NHS Pension Scheme: proposed uplift to member contribution thresholds for 2023 to 2024
Updated 25 May 2023
Applies to England and Wales
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This publication is available at https://www.gov.uk/government/consultations/nhs-pension-scheme-proposed-uplift-to-member-contribution-thresholds-for-2023-to-2024/nhs-pension-scheme-proposed-uplift-to-member-contribution-thresholds-for-2023-to-2024
Background
The NHS Pension Scheme is designed to offer significant value in retirement to people who have chosen to dedicate part, or all, of their careers to serving the public through the NHS. Backed by the Exchequer, the NHS Pension Scheme offers the security of a guaranteed income in every year of retirement for all its members, on some of the most generous terms available from a pension scheme, in recognition of their service to the NHS and the country.
The legal framework for the NHS Pension Scheme
There are 2 NHS Pension Schemes: the new reformed 2015 scheme and the older, closed scheme which is divided into the 1995 and 2008 sections. Accordingly, there are 3 sets of regulations under which entitlement to pension and other benefits are calculated:
- The National Health Service Pension Scheme Regulations 1995 (SI 1995/300) (the ‘1995 Regulations’)
- The National Health Service Pension Scheme Regulations 2008 (SI 2008/653) (the ‘2008 Regulations’)
- The National Health Service Pension Scheme Regulations 2015 (SI 2015/94) (the ‘2015 Regulations’)
The changes proposed by this consultation only affect the 2015 Regulations.
Proposed changes to scheme rules
Further to the consultation NHS Pension Scheme: proposed changes to member contributions and the associated regulations, this consultation sets out how the pensionable earnings thresholds in the member contribution structure will be uplifted to account for the Agenda for Change (AfC) pay increase.
The original consultation was published on 15 October 2021 and the consultation response was published on 15 February 2022. The consultation set out that increasing the contribution tier boundaries in line with annual AfC pay awards would maintain the yield and reduce the possibility for a small number of members to have a take-home pay reduction as a result of crossing tiers due solely to an increase to the AfC pay bands.
While there are different processes for determining the pay award for different parts of the NHS workforce, it is important that the tiers are kept consistent for all members of the NHS Pension Scheme. Consequently, it was proposed that the earnings ranges in the contribution tiers would be increased each year in line with the AfC pay award because this is the pay award that applies to the largest cohort of staff eligible to join the NHS Pension Scheme. This means that the contribution tiers would remain consistent across all areas of the NHS workforce.
The proposal received support during the consultation process, with 67% of respondents agreeing that the thresholds should be uplifted in accordance with the AfC pay award.
It is the Department of Health and Social Care’s (DHSC’s) policy to set out the thresholds in regulations and therefore they must be updated annually. To streamline this process, the department proposed to put the draft amending regulations out to a short consultation to enact new legislation as swiftly as possible after the pay award has been announced.
This consultation contains the proposed uplifts to the thresholds and is accompanied by draft amending regulations to give effect to these threshold changes.
Agenda for Change pay award
As explained in ‘NHS Pension Scheme: proposed changes to member contributions’, in order to annually increase the contribution tier thresholds in line with the AfC pay award, further changes need to be made to the contribution thresholds.
See details of the pay award in a written ministerial statement on the UK Parliament website.
The member contribution structure will be annually uplifted by the AfC pay award because staff working under AfC are the largest single group of NHS staff eligible to join the NHS Pension Scheme. In March 2021 there were over 1.2 million staff in England working on AfC conditions. Consequently, it was proposed in the original consultation that the new contribution structure should be linked to those pay bands.
While there might be differences between the AfC pay award in England and the AfC pay award applicable to Wales, the tier thresholds have been increased to align with the AfC pay award for England. This is consistent with the rationale that it is the pay award that applies to the single largest cohort of NHS staff who are eligible to join the NHS Pension Scheme. This is consistent with how the tier thresholds were uplifted last year.
Proposed increases to the member contribution structure thresholds
Following amendments made last year to the tier thresholds in the member contribution structure, the current member contribution structure is:
Table 1: member contribution structure from 1 October 2022
| Tier | Pensionable earnings (rounded down to the nearest pound) | Contribution rate from 1 October 2022 |
|---|---|---|
| 1 | £0 to £13,246 | 5.1% |
| 2 | £13,247 to £16,831 | 5.7% |
| 3 | £16,832 to £22,878 | 6.1% |
| 4 | £22,879 to £23,948 | 6.8% |
| 5 | £23,949 to £28,223 | 7.7% |
| 6 | £28,224 to £29,179 | 8.8% |
| 7 | £29,180 to £43,805 | 9.8% |
| 8 | £43,806 to £49,245 | 10% |
| 9 | £49,246 to £56,163 | 11.6% |
| 10 | £56,164 to £72,030 | 12.5% |
| 11 | £72,031 and above | 13.5% |
Following the announcement of the AfC pay award in England, this member contribution structure can now be updated. It is proposed that these changes are backdated to 1 April 2023, in line with the AfC pay award in England.
We propose that, from 1 April 2023, the member contribution structure for the period 1 April 2023 to 31 March 2024 will be:
Table 2: proposed member contribution structure from 1 April 2023
| Tier | Pensionable earnings (rounded down to the nearest pound) | Contribution rate from 1 April 2023 |
|---|---|---|
| 1 | £0 to £13,246 | 5.1% |
| 2 | £13,247 to £17,673 | 5.7% |
| 3 | £17,674 to £24,022 | 6.1% |
| 4 | £24,023 to £25,146 | 6.8% |
| 5 | £25,147 to £29,634 | 7.7% |
| 6 | £29,635 to £30,638 | 8.8% |
| 7 | £30,639 to £45,995 | 9.8% |
| 8 | £45,996 to £51,707 | 10% |
| 9 | £51,708 to £58,971 | 11.6% |
| 10 | £58,972 to £75,632 | 12.5% |
| 11 | £75,633 and above | 13.5% |
Most thresholds have been increased by 5%, in order to align with the AfC pay deal. The table will be updated at each point it is mentioned in the 2015 Regulations.
In table 2, the bottom rate of pensionable earnings at tier 1 remains at £0.00 to ensure that all earnings are considered. Consequently, it does not need to be uplifted.
The member contribution structure was designed to give a discounted rate of 5.1% to the very lowest earning members who are earning less than £13,232 a year. This was intended to support the affordability of the NHS Pension Scheme for members who are earning less than the threshold at the bottom of tier 2. These members will all work less than full-time hours and are unlikely to receive income tax relief on their pension contributions if their NHS role is their only source of income, which may reduce the affordability of the NHS Pension Scheme for the very lowest earners. Consequently, this threshold has been frozen and not increased in line with the AfC pay award.
Draft regulations
This consultation includes draft regulations ‘The National Health Service Pension Schemes (Member Contributions) (Amendment) Regulations 2023’, which increase the tier thresholds in the member contribution structure via legislation.
Future changes to the member contribution structure
As part of ‘NHS Pension Scheme: proposed changes to member contributions’, a further phase of reform to the member contribution structure was consulted on. Originally, this phase was intended to be implemented on 1 April 2023, however implementation was delayed to the member contribution structure following consultation.
The regulatory amendments associated with the second phase of the member contribution reforms will be put out to consultation shortly.
Questions
Respondents are invited to consider the following questions:
Question
Do you agree or disagree that the proposed pensionable earnings thresholds in the member contribution structure correctly reflects the AfC pay award for England?
- agree
- disagree
- don’t know
If you disagree or don’t know how to answer, please explain why.
Question
Do you agree or disagree that the draft amending regulations give effect to the new member contribution structure set out in this consultation?
- agree
- disagree
- don’t know
If you disagree or don’t know how to answer, please explain why.
How to respond
The department welcomes views on the proposals set out in this consultation and the draft legislation to amend the 2015 Regulations.
You can comment on the proposals and draft legislation via the online survey.
The consultation will close at 11:45pm on Wednesday 17 May 2023.
Privacy notice
Summary of initiative and policy
This consultation sets out proposals to make amendments to the member contribution structure in the NHS Pension Scheme. It proposes to uplift the member contribution tiers in line with the Agenda for Change (AfC) pay award in England for 2023 to 2024. The intention of this change is to ensure that the member contribution structure continues to rise in line with the pay award, so that members do not pass into a higher contribution tier as a result of receiving the annual pay award.
Data Controller
Department of Health and Social Care is the Data Controller.
What personal data we collect
The online survey will ask respondents if they are responding as an individual or on behalf of an organisation. If someone is responding as an individual, they will be asked whether they work in the NHS and their general profession. If someone is responding on behalf of an organisation, they will be asked which sector their organisation is in. From this information, it is not possible to identify individuals.
No personal information will be collected for respondents.
How we use your data (purposes)
The consultation sets out proposals to uprate the member contribution structure in the NHS Pension Scheme in line with the AfC pay award for England. It is therefore useful to DHSC to understand whether respondents are NHS staff and what roles they perform.
However, no further personal information is collected.
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Your consent is required in providing the requested information, and it is optional as to whether respondents choose to provide information regarding the sector they work in. This information is helpful to DHSC in assessing responses to the consultation process.
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All responses to the consultation will be seen by policy leads working on NHS Pensions policy in DHSC.
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Changes to this policy
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