NHS pension scheme deficit predicted within three years
The Office for Budget Responsibility has forecast the NHS pension scheme will pay out more money than it receives in 2013-14, meaning it will require a £500m Treasury bailout.
The OBR’s analysis shows spending by the NHS pension scheme in 2011-12 will leap by £600m from the government’s own forecast in March to £7.7bn. Predicted payments into the scheme – which come from both NHS employees and employers – have also been revised down this year, by £400m to £8.5bn.
By 2015-16 the NHS pension scheme will be in deficit by £1.2bn, even though a £200m surplus was predicted six months ago.
The OBR report said the rise in predicted payouts “reflects the latest in-year data, which shows an increase in retirement and average lump sum payments, and higher than expected pension lump sum commutation rates over the last couple of years”.
Commutations replace some of an annual pension with an additional tax-free lump sum.
The report said the new figures were also due to reduced pension contributions “to reflect the consequences of the pay restraint measure announced in the autumn statement”. Public sector wage rises will be capped at an average of 1 per cent for two years from April 2013.
Thousands of NHS staff went on strike last week over proposed reforms to the NHS pension scheme. Unison has previously said large public sector pension deficits were a “myth”, with income exceeding outgoings by “some £2bn in the case of the NHS pension scheme”.
The actual estimated surplus for this year has been slashed to £0.8bn.
Mark Packham, a director in PricewaterhouseCoopers’ public sector pensions practice, said: “The other major unfunded schemes – civil service, teachers and armed forces – were already cashflow negative, but we had not expected the NHS pension scheme to get there until late this decade.”