NHS Pension Scheme: proposed uplifts to the member contribution tier thresholds from 1 October 2022
Updated 8 September 2022
Applies to England and Wales
© Crown copyright 2022
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/consultations/nhs-pension-scheme-proposed-uplifts-to-the-member-contribution-tier-thresholds/nhs-pension-scheme-proposed-uplifts-to-the-member-contribution-tier-thresholds-from-1-october-2022
Introduction
Further to the consultation NHS Pension Scheme: proposed changes to member contributions from 1 April 2022 and the associated regulations, this consultation document 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 document 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. This reduction as a result of crossing tiers would be 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 highest number of NHS Pension Scheme members. 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’s policy to set out the thresholds in regulations and therefore they must be updated year on year. In order to streamline this process, the department proposed to put the draft amending regulations out to a short consultation in order 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.
Background
Member contributions
In the National Health Service Pension Schemes (Member Contributions etc.) (Amendment) Regulations 2022 (the “First Amending Regulations”), the department made various changes to the member contribution structure which will come into force on 1 October 2022. Those changes were to:
- change members’ contribution rates so that they would be based on actual pensionable pay instead of members’ notional whole-time equivalent pay
- amend the structure for member contributions and the amount of member contributions payable by different cohorts of members
- amend the regulations so that the member contribution tier thresholds could be annually increased in line with AfC pay awards
- bring in the first phase of the changes to the member contribution structure, with a further phase to follow
The above changes in the First Amending Regulations will come into force on 1 October 2022.
Agenda for Change (AfC) pay award
As explained in the original consultation document, 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.
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 AfC pay award for England has been used to increase the tier thresholds. 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.
Proposed increases to the member contribution structure thresholds
Following the details of the pay award, work has been carried out to accurately uplift the member contribution thresholds in line with the AfC pay award for England.
The First Amending Regulations implemented a mechanism in regulations that uses 2 contribution rate tables to allow:
- members who have their contribution rate based on their previous year’s pensionable earnings to use the contribution rates before any increase to tier boundaries is applied
- members who have their contribution rate based on their current pensionable earnings to use contribution rates that have increased in line with the AfC pay award for that scheme year (which will be updated by amendment regulations following the AfC award announcement)
The First Amending Regulations amended the National Health Service Pension Regulations (the “2015 Regulations”) to introduce the 2 contribution rate tables. The first table sets out contribution rates for members who have their rate based on their previous year’s pensionable pay.
Table 1: member contribution structure from 1 October 2022 for members whose contribution rate is based on their previous year’s pensionable pay
| Tier | Pensionable earnings (rounded down to the nearest pound) | Contribution rate from 1 October 2022 |
|---|---|---|
| 1 | £0 to £13,231 | 5.1% |
| 2 | £13,232 to £15,431 | 5.7% |
| 3 | £15,432 to £21,478 | 6.1% |
| 4 | £21,479 to £22,548 | 6.8% |
| 5 | £22,549 to £26,823 | 7.7% |
| 6 | £26,824 to £27,779 | 8.8% |
| 7 | £27,780 to £42,120 | 9.8% |
| 8 | £42,121 to £47,845 | 10.0% |
| 9 | £47,846 to £54,763 | 11.6% |
| 10 | £54,764 to £70,630 | 12.5% |
| 11 | £70,631 and above | 13.5% |
The second table (for members who have their contribution rate based on current pensionable earnings) needs to be updated now that the AfC pay award for England has been announced. This table is the subject of this consultation document and respondents are asked to consider whether the table has been accurately uplifted in line with the AfC pay award for England.
We propose that, from 1 October 2022, the member contribution structure for members who have their contribution rate based on current pensionable earnings will be as set out in table 2.
Table 2: member contribution structure from 1 October 2022 for members whose contribution rate is based on their current (in-year) pensionable pay
| Tier | Pensionable earnings (rounded down to the nearest pound) | Contribution rate from 1 October 2022 |
|---|---|---|
| 1 | £0 to £13,231 | 5.1% |
| 2 | £13,232 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% |
Table 2 increases the thresholds in line with the AfC pay deal for England and will apply to members who have their member contribution rate based on their in-year pensionable pay. Most thresholds have been increased by £1,400, in order to align with the AfC pay deal. In order to demonstrate how the thresholds have been uplifted, table 3 sets out the changes to the thresholds. For ease of comparison, the table below takes the lower threshold for each contribution tier.
Table 3: comparison between table 1 and table 2
| Tier | Previous year’s pensionable pay | Current year’s pensionable pay | Difference |
|---|---|---|---|
| 1 | £0 | £0 | £0 |
| 2 | £13,232 | £13,232 | £0 |
| 3 | £15,432 | £16,832 | Up £1,400 |
| 4 | £21,479 | £22,879 | Up £1,400 |
| 5 | £22,549 | £23,949 | Up £1,400 |
| 6 | £26,824 | £28,224 | Up £1,400 |
| 7 | £27,780 | £29,180 | Up £1,400 |
| 8 | £42,121 | £43,806 | Up £1,685 |
| 9 | £47,846 | £49,246 | Up £1,400 |
| 10 | £54,764 | £56,164 | Up £1,400 |
| 11 | £70,631 | £72,031 | Up £1,400 |
In table 2 above, the bottom rate in 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 above. 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.
The bottom rate in tier 8 is linked to the mid-point in Band 7 of AfC (2 to 5 years’ experience). In England, the pay award for this pay band has a 4% underpin and is therefore uplifted by £1,684.84. Consequently, the new threshold would be £43,805.84. However, the thresholds in the member contribution structure are all whole numbers so it is proposed that the threshold should be rounded up to £43,806.
The remaining thresholds have all been uplifted by £1,400 in line with the AfC pay award for England.
Question
Do you agree or disagree that the proposed pensionable earnings thresholds in the member contribution structure set out in table 2 of this consultation correctly reflect the AfC pay award for England?
- agree
- disagree
- I don’t know
If you disagree or don’t know how to answer, explain why.
Pension Scheme eligibility correction
There are 2 NHS pension schemes: the 2015 NHS Pension Scheme (the reformed scheme) and the older 1995/2008 NHS Pension Scheme (the legacy scheme), which is divided into the 1995 and 2008 sections. The legacy scheme is now closed for future accrual and members are able to join the reformed scheme instead.
We have previously consulted on amendments to the legacy scheme and the National Health Service Pension Scheme (Transitional and Consequential Provisions) Regulations 2015 (the “Transitional Regulations”) required as a result of the Public Service Pensions and Judicial Offices Act 2022 (the “PSPJO Act 2022”).
As a result of that consultation and the PSPJO Act 2022 the legacy and reformed schemes and the Transitional Regulations were amended to close the legacy scheme to future accrual from 1 April 2022 and allow all active members of that scheme to move into the reformed scheme from that date. As part of those changes, the Transitional Regulations were amended so that re-employed pensioners of the legacy scheme that were no longer eligible to accrue benefits in the legacy scheme from 1 April 2022 would be eligible to join the reformed scheme from that date.
However, in respect of the 2008 Section, one group of re-employed pensioners eligible to join the reformed scheme was inadvertently omitted from the amending regulations. This pensioner group is the 2008 Section tier 2 ill-health pensioners whose tier 2 pension has been permanently reduced to a tier 1 pension. This happens on the first anniversary of their return to NHS employment.
Therefore, we propose to make a technical amendment to correct this omission and include this group of tier 2 ill-health pensioners in the Transitional Regulations. This will permit such pensioners to join the reformed scheme where the first anniversary of their return to NHS employment falls on or after 1 April 2022. This provision will have retrospective effect from 1 April 2022.
Proposed amendments to NHS Pension Scheme regulations
Draft amending regulations
To apply the proposed changes, the department will need to amend scheme rules. The rules of the NHS Pension Schemes are set out in regulations, which are a form of secondary legislation. Those rules can be amended or replaced by new regulations drawn up in accordance with the powers and requirements of the Public Service Pensions Act 2013 and the Superannuation Act 1972 as relevant.
The draft amending regulations are published alongside this consultation document.
Explanatory notes for the draft amending regulations
The department presents for consultation the draft National Health Service Pension Schemes (Member Contributions etc.) (Amendment) (No. 2) Regulations 2022. These regulations would amend:
- the National Health Service Pension Schemes (Member Contributions etc.) (Amendment) Regulations 2022 (the “First Amending Regulations”)
- the National Health Service Pension Scheme (Transitional and Consequential Provisions) Regulations 2015 (the “Transitional Regulations”)
The regulations are amended to:
- update the pensionable earnings bands that determine a member’s contribution rate in circumstances where that member’s pensionable earnings are calculated based on their earnings in the current scheme year
- correct an omission in the National Health Service Pension Schemes (Amendment) Regulations 2022 which made changes to the Transitional Regulations
This section describes how the draft regulations amend the scheme regulations to deliver those objectives. It should be read in conjunction with the draft regulations which are published alongside this consultation. Note that these are draft regulations, and the drafting approach and other technical aspects may change following the consultation and before the final instrument is laid before Parliament.
Assessment of a tiered contribution rate for members (regulations 30 and 31)
Regulation 30 (members’ contributions: employees) of the 2015 Regulations requires employed members to make scheme contributions at the percentage contribution rate that applies to a member’s pensionable earnings depending on where those earnings fall within the pensionable earnings bands.
Regulation 31 (members’ contributions: practitioners and non-GP providers) of the 2015 Regulations requires practitioners and non-GP providers to make scheme contributions at the percentage contribution rate that applies to a member’s pensionable earnings, depending on where those earnings fall within the pensionable earnings bands.
The draft Statutory Instrument (SI) makes changes to regulations 30 and 31 in order to update the new member contribution structure as outlined in this consultation document.
Amending regulation 3 substitutes the table in regulation 3(3) of the First Amending Regulations to update the pensionable earnings bands in regulation 30(3A) of the 2015 Regulations. It will update the pensionable earnings bands in line with the AfC award and affect members whose member contribution tiers are calculated based on their pensionable earnings in the current scheme year. Amending regulation 3 will take effect from 30 September 2022 in order for regulation 3(3) of the First Amending Regulations to be amended prior to it coming into force on 1 October 2022.
Amending regulation 4 has a similar effect and substitutes Table 2 in regulation 4(4) of the First Amending Regulations to update the pensionable earnings bands in Table 2 of regulation 31(9) of the 2015 Regulations. It will affect members who have their member contribution tiers calculated based on their pensionable earnings in the current scheme year. Amending regulation 4 operates in the same way as amending regulation 3 by inserting a new member contribution table, uplifted in line with the AfC pay award. It will also take effect from 30 September 2022.
Tier 2 ill-health (Schedule 1)
Amending regulation 5 amends Schedule 1 (eligibility of pensioners) of the Transitional Regulations to include part of a table that was previously omitted. Amending regulation 5 has retrospective effect from 1 April 2022, which is the date that the omission occurred.
Question
Do you agree or disagree that the draft amending regulations give effect to the policy intentions set out in this document?
- agree
- disagree
- I don’t know
If you disagree or don’t know how to answer, explain why.
Conclusion
While it has already been decided through the previous consultation that the thresholds in the member contribution structure will be uplifted to reflect the AfC pay award, respondents are invited to assess whether the AfC pay award has been properly reflected in the proposed amendments.
Respondents are also invited to provide commentary on the draft amending regulations.
How to respond
The department welcomes views on the proposals set out in this document and the draft legislation to amend NHS Pension Scheme regulations.
This consultation will close at 11:45pm on 12 August 2022.
The easiest way to respond is through our online consultation survey.
Or by email to nhspsconsultations@dhsc.gov.uk.
Or you can post your response to:
NHS Pensions Policy Team
Department of Health and Social Care
Area 2NE Quarry House
Quarry Hill
Leeds
LS2 7UE
Confidentiality of information
We manage the information you provide in response to this consultation in accordance with the Department of Health and Social Care’s personal information charter.
Any information received, including personal information, may be published or disclosed in accordance with the access to information regimes (primarily the Freedom of Information Act 2000 (FOIA), the Data Protection Act 2018 (DPA 2018) and the Environmental Information Regulations 2004).
If you want the information that you provide to be treated as confidential, be aware that, under the FOIA, there is a statutory code of practice with which public authorities must comply and which deals, among other things, with obligations of confidence.
In view of this it would be helpful if you would explain to us why you regard the information that you have provided as confidential. If we receive a request for disclosure of the information you have provided, we will take full account of your explanation, but we cannot give an assurance that confidentiality will be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on the department.
The department will process your personal data in accordance with the DPA 2018 and, in most circumstances, this will mean that your personal data will not be disclosed to third parties.