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Home  »   Latest News   »   Government announces outcome of NHS pensions consultation

Government announces outcome of NHS pensions consultation

The government has announced the outcome of the NHS pensions consultation and has set a date for contribution increase as part of a package of changes.

Sat 19th February 2022 The PDA

PDA members may recall that the government had launched a consultation exercise on three proposed changes to the NHS Pension schemes. These proposals were explained by the PDA and members’ views were sought. Following this consultation, the PDA submitted a response on behalf of members having access to the NHS Pension scheme.

Unfortunately, the government has not accepted the PDA’s arguments for a delay to the proposal to increase contributions until the outcome of the next valuation. However, they have at least decided to wait until after the next NHS pay increase is implemented. This means that the increase in contributions should not lead to a decrease in current take-home pay levels.

It is important to note, however, that the two other proposals are to be implemented in full and the PDA welcomes this. The proposal to change the way part-time workers’ contributions are calculated will mean a significant reduction in the cost of the scheme for many part-time workers who will see their contribution rate now based on their actual earnings, not by the rate paid by an equivalent full-time worker.

The proposal to link the cut-off points at which scheme members move to a higher contribution rate with pay increases also brings an end to the unfair situation of a pay increase leading to a higher contribution rate. Therefore a reduction in take-home pay where the pay increase was less than the increase in pension contributions. Now the point at which higher contribution rates are applied will increase by the amount of any pay award, finally addressing this anomaly unique to the NHS scheme.

As someone once said, “two out of three isn’t bad”, but unfortunately for many members, the cost of their pension scheme, which is already high, will increase further. Those full-time members earning between £27,780 and £47,845 will see contributions increase by 0.5% or 1.4% before tax, although other members may see a decrease in their contributions. The full details can be found here and members are advised to read the document in detail to see exactly how they are personally affected.

Overall, it is disappointing that the two beneficial and long-needed changes are being made at the same time as the decision to increase contributions. The delay in implementing the increase will mitigate the impact but the PDA believes the cost of the NHS scheme was already high for members and this further increase is therefore unwelcome.

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