Pension contributions for higher earners and part-time staff to be cut

 The government has confirmed it will change how much people pay towards their NHS pension, with adjustments due to be phased in from October. 

The Department of Health and Social Care ran a major consultation last October. The changes being considered included cutting the rate of contributions for some staff – particularly those working part-time and higher earners – to better reflect planned changes to the way pension benefits are built up.

Several of DHSC’s proposed changes will go ahead as planned, including:

• Members’ contribution rates being based on actual pensionable pay rather than whole-time equivalent pay, meaning pension scheme members who worked part-time would see their contributions reduce;
• A reduction in the total number of tiers to create a flatter structure of contributions – the result of these changes would increase the rate of pension contributions for those with pensionable earnings less than £26,823 but reduce it for those earning more than £47,846, while those with earnings in between could see their contribution rate go up or down depending on which tier they currently fall into; and
• Increasing thresholds within the member contribution structure to bring it in line with annual Agenda for Change awards. 

However, DHSC has also decided to delay the implementation of the contributions changes until this October. It had originally proposed the changes be introduced in April. The changes will be phased in over two years. 

The DHSC said it was “justifiable” to postpone the implementation of the changes for six months to “mitigate the impact of the effect changes will have on the take-home pay of some staff members”.

The consultation, which ran until early January, received more than 1,000 responses. 

The consultation’s conclusion said: “Overall, the vast majority of respondents agreed with the proposals, and where there was disagreement, this was largely due to competing interests of different parts of the diverse workforce, and the department has sought to adopt an approach which is proportionate to all of these views.”

However, Sara Gorton, trade union Unison’s head of health, said the government’s changes “could prove a step too far” for staff.

She added: “Top earners in the NHS will be quids in under the changes. Part-time staff will end up paying less too, but the majority of full-time employees will be worse off. Some significantly so.

“The government must get behind an inflation-busting wage rise for NHS workers to soften the blow, or many will walk.

“With many health workers close to the age they can start claiming their pensions, this is a real possibility. Then the NHS, which is already thousands of staff short, really could be in trouble.”

NHS Providers chief executive Chris Hopson said trusts and staff will “welcome” the changes and that they will benefit less than full-time workers, who include “many women, older members of staff and those with caring responsibilities,” and that it will also support flexible working options for staff, “which is key for retention”.

He said: “However, some elements of the proposed changes are concerning, particularly the flattening of contribution rates. This will affect lower and middle band NHS staff the most, as they will see a notable reduction in take-home pay as a result of these changes, at a time of exponentially increasing cost of living.

“These staff tend to be younger and from minority ethnic backgrounds.”

From this April, NHS pension members’ benefits will shift from being accumulated on a final salary link structure – where a person’s pension is calculated based on their final salary – to a career average revalued earnings model, where pensions are based on a person’s average salary throughout their employment.