect those earning more than £15,100. Up to £61,000, the rate will be 6.5%. A nurse earning £25,000 will pay £125 more annually, while a manager on £49,000 will have £245 more deducted per year in contributions.

The big increases are for high earners, mainly affecting doctors. For those earning more than £100,000, reckoned to include around one in 10 general practitioners, pension contributions will rise from 6% to 8.5%, meaning those on the threshold will see their annual contributions rise by £2500.

Not all the figures are finalised because actuarial calculations on the Scottish public-sector pensions schemes are not completed. The figures announced yesterday are based on English reckoning, and the system could be reviewed if Scotland is found to be significantly different.

The savings to the public purse from increasing the pension age for new recruits are expected to total £500m to the NHS over 50 years, and £400m on the teachers’ scheme. Throughout the UK, the Treasury hopes the changes in public-sector retirement age will see it save £13.5bn over that time.

Dr Peter Terry, chairman of the British Medical Association Scotland, said doctors would prefer not to be paying more, but they recognised the need to secure their pension scheme for younger people coming into the profession.

“On the whole, we think it’s reasonable,” he said.

“We have managed to keep our final-salary scheme and also got our existing members the ability to retire at 60, which most people would regard as an advantage.”

Unison, the main public-sector union, has had backing for the proposal from a large majority of members, while a spokesman for the Educational Institute of Scotland, representing most teachers, said: “Given the current climate, it could have been a lot worse.” The schemes are not paid from pension funds in the way that is common for private-sector pensions, but from the future tax revenue paid at the time today’s workers are retired.

That has drawn criticism from the private sector that retention of the retirement age at 60 has feather-bedded the public sector at future taxpayers’ expense, while disadvantaging businesses when they want to recruit skilled workers. As employers of teachers, councils will have to pay 1% more on payroll contributions from April next year, while NHS boards are not expected to increase their employers’ contributions.