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Home  »   Latest News   »   DHSC opens consultation on further changes to the NHS Pension Scheme

DHSC opens consultation on further changes to the NHS Pension Scheme

The Department of Health and Social Care (DHSC) seeks views on three significant changes to the NHS Pension scheme relating to pensionable pay, the amount members pay for their pension benefits and how this amount will change in the future.

Thu 28th October 2021 The PDA

Paul Moloney, PDA Union National Officer with responsibility for pensions, explains the possible implications of the proposals.

The consultation covers three key areas, two of which address the concerns raised by NHS trade unions including the PDA Union since the introduction of the 2015 scheme. The other, however, includes changes to the contribution rate tiers which tend to disadvantage those in Bands 6 and 7 and at the start of Band 8a, but favour those who are paid above this.

First proposal

To link the different contribution tiers to annual pay increases

The two areas that are broadly welcomed (pending detailed analysis of the full implications) is the proposal to link the different contribution tiers to annual pay increases. At present, the tiers are fixed and do not increase when an annual pay award is made. This means, for example, that someone earning £47,000 and receiving a 3% increase would move from a contribution rate of 9.3% to 12.5% with almost all of their increase being taken in higher pension contributions. This is because they would cross the current threshold for the 12.5% rate which is currently £47,845.

Under the proposals, the threshold would move with the pay increase, so in this example, the £47,845 would increase by 3% meaning the receipt of a pay increase would no longer be swallowed up by increased pension contributions. This is just one example. There is a similar threshold within Band 5 and the same would apply, with all thresholds moving up in line with pay increases.

This does not stop pay progression or promotion taking someone into a higher contribution bracket, but it does remove the particularly unfair situation of an annual cost of living increase potentially leaving someone with a lower take-home pay after the increase, than before.

Second proposal

Likely to reduce contributions for many part-time workers

The second proposal, which is also broadly welcomed, is likely to reduce contributions for many part-time workers. At present, their contribution tier is determined by the tier they would be in if they worked full time. So, if someone worked part-time and earned £25,000 but the full-time equivalent for their job was £47,845, they would pay 12.5% of their earnings. The proposal is to determine the contribution tier by actual earnings, not the full-time equivalent, so in this example, contributions would drop from 12.5% to 7.1%.

This would have a significant impact on part-time workers and the DHSC has suggested around 30% of the entire membership of the scheme will pay less of a contribution because of this change.

Third proposal

To increase the contribution rates and restructure the contribution tiers

The final proposal, however, is the one likely to cause the most concern. This proposal is to increase the contribution rates and restructure the contribution tiers. This proposal is complex but generally, most of those working full time in Bands 5-7 and at the start of Band 8a will see an increase in contributions with those earning above these amounts seeing a decrease in contributions.

The PDA Union will be carrying a detailed analysis of the proposals and will respond to the consultation by the deadline in January 2022. Any member who wishes to contribute to this should email Paul Moloney at paul.moloney@the-pda.org no later than 6 December 2021 with their views on the issues under consultation and the DHSC proposals.

Members are encouraged to look at the consultation document using the link below to see exactly how they would be affected by the proposed changes.

Learn more

 

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