Changes to the NHS Pension Scheme to attract and retain experienced staff
Following a period of consultation, the Department of Health and Social Care (DHSC) has confirmed it will implement changes to the NHS Pension Scheme to help employers to attract and retain valuable experienced staff, maintaining the capacity required to deliver high quality patient care.
Overview of the proposed changes
The consultation outcome has confirmed the following changes:
From 1 April 2023, employees who have taken their pension from the 1995 section of the NHS Pension Scheme and return to work in the NHS will be able to join the 2015 Scheme and build up further pension if they wish. This will enable employers to provide a more valuable reward offer to attract and retain their most experienced staff.
Prior to these changes being introduced, employees who had taken their pension from the 1995 Section were not eligible to re-join the NHS Pension Scheme on returning to work in the NHS. Many employed pensioners may be members of an alternative pension arrangement, for example, the National Employment Savings Trust (NEST), or may not contribute to a pension scheme.
Employers will not be required to enrol all newly eligible members into the 2015 Scheme on 1 April 2023. However, employers must notify all staff who have taken their benefits from the 1995 Section and returned to work before 1 April 2023 that they are eligible to join the 2015 Scheme from 1 April 2023 if they wish. Employers must set up membership for any employees who take up the option to join the 2015 Scheme and may need to end their membership to any alternative pension arrangement.
Employees who retire and return on or after 1 April 2023 should be contractually enrolled into the 2015 Scheme on the first day of their employment, in the same way as any other new starter.
Where an employee chooses to end their membership to an alternative pension arrangement and join the 2015 Scheme, they may ask if it is possible to transfer their benefits from the alternative pension arrangement in to the 2015 Scheme. Employers should signpost employees to guidance on transferring benefits on the NHS Pensions website.
From 1 October 2023, members of the 1995 section can draw down all or part of their pension while continuing to work.
Prior to these changes being introduced, members of the 1995 section had to leave NHS employment to take their pension from the scheme. Although many staff choose to take their benefits and return to NHS employment (sometimes referred to as, retire and return), this change provides a more flexible and seamless approach.
The new flexibilities aim to support employees to achieve a healthy work-life balance by working more flexibly towards the end of their careers. It is hoped this will help employers to retain their most experienced staff for longer to help with service delivery.
This change may enable staff to manage their pension tax position by choosing to claim their pension and remain in work, rather than opting out of the NHS Pension Scheme or leaving the NHS.
The 16-hour rule places a limit on the amount of hours an employee can work per week in their first month after returning to work from retirement. The rule is currently suspended on a temporary basis and will be permanently removed from 1 April 2023.
DHSC will change the date on which NHS Pension Scheme benefits are increased with inflation from 1 April to 6 April with effect from the 2022/23 tax year.
This change aligns the rates of inflation used in annual allowance calculations with the revaluation of scheme benefits and ensures that the annual allowance calculations only measure pension growth that occurs above the rate of inflation.
This will lessen the impact of the annual allowance for members of the NHS Pension Scheme and aims to support the retention of senior clinical staff, who may otherwise opt out of the NHS Pension Scheme, reduce their commitments, or leave NHS employment due to pension taxation.
For members unaffected by the annual allowance, the proposed change will have no effect on the value of pension they are entitled to on retirement.
Other technical amendments ensure general practitioners pay the correct contribution rate over the full scheme year and simplify access to the scheme for primary care networks (PCNs).
Read the consultation outcome in full.
NHS Employers is currently updating our flexible retirement web pages and creating detailed guidance for employers. We will soon publish new tools and resources to help you promote, explain and implement the new retirement flexibilities to support retention in your organisation.