Changes to NHS Pension Scheme are required from 1st October 2022. The main purpose of the changes include using actual pensionable pay instead of Whole Time Equivalent to set pension rates, and changing the pay tiers on which pension rates are determined. These changes were originally planned to be implemented in April 2022 but were postponed until October 2022.
Following extensive consultation with the NHS Pension Scheme advisory board in 2021 and 2022, the following proposals were made:
- Member’s contribution rates would change to be based on actual pensionable pay instead of the member’s notional whole-time equivalent pay
As a reflection of the increasing number of scheme members with no active final salary link, this change would mean that many part-time members will see their contribution amounts reduce. Members who work part-time would benefit from their contributions more accurately reflecting the amount of pension they are building.
- The structure for member contributions would change.
Heavily informed by stakeholder collaboration, the section ‘Design feature: fewer contribution tiers’ below sets out the proposed member contribution tiers, including a reduction in the number of tiers to ‘flatten’ the contribution model. These have been designed to ensure the required yield of 9.8% average member contribution is met while protecting the affordability of the scheme for the whole NHS workforce.
- The thresholds for the member contribution tiers would be increased in line with annual Agenda for Change pay awards
This change will benefit members who, under the current structure, find that small salary increases due to centrally agreed annual pay awards can lead to moving up a contribution tier, and a net reduction in take-home pay.
- The proposed member contribution structure would be phased over 2 years.
As the proposals mean that some members will see an increase in their pension contributions, the changes would be communicated clearly and phased in over 2 years starting 1 April 2022, with the final changes made from 1 April 2023. This approach is designed to minimise the impact on take-home pay while giving members time to adjust to the changes.
NOTE: Following consultation, it was agreed that the initial changes would start from 1 October 2022, not 1 April 2022.
What this means for Kashflow Payroll?
- From 1 October 2022, employee contribution rates will be set based on employee’s actual pensionable pay, not the WTE pensionable pay. The system will need to perform an assessment on current employees and reset the pension rate where appropriate, prior to the October 2022 payrun.
- The NHS Pension Scheme contribution rates and tiers will change from 1 October 2022. System will need to perform an assessment on current employees and reset the rate where appropriate, prior to the October 2022 payrun.