Posted 4:10 PM by Dil
WHAT ABOUT UK RATHER THAN EU PENSION PROBLEMS?

FRS17 to reveal £100bn hole in NHS pensions
By AccountancyAge.com [11-08-2003]

The controversial pension accounting rule FRS17, which has revealed massive deficits in UK company pension schemes, is set to do the same to the National Health Service.
Link: FRS17 special report
Now taxpayers are likely to have to cough up to cover the cost of pensions owed to 1.3 million civil servants at the NHS, estimated as being equivalent to the revenue from 5p on the basic rate of income tax.

And it could even be worse, according to Charles Cowling, worldwide partner at William M Mercer actuaries, the NHS pensions bill could be as high as £125bn.

He told The Times: 'Before the accounting change the government was simply reporting the cash cost of paying benefits each year, not the cost of the benefits it is storing up for future generations to pay.'

FRS17 takes a snapshot of company pension schemes' assets and liabilities.




NHS shortfall to swallow 1p of income tax
By James Mawson
07 December 2003


The Government is to pour £3.4bn into the pension scheme for NHS employees to try to deal with a shortfall that has soared to nearly £110bn.

The Treasury is being forced to set aside the equivalent of a penny on income tax because the cost of payments to existing pensioners in western Europe's largest public service pension scheme, which has nearly two million members, has risen by 50 per cent in the last five years.

Including employee contributions, the pensions bill in 2004-05 will be about £5bn, compared to this year's £3.5bn. The total NHS budget was forecast to be £68.7bn in the next financial year and typically two-thirds of the budget is swallowed by staff costs.

Christopher Daykin, the government actuary, has identified £109.3bn of NHS pension liabilities, up from £71.3bn five years ago. As this is a long-term estimate, it has not been taken into account in the public sector borrowing requirement, although the annual contributions are part of the overall NHS budget, according to the Treasury.

Without fanfare, the Treasury has sharply increased the amount of money being paid into the scheme. It pays a direct contribution of 7 per cent of NHS salaries to the pension scheme.

However, the amount paid by the NHS employers, which also comes from the Government, has been increased to 7 per cent, up from 4 per cent in 2000. Most employees pay 6 per cent.

The Treasury's direct payments had been a concealed subsidy to the NHS. In future, all this money is to come out of NHS employers' budgets. The Treasury, via the Department of Health, will provide a matching increase in funding to the NHS Trusts above that set aside by the Chancellor, Gordon Brown, in the last spending review.

A Treasury spokesman said this accounting move was to "rationalise and improve, not to shift long-term liabilities or immediate payments".

However, the Department of Health, in a background briefing, said NHS employers would have the freedom to vary the way they do things within their budgets, of which pensions, as deferred pay, is one element. None of the trusts contacted would comment on the changes.

A review of the pension scheme is also under way.

One proposal, which Unison, the main union, opposes, is to increase the retire- ment age from 60 to 65. The review is likely to be finished in 2005.

Pat Corless, the interim chief executive at the NHS Pensions Agency, which administers the scheme, said: "We are at a preliminary stage and are consulting widely whether we need a totally new scheme or just a tweak to the existing one."