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Audit Report

Theresa Fyffe of RCN Scotland

Theresa Fyffe of RCN Scotland

Nursing leaders have warned that further changes to NHS pensions, on top of a proposed pay freeze and job losses would be “a step too far”.

Speaking as an Audit Scotland report revealed that public sector pensions cost £3 billion per year, RCN Scotland director Theresa Fyffe said that the impact of changes already agreed should be monitored first.

In its report on the cost of public sector pensions in Scotland, published today, Audit Scotland says that the Scottish Government and councils will need to implement changes in Scotland to ensure that pensions are fair and affordable in the future.

Currently, public bodies – or the tax-payer – pay £2.2 billion per year, while employees pay around £810 million towards the cost of providing pensions.
The report looks at Scotland’s six main public pension schemes, which cover around a million people (including those already receiving pensions and those who have yet to retire.

It comes ahead of the report next month of the independent review of public pensions across the UK. Chaired by former Labour minister Lord Hutton, this is expected to suggest options which would lead to employees having to bear more of the brunt of the cost.

On average, employees’ contributions cover around a quarter of total pension costs and vary between 1.5 per cent and 11 per cent of pay. Public sector employers pay the largest share with contribution rates ranging from 11.5 per cent to almost 25 per cent of pay. Although higher contributions tend to reflect higher benefits in some schemes, the Audit Scotland report says there appears to be no clear reason for these variations.

Pensions are earned according to pay and length of service. The average annual pensions (excluding lump sums) range from £4,222 in the civil service scheme to £15,674 in the police scheme.

Ms Fyffe said that the report “explodes the myth about gold-plated public sector pensions” because the average annual pension for people who worked in the NHS in Scotland is £7,057.

“Indeed, most retired nurses receive even less because women who worked in the NHS receive an average of only £5,098. 90% of nurses in NHS Scotland are women,” she added.

“Our members understand the pressures on public sector pensions resulting from our ageing population and we have previously supported changes to the NHS pension. This included an increase in contributions to the scheme, progressive increases for higher earners, an increase in pensionable age for new entrants and protection for the tax-payer against increased liabilities.

“There is no need to make any further changes to the NHS pension at this stage: the impact of the changes already agreed should be monitored instead.

“Pensions reform has featured heavily in UK public debate in recent months, but any further changes to pensions, on top of the proposed pay freeze and increased workloads as staff numbers are cut, would be a step too far.”

But watchdogs suggested action was needed. Robert Black, Scotland’s Auditor General,said: “Pensions are a large and important part of public sector pay – one in five Scottish people have or will get a public sector pension and it costs the Scottish public sector £2.2 billion a year to support the six major public schemes. With major UK-wide pension reforms imminent, the Scottish Government should look at the differences between the country’s schemes, and consider how to implement changes that will be both fair and affordable in the long term.”

John Baillie, the chairman of the Accounts Commission for Scotland, pointed out that councils were facing escalating pension costs.

“Over the past five years employers’ contributions to the scheme have increased by 25 per cent in real terms to £836 million a year. Scotland’s councils should now decide on the extent and pace of further reform to ensure the scheme stays sustainable. This includes considering how to share the increasing costs of pensions most fairly with employees.”