Consultation on increases to NHS Pension Scheme contributions launched
The Department of Health launched a consultation on 28 July 2011 on proposed changes to the level of contributions made by NHS Pension Scheme members towards their pension.
Under the proposals, the lowest earners are protected - those earning less than £15,000 on a full time equivalent basis will pay nothing extra. Almost all newly qualified healthcare professionals would pay only 0.6% more towards their pensions in 2012/13. Contributions increases would be greater for the highest earners.
The proposed increases in 2012/13 are approximately the same amount already agreed by the unions under the ‘cap and share’ arrangements set out in the pre-budget report 2009.
Examples of how the proposed changes would affect individual members include:
Healthcare assistant working full-time earning £15,000
- You would pay no extra for your pension.
- In 2012-13 you will continue to contribute 5% compared with the current employer contribution of 14%.
- This means that for every £1 you contribute, the employer contributes £2.80. For your overall yearly contribution of £750, your employer pays £2,100.
- Because your contributions are tax free, your effective contribution rate is 4%, which is equivalent to £600 per annum.
- If you are in the 1995 section of the pension scheme then for this, after you retire, you will receive a pension, for this you will earn pension of £188 per year and a tax free lump sum of £563 payable at age 60.
- If you are in the 2008 section of the pension scheme then for this, after you retire, you will receive a pension of £251 per year, with the option to exchange some of this for a tax free lump sum, payable at age 65.
Nurse working full-time earning £25,000
- In 2012-13 you will contribute 7.1%, compared to the current employer contribution of 14%.
- This means that for every £1 you contribute, the employer contributes £1.97. For your overall yearly contribution of £1,775, your employer will pay £3,500.
- Because contributions are tax free your effective contribution rate will be 5.7%, equivalent to £1,425 per annum. This represents an increased personal contribution in 2012/13 of £10 per month after tax relief.
- If you are in the 1995 section of the pension scheme then for this, after you retire, you will receive a pension, for this you will earn pension of £313 per year and a tax free lump sum of £938 payable at age 60.
- If you are in the 2008 section of the pension scheme then for this, after you retire, you will receive a pension, for this you will earn pension of £417 per year, with the option to exchange some of this for a tax free lump sum, payable at age 65.
Scientist working full-time earning £30,000
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In 2012-13 you will contribute 7.7%, compared with the current employer contribution of 14%.
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This means that for every £1 you contribute, the employer contributes £1.82. For your overall yearly contribution of £2,310, your employer will pay £4,200.
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Because your contributions are tax free your effective contribution rate will be 6.2%, equivalent to £1,860 per annum. This represents an increased contribution in 2012/13 of £25 per month after tax relief.
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If you are in the 1995 section of the pension scheme then for this, after you retire, you will receive a pension, for this you will earn pension of £375 per year and a tax free lump sum of £1,125 payable at age 60.
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If you are in the 2008 section of the pension scheme then for this, after you retire, you will receive a pension, for this you will earn pension of £500 per year, with the option to exchange some of this for a tax free lump sum, payable at age 65.
Manager working full-time earning £60,000
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In 2012-13 you will contribute 8.5%, compared with the current employer contribution of 14%.
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This means that for every £1 you contribute, the employer contributes £1.65. For your overall yearly contribution of £5,100, your employer will pay £8,400.
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Because contributions are tax free your effective contribution rate will be 5.1%, equivalent to £3,060 per annum. This represents an increased personal contribution in 2012/13 of £60 per month after tax relief.
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If you are in the 1995 section of the pension scheme then for this, after you retire, you will receive a pension - for this you will earn pension of £750 per year and a tax free lump sum of £2,250 payable at age 60.
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If you are in the 2008 section of the pension scheme then for this, after you retire, you will receive a pension for this you will earn pension of £1,000 per year, with the option to exchange some of this for a tax free lump sum, payable at age 65.
Consultant earning £130,000
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In 2012-13 you will contribute 10.9%, compared to the current employer contribution of 14%.
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This means that for every £1 you contribute, the employer contributes £1.28. For your overall yearly contribution of £14,170, your employer will pay £18,200.
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Because contributions are tax free, your effective contribution rate will be 6.5%, equivalent to £8,450 per annum. This represents an increased personal contribution in 2012/13 of £152 per month after tax relief.
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If you are in the 1995 section of the pension scheme then for this, after you retire, you will receive a pension for this you will earn pension of £1,625 per year and a tax free lump sum of £4,875 payable at age 60.
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If you are in the 2008 section of the pension scheme then for this, after you retire, you will receive a pension, for this you will earn pension of £2,167 per year, with the option to exchange some of this for a tax free lump sum, payable at age 65.
The consultation document sets out proposals for increased employee contributions to the NHS Pension Scheme in 2012/13 only. This represents around 40% of the total contribution increases expected by 2014/15. Proposals for increasing rates in 2013/14 and 2014/15 will be the subject of further discussion with trade unions.
The consultation follows plans set out in the Spending Review 2010 to secure £2.8bn savings per year by 2014/15 through increasing public service employee pension contributions by an average of 3.2%, phased in from April 2012.
This consultation closed on 21 October 2011