The Department of Health and Social Care is consulting on proposed changes to employee contribution rates to the NHS Pension Scheme.

With the NHS Pension Scheme moving to a career average revalued earnings (CARE) model for all active members from 1 April 2022, the consultation proposes a new employee contribution structure which will contain fewer tiers and new contribution rates.

Given that some members will see an increase in their pension contributions, the changes would be phased in over two years starting 1 April 2022, with the final changes made from 1 April 2023. This approach seeks to minimise the impact on take-home pay and to give members time to adjust to the changes.

Below, we summarise the key proposals you need to know about. You can find all of the proposed changes here.

Increase of tier thresholds for contributions

The thresholds for the member contribution tiers would be increased from time to time in line with annual Agenda for Change pay awards. This change would benefit members who currently find that small salary increases (due to centrally agreed annual pay awards) can lead to moving up a contribution tier, and a net reduction in take-home pay.

Contribution rates will be based on pensionable pay from April 2022

Employed members’ contribution rates would change to be based on actual pensionable pay instead of members’ notional whole-time equivalent (WTE) pay. This directly impacts how contribution rates would be calculated for part time staff. The consultation proposes that for part timers (including bank workers), where possible, pension contributions would be calculated on actual annualised earnings from the previous scheme year, instead of on a WTE basis. Many part-time members could therefore see their contribution amounts reduce.

From 1 April 2023, it is also proposed that where a member has multiple part-time roles, their salaries would be combined for the purposes of setting their contribution rate.

Summary of changes to expect if the proposals go ahead

• introducing a new member contribution structure containing new tiers and contribution rates
• phasing in changes to the member contribution rates over a two-year period, starting in April 2022
• index-linking the tier boundaries to reflect any annual pay awards
• using actual annualised rates of earnings to set members’ contributions tiers (instead of using WTE earnings) from 1 April 2022
• from 1 April 2023 aggregating multiple part-time employments to set members’ contribution tiers where members have employment across different employers

Have your say in the consultation

Full details of the proposed consultation can be found here. If you would like to comment on the proposals, you can respond to it until 7 January 2022.

Once the Government responds to the consultation, appropriate amendments to the NHS Pension Scheme Regulations will likely be introduced early in the New Year.

How Capsticks can help

Capsticks has significant experience of supporting healthcare and public sector employers on all kinds of NHS pension issues, so you can operate effectively under the pension scheme and avoid risks for your organisation and employees. We’ll keep you updated on the consultation and will let you know of further decisions as soon as they arise.

For further details on the issues discussed, please contact Raj Basi to find out how we can help.