NHS scheme consultation on member contributions opens

The government is seeking to implement a new contribution structure from next year

Hope William-Smith
clock • 2 min read
NHS scheme consultation on member contributions opens

Industry input on proposals for a new member contribution structure in the NHS Pension Scheme are being sought by the government.

The Department of Health and Social Care (DHSC) confirmed on Friday (15 October) that the new contribution structure it is seeking to implement next April will "recognise all members of the NHS Pension Scheme".

The proposal includes basing members' contribution rates on actual annual salaries through the use of a career average revalued earnings (CARE) scheme model, and reducing the cross-subsidy between higher and lower earners.

All members will now build up CARE benefits from the start of the new tax year in April, a structure that will be introduced as part of the McCloud remedy.

Proposals to be considered within the consultation include the change in contribution rates to be based on pensions pay rather than whole-time equivalent pay; the structure for the changes; and the thresholds for the member contribution tiers.

The DHSC is also seeking feedback on whether the proposed member contribution structure can be effectively phased in over a two-year period, with final changes made from 1 April 2023.

A two-year approach will "minimise the impact on take-home pay", the government said, while also giving members "time to adjust" to any changes.

A reform of the scheme follows a string of pension tax tribulations for NHS doctors and specialists in particular who are members of the scheme. Charges for breaching the tapered annual allowance - which reduces by £1 for every £2 earned over £240,000 - have been a particular concern and have seen many doctors reject promotions or extra shifts.

The government first launched a consultation on amending the contribution rules of the NHS Pension Scheme in 2019 in a bid to mitigate the issue after research from The British Medical Association estimated 3,500 doctors had retired early over pension scheme tax concerns.

NHS Providers research last January also found 60% of staff will not accept leadership roles due to the effect of higher salary packages on their pension savings.

This latest consultation - which will close on 7 January - aims to reconstruct the scheme to ensure its cost is "fairly distributed and affordable" for all members.

The announcement of the consultation comes at the same time as HM Treasury's confirmation that public sector schemes can conclude their 2016 valuations as the amendments to the cost control framework made by the Government Actuary's Department following the tool's suspension after the McCloud judgement have been accepted.

 

 

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