Oxleas NHS Foundation Trust offering cash inducements to opt out of pension

woolly_wombat

Today's Times is reporting that Oxleas NHS Foundation Trust are offering cash inducements to entry-level nurses if they give up their NHS pension membership.

It is reported that the Pensions Regulator has approved the arrangement despite auto-enrolment rules which forbid employers from offering financial inducements to opt out of pensions.

See more at:
http://oxleas.nhs.uk/working-at-oxleas/

We have created a new pay offering, which is open to all band 5 nurses at Oxleas and will allow the choice of taking either the standard NHS pay scheme, or one that has an enhanced rate of pay, which when combined with additional pay for unsocial hours, will equal the pay offered by many agencies.

Accessing this offer means you would not be a member of the NHS pension scheme, we will instead be paying you directly the money that we would have paid into the NHS Pension Scheme on your behalf.

A worrying development.

Is this really legal?

princeofpounds

How exactly is this a worrying development?


I mean, pension savings are good, but they aren't forcing anyone to do anything.

The situation they will find themselves in on accepting this change of arrangement isn't really any different from how most people have to arrange their finances (until auto-enrolment comes in fully).

And plenty of medical staff quite happily work for agencies that effectively have similar arrangements; shouldn't the NHS be allowed to recruit such workers direct?


Personally I think there should be compulsory pension contributions for all employees invested into a private system, similar to systems we have had in place in Poland or Chile. And that distorted public sector pensions should be reformed. But I guess that wasn't where you were going with this topic.

PensionTech

I'm following this case with some interest. There's a fine line between cash inducements and genuine flexible benefits packages.

It has been cleared already with the Pensions Regulator, but the NHS Pensions Board is concerned about it and is thinking about referring it back to TPR for reconsideration. Journalists and the Pensions Minister have seized the opportunity to denounce it as flouting the auto-enrolment rules, or at least the spirit of them, and are accusing the NHS of trying to keep pension costs down against the interests of their employees. To me it seems like it might come down to a) the intention behind the offer and b) how it is presented - but that does not create a firm or objective legal precedent for others to follow.

woolly_wombat

princeofpounds wrote: »

How exactly is this a worrying development?

Because auto-enrolment rules were supposed to prevent employers from offering financial inducements to opt out of pensions.
1. Because it sets a dangerous precedent which other employers could seek to emulate.
2. Because you only have to search on MSE to see how many NHS employees don't understand what a valuable part of their employment package the NHS pension is.
3. Because I'm glad there are still people out there who are prepared to join the nursing profession and I'd hate to see them being conned out of a valuable benefit.

woolly_wombat

PensionTech wrote: »

Journalists and the Pensions Minister have seized the opportunity to denounce it as flouting the auto-enrolment rules, or at least the spirit of them, and are accusing the NHS of trying to keep pension costs down against the interests of their employees.

I see from the FT that Ros Altmann is on the case and her officials are investigating. Excellent.

princeofpounds

Because auto-enrolment rules were supposed to prevent employers from offering financial inducements to opt out of pensions.

We don't actually know if this is any kind of inducement at all at the moment. Merely offering flexible salary vs. pension is not an inducement - it's quite a normal thing (although most people start with a small pension and the opportunity to increase contributions, rather than the other way around).

Because it sets a dangerous precedent which other employers could seek to emulate.

Most employers operate this way anyway. I happen to agree that it's not optimal to leave all pension saving down to individual choice, but there is no precedent here; if anything the practice of pensions in the public sector lags the unfortunate reality that everyone else has faced up to by a couple of decades.

Because you only have to search on MSE to see how many NHS employees don't understand what a valuable part of their employment package the NHS pension is.

True. Do you actually know if the salary being offered is different to the actuarial value of the pension benefits accumulated? I suspect it's not, if the pension regulator has looked at this properly.

Because I'm glad there are still people out there who are prepared to join the nursing profession and I'd hate to see them being conned out of a valuable benefit

Where is the evidence that anyone is being conned?


I know I'm being somewhat obtuse here, but the point is that this is not necessarily an 'NHS traditions under attack' situation at all, pending an understanding of the details. You can't talk about it being a 'worrying development' if you don't really understand what is being offered.


If you come back and show that the payments being offered are much less than the value of the pension and being deceptively marketed, then I'll be on board.

PensionTech

Do you actually know if the salary being offered is different to the actuarial value of the pension benefits accumulated?

I don't know, but I would be pretty certain that it is different. The scheme is funded as a whole; benefits are worth more or less for different members. I really doubt you'd end up with individual calculations of the actuarial value of benefits for every employee of different age/sex. And imagine what an outcry: older women offered 30% uplift but younger men offered 10%...

One of the pertinent questions is indeed what uplift is actually being offered. If it's the AE minimum employer contributions then that's clearly a breach since the scheme costs a lot more than that. (For that reason I doubt it is the AE minimum.) My guess would be that it's the current level of employer normal contributions on behalf of the scheme membership as a whole. But then you have the issue of selection risk!

I do agree that it's premature to jump to the conclusion that the NHS is failing its AE duties (in fact the evidence currently points in the other direction, since TPR is the ultimate authority on this and they have already come to a decision). But I do think it's unwise for the NHS to allow themselves to become embroiled in this kind of controversy, and it does seem appropriate to have their motives examined publicly - as this plays a large part in ultimately defining whether it is or is not a breach.

It has also already been pointed out that TPR have left this something of a grey area, potentially open to abuse - so a test case like this is useful, and could help to tighten up any loopholes.

princeofpounds

And imagine what an outcry: older women offered 30% uplift but younger men offered 10%...

yes imagine... it would be nice, though, if it was transparent how much people on these DB scheme actually get paid.


My father was in a government DB scheme. Sort of the bottom of the higher ranks, I suppose, maybe top of the middle management.


When he retired a few years back, his pension would have been worth 1.8m quid (in fact probably over 2m at current rates, given the inbuilt indexation and spouse protection), if he had actually built one up.


Quite some retirement bonus. Yet there are thousands and thousands like him.

kidmugsy

Do the nurses get the opportunity to opt into the NHS scheme later on?

PensionTech

Yes, but with the requirement that they would have to drop to the lower pay scale.

There is some information on it here:

http://oxleas.nhs.uk/working-at-oxleas/

http://oxleas.nhs.uk/site-media/cms-downloads/Oxleas_Nurses_Band_5_Pay_Scales_v2.pdf

It looks like they're offering 10% extra gross salary, but employer contributions are 14.3% according to this:

http://www.nhsemployers.org/your-workforce/pay-and-reward/pensions/pension-contribution-tax-relief

Humbleatsource

As a new user I am not permitted to add hyper links, however you can find the pay offers on links shown on the Oxleas NHS Working4us website. It also suggests eligible employees can select an alternative option later.

Currently, employer contribution rate is 14.3% and employee contribution rates are salary banded.