Drs' payrise should be funded by cutting 23.7% govt pension contribution

[eyeses]

The Telegraph today suggests that the Government could fund a significant payrise to Resident Doctors by reducing our surprisingly high payments into their pensions.

"Yet what is often forgotten is that these doctors enjoy bumper pensions worth close to 75pc of their salaries in retirement – and which are guaranteed to rise with inflation each year.
Doctors enjoy index-linked, taxpayer-funded “defined benefit” schemes, many of which pay a proportion of the recipient’s final salary from the day they retire.
Under the NHS scheme, staff contribute between 5.2pc and 12.5pc of their salaries while the state contributes a vast 23.7pc each year.
By comparison, private sector workers, who are almost all enrolled in “defined contribution” pensions where the value of the final pot depends on investment performance, receive a contribution of just 3pc from their employer.
The NHS is paying out nearly £1bn a month in staff pensions, with almost 2,000 staff receiving pensions of more than £100,000 annually – a figure that has more than doubled in a year."

AIBU - No, junior Drs deserve that we fund a big pay rise and huge pension
IANBU - We pay far too much into Dr's pensions and they want the money now

What Resident Doctors don't want you to know about their pay

I don’t think this is right.

only basic salary and the responsibility allowance is pensionable. You can earn £180k as a consultant, but it doesn’t all count towards your pension

in the old 1995 pension (which has been closed to applicants since 2015) you can earn a maximum of 40/80ths of your final salary, so half. At consultant level this costs you 12.5% of your salary. Essentially if you work for 40 years you get 50% of your final basic pay but you’ve paid directly for the first 10 years of this with your own 12.5% yearly contributions.

if your husband has most of his pension in this scheme and is on £180k, then around £150k will be pensionable. So his pension will be about £75k. Even if he works more than 40 years, the amount he receives can never exceed 40/80ths. He may have a few extra years in the 2015 scheme if he’s still working (counts from 2022 onwards) but not enough to equate to more than £30k

The 2015 pension is a career average earnings pension. Still costs 12.5% but now it gives you 1/54 of your pensionable salary each year. This one is linked to state pension age and I think very few people are still capable of working as consultants or surgeons at the age of 70 (and would you really want them to?!) so will end up taking early retirement. Retiring at 60 instead of 68 will cost you around 30% of your expected pension in deductions

Add to this the massive tax bills accrued on pension growth each year due to annual allowance charges (you have absolutely no control over how much you pay in or how much your pension ‘grows’ because it’s all just linked to your salary) it’s really not as good a deal as people think it is. It’s not terrible, but I certainly don’t think it’s something that would attract you to the NHS on its own

Lining up to replace them?

my consultant Rota is full of gaps because there is literally no one to recruit. If you know of loads of consultants desperate for work, please send them my way!!

@AndSoFinally we took advice from Wesleyan on the likely return and it is projected to not be less than £100k pa. The more valuable bit, that often seems to be overlooked by those in the NHS scheme who perhaps are less familiar with “common or garden” DC schemes, is that it’s index-linked and lifelong. (I take an unhealthy interest in our retirement income, because our disabled DS is unlikely to live independently).

How were you a partner in an LLP without a limited liability? I don't understand how that would work.

I know you invest capital (have also been a partner in one) but that is the limit of your liability.

@Mithral I think you took issue with the “might lose your house” part of my original post. A partner’s liability “only” being limited to capital is not much comfort if (as is quite likely, since the average person does not possess buckets of idle cash) you take out a secured loan for investment purposes. In much the same way, statutory directors might expect to give personal guarantees over company loans even though the legal entity itself has limited liability. Then there is the risk of negligence (quite high in some areas of law, like real estate), misconduct or wrongful trading, for which liability cannot be excluded. Plainly, there is less risk associated with being a salaried NHS employee relative to partnership, even in a UK LLP, which is the point I was trying to make.

FWIW most international law firms (and presumably Big 4 accountancy firms too) mix and match their LLP’s under a Swiss verein. (There may be a more up to date vehicle, but I’m not aware of it). Different rules apply to LLP’s depending on where they are established, e.g. partners in our US “limited partnership” did not have limited liability at all (and similar applied in the ME iirc). Anyway, I think this officially counts as being off topic now! 😀

So what was your model? You said your liability wasn't limited in your LLP? That's what I was responding to - I wasn't denying other forms of partnership exist.