More NHS staff to benefit from NHS pension contribution freeze
Over half a million extra staff will not need to pay any extra into their pensions next year, the Department of Health announced today
Consultation leads to greater protection for lower paid
Over half a million extra staff will not need to pay any extra into their pensions next year, the Department of Health announced today.
Following a consultation, the threshold for freezing pension contributions will be raised from £15,000 to £26,557 for 2012/13, affecting 630,000 staff in the NHS in total - almost half of all those in the NHS Pension Scheme.
This change will protect the lower paid in the NHS. The increases in employee contributions have been distributed among higher earners where they will be significantly offset by the benefit of tax relief for higher rate taxpayers. So someone earning £60,000 would no longer contribute less as a proportion of their salary towards their pension after tax relief than someone earning £15,000.
Health Secretary Andrew Lansley said:
“Having listened to staff and stakeholders, we have improved our proposals so that an extra 530,000 NHS staff will not pay any more into their pensions next year.
“Public service pensions will remain among the very best available, providing a guaranteed pension level for all employees - today very few private sector employers still offer this. But people are living longer and pensions are costing taxpayers more and more every year.
“These changes alone will not be enough to ensure that NHS pensions are affordable in the long term. We are continuing to discuss wider changes to pensions with Trades Unions and hope to reach an agreement by the end of the year. But we are clear that people will also keep whatever they have already earned. We will honour in full benefits earned through years of service - which means little, if any, change for those close to retirement.”
Examples of how the proposed changes could affect individual members include:
As a healthcare assistant working full-time earning £15,000 a year:
• You would pay no extra for your pension.
• In 2012-13 you would continue to contribute 5% compared to 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.
As a nurse working full-time earning £25,000:
• You would pay no extra for your pension.
• In 2012-13 you would contribute 6.5%, compared to the current employer contribution of 14%.
• This means that for every £1 you contribute, the employer contributes £2.16. For your overall yearly contribution of £1,625, your employer will pay £3,500.
As a scientist working full-time earning £30,000:
• In 2012-13 you would contribute 8%, compared to the current employer contribution of 14%.
• This means that for every £1 you contribute, the employer contributes £1.75. For your overall yearly contribution of £2,400, your employer will pay £4,200.
As a manager working full-time earning £60,000:
• In 2012-13 you would contribute 8.9%, compared to the current employer contribution of 14%.
• This means that for every £1 you contribute, the employer contributes £1.57. For your overall yearly contribution of £5,340, your employer will pay £8,400.
As a consultant earning £130,000:
• In 2012-13 you would contribute 10.9%, compared to the current employer contribution of 14%.
• 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.
Proposals for employee pension contributions in 2013/14 and 2014/15 and other changes following the Hutton review will be subject of further discussion with Trades Unions.
Notes to Editors
1. The new breakdown of pension contributions are:
_2012/13 employee contributions__ before tax relief (gross)__ _
Full-time 2010/11 pay** ** 2010/11 contribution **rate **(gross)** **2012/13** **contribution **rate **(gross)** **Contribution **rate **increase **(percentage points)**
Up to £15,000 5% 5% 0
£15,001 to £21,175 5% 5% 0
£21,176 to £26,557 6.5% 6.5% 0
£26,558 to £48,982 6.5% 8% 1.5
£48,983 to £69,931 6.5% 8.9% 2.4
£69,932 to £110,273 7.5% 9.9% 2.4
Over £110,273 8.5% 10.9% 2.4
_ _
2012/13 contributions__ after__ tax relief__ (net)__
Full-time 2010/11 pay** **2010/11 contribution **rate **net of tax relief** **2012/13 contribution **rate **net of tax relief** **Net contribution **rate **increase **(percentage points)** Additional cost per month (£)**
£10,000 4% 4% 0 0
£15,000 4% 4% 0 0
£20,000 4% 4% 0 0
£25,000 5.2% 5.2% 0 0
£30,000 5.2% 6.4% 1.2 30
£40,000 5.2% 6.4% 1.2 40
£60,000 3.9% 5.34% 1.44 72
£80,000 4.5% 5.94% 1.44 96
£130,000 5.1% 6.54% 1.44 156
2. These changes will still deliver the same overall level of savings of £530m in 2012/13.
3. For media enquiries only, please contact the DH Press Office on 020 7210 5221.