The latest proposed changes to NHS pensions in England and Wales are unfair for pharmacists and a backward step says Paul Moloney, PDA Union National Officer.
Paul Moloney, who leads on pensions for the PDA Union, explains that many of the proposals are non-contentious and make helpful minor improvements to the scheme but two of the proposals are significant and detrimental to pharmacists in the NHS. Paul said, “We have made it quite clear in our response to this consultation that two of the proposals represent a backward step and are unfair for all pharmacists, particularly those at Bands 7 and 8.”
Last year, a consultation exercise was undertaken to find ways of ending the anomaly where a pay increase could move people into a higher contribution rate leaving people with less take-home pay than before the increase. The NHS scheme contribution rates are tiered and the higher someone earns the more they have to pay in contributions. For example, someone on £45,000 pays 9.8% of their salary and someone on £46,000 is in a higher contribution tier and pays 10.7%. Previously, these rates were fixed which meant that as people received annual cost of living increases more and more people were moving into the higher contribution tiers.
These ‘cliff edges’ as they were known meant people often saw little of any pay increase if it meant they moved into a higher tier. In years where the pay increase was only 1% people who moved into a higher pension contribution tier as a result of the increase even found their take-home pay was lower than before the increase. There was widespread agreement this was unfair and long-awaited changes were made to link the tier points to the annual pay increase so that they would increase by the same amount as the pay award. This was felt to be much fairer and meant that no one would see their annual increase swallowed up by increased pension contributions in the future.
PDA members can see the current contribution tiers here.
However, the government seems to be backtracking on this, saying that the contribution rates can only be changed by parliament making the commitment to link them with the pay increase too onerous. Instead, they are proposing to link with CPI (Consumer Price Index) instead, rather than the actual pay increase. This would require a one-off decision by parliament and therefore be a much more streamlined process.
Paul Moloney explains why the PDA Union is against this by saying, “Our long-held objective is to see members’ pay rates in the NHS increase by more than CPI, so linking the points at which pension contribution levels increase to CPI will mean more people will pay higher rates than is currently the case. This is a backward step and goes against the spirit of what we thought had been agreed, and one our NHS membership would expect us to oppose.”
The PDA Union is making its own proposals that it believes addresses the issues raised in the consultation and protects members from the long-term impact of the government’s approach.
Paul continued, “We have urged the government to find a way of linking the tier points to the pay increase but if this really can only be done each year through parliament then we are suggesting they link with CPI but carry out an adjustment every other year in line with actual pay increases so that in the long run the tier points do maintain the value they have today”.
In addition to this, there is the separate proposal to freeze the point at which people pay the highest contribution rate, meaning it remains at its current level as salaries increase each year. The PDA Union believes this represents a double whammy for pharmacists as more and more will fall into this group over time. The PDA Union believes this is a significant watering down of the agreement everyone had thought was in place following the last set of changes and is simply unfair to those working in bands 7 and 8.
Paul commented, “We have calculated that someone at the top of Band 7 could reach the highest contribution rate in 4 years’ time if pay increases during that time average 4% each year. For someone in Band 8a it would take just two years.
At present the highest rate is paid by those in Band 8b and above and we see no evidence to support the need to gradually reduce this tier to include anyone else.”
The PDA Union has submitted its response and will be updating members in the new year when the government response to the consultation is expected to be published.
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