Feb 2008 24

Record numbers retire on £1 million NHS pension pots25

  • 8,500 retired NHS staff have retirement benefits worth £1 million
  • Total bill of £8.5 billion

The bill for public sector pensions is of growing concern for taxpayers facing huge bills for underfunded and over-generous pensions. In December 2007, the TaxPayers’ Alliance (TPA) revealed that there are almost 3,700 retired civil servants with retirement benefits worth £1 million. In the second paper of our public sector pensions series, we look at the generosity of pension arrangements in the NHS in England and Wales.

Using information obtained from the NHS Business Services Authority Pensions Division, TPA researchers have calculated the extent of the taxpayers’ pension commitments. The findings are shocking:

  • There are almost 8,500 retired NHS employees (including GPs) in England and Wales with retirement benefits worth £1 million.
  • The total value of these retirement benefits is almost £8.5 billion (up to £337 per household)

Download £1 Million NHS pensions (PDF)

Corin Taylor, Research Director at the TaxPayers’ Alliance, said:

"Unfunded public sector pension liabilities are reaching completely unsustainable levels. Every household will have to pay up to £40,000 over the next few decades to fund gold-plated retirement benefits for public sector employees, including £1 million pension pots for the NHS elite. Urgent change is needed to reduce the bill to taxpayers – for a start, the pension age for existing public sector employees should be raised to the state pension age as soon as possible.”

The figures, which were obtained through a Freedom of Information request, have been scrutinised and approved by Terry Arthur, Fellow of the Institute of Actuaries and Fellow of the Pensions Management Institute.

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  • One marcus

    Lets not run away with this one. I work in the public sector work very hard for the public good doing long hours and get paid far less than in the private sector, the only benefit is the pension. I’m not going to get a £1 million pension pot when I retire. If you take away the pension increase my wages, so that I can pay my mortgage without getting into massive debt.

  • cc

    Finally someone has published this article showing how some well paid nhs staff do exceptionally well with the pension.
    Whats more is that a consultant can do a part time post for the final years, and have this pro rata-ed up to full time when calculating a final salary.
    e,g, doctor does 37 years for nhs, then 3 years consulatancy part time (8 hrs per week £25,000 per year)
    the pension will be calculated at £125000p.a, full time equiv final salary.
    pension will then be – if taken at 60
    40/80 * 125k =66k per year
    plus lump sum of 66*3=200k
    its a scandal, just another way the country is going down the pan under a left wing government who have lost control

  • AD Blyth

    My understanding of the Pensions Act 2004 is that Company pension funds are required, by law, to carry out regular valuations of their funds in accordance with Scheme Specific Valuation requirements. The Company is required, where a shortfall of future liablities is identified, to submit the valuation, along with a recovery plan, to the Pensions Regulator. Presumably the Pensions Regulator will satisfy himself as to the adequacy of the provisions of the plan prior to expressing approval.
    The Company is required, again by law, to include details of any relevent costs , provisions, reserves etc within its Annual Report & Accounts and balnce its books accordingly.
    Surely the same requirements should apply to central and local governments along with other public sector bodies such as NHS Trusts.
    Is Government there just to make laws, not to obey them ?
    I suspect there is not a single one of these bodies that would be able to produce a balanced budget if pension liabilities were included. So, is it legal ?

  • LPJ

    What a load misleading crap.
    Its time we had a Government that stood up to the crap rightwing in this country. Allways remember that public sector workers choose to pay for their own pensions whilst they are working over a 40-50 year working span. Their pension pay deductions are taken into the Government’s coffers. And whilst doing so public sector workers pensions contributions are propping up welfare giro payments to social scroungers in the private sector who don’t want to do any work, except complain about their next welfare cheques.

  • http://www.mastervisions.com/gift_ideas/retirement-gifts.htm Mark

    We all have to work out our own way to retire. I am definitely behind and my wife and family have suffered.
    I wish I had been wiser when I was younger but I didn’t think it was important back then and now . . . here I am.
    Cheers,
    Mark

  • Stephen Thomson

    9)This is an area that makes me furious.
    Public v Private sector pay and pensions. It was generally recognised many years ago that the private sector paid better than the public sector and that one of the benefits of the public sector was the gold plated final salary pension which “made up the difference”. Well salaries appear to have caught up with private sector, and that argument does not hold true anymore – so why is the public sector still continuing on with its final salary schemes, especially as it is now recognised that these open ended liabilities cannot be afforded by companies and the country. The private sector schemes are all but closed to new members now – so why does the public sector think it can continue offering these. Why should someone who works in the private sector and contributes to a pension pot be subsidising through higher taxes, someone in the public sector who will end up with a far greater pension on retirement than a like person who has no final salary scheme in the private sector. This is another situation that breeds resentment, splits society and is going to lead to serious financial issues for the country. It is extremely unfair and the government needs to finally address this issue in Britain in the 21st century and align public schemes with private schemes…if not we can see a future “Bankrupt Britain”.
    WELCOME TO RIDICULOUS BRITAIN – THE SOFT TOUCH

  • Francis day

    Public Sector Pensions.
    What bitter and twisted individuals you are. I refer to the article above and comments in the Times.
    Should you get your wishes and the retirement age in the fire service is raised to 65 lets hope you wont be concerned when in need of rescue from a burning building a 65 year old woman appears at the top of the ladder to carry you and your loved ones to safety, that is if she were still able to lift it off the engine, carry and raise it to your window in the first place.
    I personally pay 11% of gross salary each month towards my pension and can retire at 50, my so called gold plated pension amounts to roughly two thirds of what is no more than average income and will be subject to income tax at the normal rate after retirement.
    Unless im mistaken I pay income tax now and will continue paying tax till I die, therefore I pay for the state pensions of those who don’t care to save and will continue to pay for the same people from my pension.
    There are in some authorities more retired ex service members than remain on payroll for various reasons, cutbacks in public spending; which should please you and the introduction of breathing apparatus which means that firefighters now live more that five years after retirement these days rather than dying of various horrible and distressing lung and chest problems.
    You will also be pleased to know that those injured in the line of service and are unable to carry out their previous duties can now be dismissed on medical grounds without a penny, contibutions to that date will then be frozen until their 65th birthday.
    After retirement some individuals do continue working, I guess they just love it, or is it because they cant afford not to?
    I think we all agree that public money needs to be spent well but a little commonsense is needed to prevent ill informed comment.

  • David Smith

    to all of you civil servants, remember who pays your wages. Overpaid bureaucrats who earn obscene amounts of money with no control over performance or remuneration disgust me.
    Why can’t all workers hold back taxes en masse and see how these thieves manage.

  • HS

    If the terms and conditions are so bad around pay and conditions in the public sector how come there is a waiting list to join virtually every sector including the fire service ? And we are only talking about T & C,s.Compared to the private sector there is job security,and no
    performance management and the public sector is still recruiting compared to the contracting private sector where existing employees have to work harder to make up shortfalls in the workforce to cut costs.We all made a mistake in not choosing the public sector as a career.But then how would we generate the wealth to fund the vast public sector.No matter how how badly off you think you are in the public sector those of us who pay your wages have to work longer and harder and for the most part for less rewards in the long term.

  • Phil

    Having worked in both the public and now private sector, I must agree that this is an unfair and stupid situation. The pay in the public sector is at least equal and sometimes more than that in the private sector. Why should private sector workers fund the final salary schemes of those in the public sector? Yes it really is that simple.

  • SP

    The other thing that really riles me is public sector workers who keep complaining that a ridiculous pension compensates for lower salaries.
    One, this Labour government has gone to great lengths to address the salary gap. The pension gap remains.
    Two, public sector workers often get a range of other benefits that compensate for lower salaries in any case.
    I’m talking about things such as increased job security (or total job security in many cases). Things such as better holiday entitlements, significantly better maternity/paternity provisions. That’s without even mentioning better sickness benefits, and increased access to flexible working.
    The truth is that public sector employees do pretty well as it is. Expecting the private sector to pick up the tab for huge pensions is ridiculous.

  • SP

    Whilst it is true to say that Public Sector pensions are amongst the last remaining defined benefit schemes, the fuss over retirement age is ill-informed. Most pension schemes, whether Public or Private Sector allow for retirement before State Pension age. The vast majority of people, in both sectors, cannot afford to retire before State Pension age. An Administrative Officer in the Civil Service, earning around £20k per annum, with 20 years service (not unusual) might expect a “gold-plated” pension of around £5k per annum.
    Of course, a minority of public servants earn very much more than that but bear in mind that the most senior civil servants, including those grappling with the credit crunch, earn less than £150k per annum ie less than the lowest paid FTSE 250 directors and I am not sure the case is well made here.

  • http://www.taxpayersalliance.com SP

    Whilst it is true to say that Public Sector pensions are amongst the last remaining defined benefit schemes, the fuss over retirement age is ill-informed. Most pension schemes, whether Public or Private Sector allow for retirement before State Pension age. The vast majority of people, in both sectors, cannot afford to retire before State Pension age. An Administrative Officer in the Civil Service, earning around £20k per annum, with 20 years service (not unusual) might expect a “gold-plated” pension of around £5k per annum.
    Of course, a minority of public servants earn very much more than that but bear in mind that the most senior civil servants, including those grappling with the credit crunch, earn less than £150k per annum ie less than the lowest paid FTSE 250 directors and I am not sure the case is well made here.

  • Peter Lucas

    Oh, what spite. Surely your energy and efforts would be more usefully focussed on trying to improve the pension entitlements of those working in the private sector, rather than on ending the few schemes that usually (not always) pay an above-poverty levle pension. Why have companies, who took long pension scheme contribution ‘holidays’ when times were good, got off so lightly? Surely any decent employer should aim to provide a decent pension to their workers? Or is it only those who have grown rich off the efforts of others (i.e. those in the private sector) who should be able to retire with a degree of dignity and security?

  • Peter Faulkner

    Not half as spiteful as I feel. Most public servants are a pain and simply aren’t worth what they are paid and certainly aren’t worth the drain on national resources when they retire on a fat pension paid for by millions fated to starve on a miserable state pension.

  • Call me Dave

    Anyone wishing to defend the status quo on public sector pensions please engage on this thread;
    http://www.taxpayersalliance.com/research/2008/11/new-research-pe.html
    I would appreciate however that you first take the time to read the thread before commenting. Any attempt at defending this apartheid will only make you look rather silly!! For example a commentator above mentions that he contributes 11% of salary and can retire at 50 on 2/3rd’s final salary whilst also referring to individuals (like myself) as “ill informed” and “bitter and twisted”. Does this individual have any idea how much his pension is actually worth? Obviously not – but if he cares to become enlightened and a lot less ignorant on the subject he will find the the unpalatable truth on the links I provided.
    Of course individuals defending the status quo wish to ignore the facts and display selective thinking in their approach. It is therefor highly unlikely they will take the time to become less pig ignorant on the subject. A bit like MP’s along with other public sector influencers on their own pension arrangements.
    Happy reading y’all.
    Just as well David Cameron isn’t quite as ignorant on the subject. Change must and will happen.

  • MP

    I am in the Forces.
    Three points.
    1. Service personnel generally get a full pension after 30 years service. They cannot retire at age 60 or 65 because even those in their 40s start to struggle to pass the compulsary 6 monthly fitness tests. We all get old! Image a 64 year old Para charging the Taleban!
    2. I believe that it was the private sector Financial Services sector that started(?) exacerbated(?) this whole recession, particularly falling tax credits and funding public liabilities.
    3. Should not the private sector look to their own bosses and fight back?
    For my own part, disband the Forces if you want. At least it won’t mean Christmas being mortered anymore on behalf of both public and private sector, UK citizens.

  • Call me Dave

    Point 1. Following your logic a professional footballer playing for one of the many also ran teams earning a relative pittance should retire on a full pension around age 35 (since after this age it is likely he would no longer be fit enough to compete). Without public sector cash to fall back on he gets another job – and why not?
    Point 2. Err no. Private sector final salary schemes have been in freefall since 1998 following Labours tax grab on pension funds.
    Point 3. Yes they could fight back like the public sector unions but unfortunatly their employers would become uncompetitive and ultimately go bust if they get their way – along with the pensions. Private sector companies do not have the luxury of ploughing billions of pounds of tax payers money into unaffordable pension provision. Shortfalls in the private sector have to be funded with employee or employer contributions. If you look at the link I provided earlier this means circa 40% or so of annual salary depending on accrual rate. (unless your a police officer where it is around 70%. So the 11% a police officer contributes looks like a lot and they are convinced they have contributed and are therefor entitled to full pension / early retirement. The remaining 59% of lifetime annual earnings is provided by the tax payer.
    Who said we should disband the Forces??? Not me for sure.

  • MP

    The Armed Forces Pension Scheme (AFPS) is one of the reasons that experienced service personnel stay in – golden handcuffs if you like. It is similarly a retention factor for youngsters just starting out.
    Re your footballer analogy – many service people do retrain and leave for civvy street wihtout the AFPS to fall back on (until it kicks in at 65 at a much reduced rate obviously).
    The AFPS is the very least this Nation can offer people who have fought this country’s wars.

  • Call me Dave

    MP, I salute you and your colleagues who defend our freedoms. This does not however mean I agree with your pension arrangements. It is clear if one is employed in whatever area of the public sector then you will attempt to defend the status quo on final salary arrangements for your own area or indeed the wider public sector.
    A higher purpose can be served by understanding the wider issue and it’s impact on not just you but your neighbours who may be unfortunate enough to be employed in the private sector with nothing but means tested benefits to look forward to in retirement.
    I would encourage you once more to read the thread on the link I provided earlier. (your response tells me you didn’t bother but I did expect that) Hopefully you can cast aside your self interest and realise we are facing an unjust two teir society where public sector pensioners retire in relative luxury compared to their private sector counterparts. Not to mention the burden we are placing on our children and our grandchildren as they pay punitive taxes to fund the pensions of retired public sector workers.
    Perhaps you don’t give a hoot about these things and hey – that’s fine. It’s a free society.

  • Steve Robson

    The trouble is that’s TPA research, ie invalid because of the faulty research methodology (start with conclusions and work back to findings). Have you not got something from someone with more credibility, like St Luke’s Primary School.

  • Call me Dave

    Steve, the thread I’m encouraging readers to look at contains research from a variety of independent sources as well you know having engaged in the discussion yourself.
    Your comments about the TPA’s own research is your opinion. The vast majority of professional research (and indeed opinion) agree that public sector pension provision is unjustifiable and is creating a two-teir society of pensioners.
    The proponderance of evidence is something you should take into account from a wide range of sources – not just the TPA.
    Perhaps St Lukes Primary can come up with evidence supporting the moral justification of public sector final salary pension provision. They’re probably your best bet Steve.

  • http://www.taxpayersalliance.com/waste/2008/02/record-numbers.html MP

    Call me Dave
    I have now read the link as you (first) suggested. Please accept my apologies for not doing so first.
    Sometimes public sector pension schemes are viewed (cynically) by those signed up to them as a way for “the Establishment” to keep experienced employees “in” or “onside”. The so-called “pension trap”. It is a pull-factor for retention purposes.
    In the Forces it is well known that we call our own pension scheme a “pension trap” and that many personnel seek to leave before that “pension trap” snaps shut.
    A new AFPS was introduced some years ago offering final salary pensions. The
    take-up was just 7%!!!
    The old pension scheme is still going. Nowhere near as generous BUT it does give personnel the option to leave whenever they want without suffering the sort of financial loss that I would suffer if I dared leave the new scheme before I reached 55.
    The decision is not an easy one, you may be surprised to learn, but 93% have clearly decided that the ability to leave and do other things is more important than a final salary pension.
    Some years ago I gained an OU degree majoring in business studies. I also qualifed as a commercial pilot. Then I was offered the new AFPS whereby I could now expect a final salary based pension at age 55.
    I took up this offer but please believe me when I say that I desperately, desperately wanted to leave the Forces and fly commercially: I was dreading this offer coming along! But I had been “handcuffed” if you like by the promise of future security in retirement if I would stay.
    My point is that I had actively planned, financed and retrained for civilian life but when the new AFPS was offered to me, just 12 months before I was due to leave, it was a “no-brainer” for me I guess. (I am not a pilot in the Forces by the way).
    If this AFPS is now removed from me, and others like me, well, I do not know what I would think or do now that I am older and perhaps less likely to get employment. I would suggest that this is true for other public sector workers. And is (still) being faced by the private sector I know.
    My “life” decisions were shaped by the pensionable remuneration offered to me at a critical point in my employment: just when I could have left for civilian life – as I was planning – and saved all of you cash!
    I worked in the private sector (oil industry) before being made redundant. It is the hardest I have ever worked – long hours, flexible working attitudes and the ever needful requirement to be competitive.
    In the public sector (Armed Forces in my case)I still work long hours and need to have a flexible working attitude but of course I no longer need to worry about being competitive. I suspect the Police and the Fire Service are the same – and perhaps “teeth services” of the NHS and Local Councils ie those who get dirty!?
    I actually agree with you that there is going to have to be a major, earth-moving rethink about public sector pensions BUT I do not see how this can be achieved “peacefully” if ALL public sector employees are targeted as opposed say, to new entrants only or those serving but not yet on pensionable terms?
    Perhaps another way would be to make all public sector pensions “more contributable” say by awarding payrises graded downwards to reflect pension contributions.
    It is interesting to look at the problems that British Airways currently has. As a former public owned airline, with state pension funds and working practices they are now, as a private sector company having to wrestle with these financial “burdens”.
    But remember, “burdens” they may be but to those long serving employees they perhaps represent sacrificing personal dreams to move on elsewhere for the promise of financial security in retirement.
    And of course private sector pension funds should have that dividend tax removed.
    I for one would be quite happy for the UK to decide that substantial savings could be made by relinquishing our UN Security Council seat, remove Trident: cut back the Forces towards a “punchy” Homeland Defence Force e.g. like Denmark, Sweden, Norway but “a bit” bigger! We aspire to be the USA’s equal partner but we no longer have the cash.
    In closing, it is without doubt a fact that the UK is in danger of having to go to the IMF again unless we all, no matter what sector we are in face up to some unpleasant truths about UK Plc’s future financial security!

  • Graham Roxburgh

    A request to all those commenting on public sector pensions – by being index-linked to RPI, they are “platinum plated” (not “gold”). A rare final salary pension would need 40% extra contributions to be RPI linked as in the public sector. The private sector is “lead plated” and lies at the bottom of the food chain after the various pension raids.

  • C Cox

    Public sector emolyees do contribute to their pensions—–doctors’ contributions were upped in 1981 by Mrs Thatcher. Most public sector workers do not have the free company cars, free public school education for their children, and other, minimally-taxed benefits enjoyed by many in the private sector. a typically British characteristic is wanting a superlative service for almost nothing. Many Taxpayers’ Alliance comments smack of this. There is also the matter of boardroom greed.