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Top earners to pay less into NHS pension from April

Published on: 28 Feb 2024

Top earners will soon pay less into their NHS pension each year, the government has confirmed.

Publishing a response to a consultation run last October, the Department of Health and Social Care confirmed the number of pension contribution tiers will be almost halved, from 11 to six, while the highest contribution rate will be reduced from 13.5 per cent to 12.5 per cent.

However, the response also revealed the pensionable earnings in each band would be increased to reflect inflation. 

Those at the upper end of band 8 on the Agenda for Change pay scale, as well as most in band 9 and very senior managers, will benefit from the reduced top rate. The cut amounts to just more than £750 per year.

At the same time, the rate at which employers contribute to the scheme will rise from 20.6 per cent to 23.7 per cent. However, the increase will be absorbed by central funding from NHS England and the NHS Business Services Authority.

Other changes announced include automatically increasing contribution tier thresholds in line with the consumer price index rate each April – except for the first tier and entry point to the second threshold – and further adjusting for Agenda for Change pay awards later in the year if these are higher. This follows concerns that pay awards could create so-called cliff edges and leave some staff with a cash fall in their take-home pay.

Pension abatement rules – where a person’s pension is reduced if their earnings exceed their pre-retirement pensionable earnings – will also be permanently removed for special class right members, aged between 55 and 60, who have since returned to working in the NHS.

The abatement rules were suspended during the pandemic to increase and enhance recruitment, as they largely affected nurses, midwives and physiotherapists. The initial plan was to reintroduce the rules in March 2025, but ministers made clear they would be abolished as part of the 2023-24 AfC pay deal.

Other changes include recognising carer’s leave the same way as other periods of unpaid authorised absences, while members of the 1995 scheme will be able to take partial retirement once they have reached maximum pensionable service.

The consultation also proposed allowing providers to introduce a “real-time re-banding” of members’ contributions which fluctuate and frequently cross tier boundaries.

However, DHSC said it would consult further on this in the spring, with a view to rolling out the change from April 2025.