Article

Pension contributions and tax relief

Details of the contribution rates payable by members and employers in the NHS Pension Scheme and information on tax relief arrangements.

27 June 2022

The NHS Pension Scheme is financed by payments from the employer and current members who pay contributions at different tiers depending on their pay.

Employer contributions and administration levy

The employer contribution rate for the period 1 April 2019 to 31 March 2023 is 20.6 per cent of pensionable pay for both the 1995-2008 Scheme and the 2015 Scheme.

The employer contribution rate is set through a process known as the scheme valuation. A scheme valuation is carried out every four years and it measures the full cost of paying pension benefits (to current pensioners). The most recent 2016 scheme valuation identified the need to increase the employer contribution from 14.3 per cent to 20.6 per cent from 1 April 2019.

Employers are required to pay a scheme administration levy, in addition to the employer contribution rate, to cover the cost of the scheme administration. This levy is 0.08 per cent of pensionable pay and will be collected at the same time and in the same way as normal employer contributions. In practical terms, this means employers will pay 20.68 per cent of pensionable pay.

For the 2019-20, 2020-21, 2021-22 and 2022-23 scheme years, employers are responsible for paying 14.38 per cent of contributions, with the remaining 6.3 per cent being funded centrally.

Member contributions

A contribution structure is in place to determine the percentage of pensionable pay that members are required to pay into the NHS Pension Scheme, based on their pensionable earnings. The current structure has been in place since 1 April 2015 and will change from 1 October 2022. 

From 1 October 2022, three key changes will be made:

  • These rates will be determined using a member's actual pensionable pay earned in the previous scheme year. The current system uses whole-time equivalent pay.
  • A new contribution structure will be introduced, meaning that many members will pay a different rate to what they are currently paying.
  • Going forward, the thresholds for each tier will be increased in line with he Agenda for Change pay award, which will reduce the likelihood of a member moving to a higher contribution tier as a direct result of a national pay award.

The key messages to communicate to staff about the changes from 1 October 2022 can be found on our dedicated web page.

Member contribution rates

New member contribution structure
Pensionable pay

Current

Contribution rate based on whole-time equivalent pensionable pay

Phase 1

Contribution rate from 1 October 2022 based on actual pensionable pay

Phase 2

Contribution rate based on actual pensionable pay

Up to £13,231 5% 5.1% 5.2%
£13,232 to £15,431 5% 5.7% 6.5%
£15,432 to £21,478 5.6% 6.1% 6.5%
£21,479 to £22,548 7.1% 6.8% 6.5%
£22,549 to £26,823 7.1% 7.7% 8.3%
£26,824 to £27,779 9.3% 8.8% 8.3%
£27,780 to £42,120 9.3% 9.8% 9.8%
£42,121 to £47,845 9.3% 10% 10.7%
£47,846 to £54,763 12.5% 11.6% 10.7%
£54,764 to £70,630 12.5% 12.5% 12.5%
£70,631 to £111,376 13.5% 13.5% 12.5%
£111,377 and above 14.5% 13.5% 12.5%

This table of current and future member contribution rates is available to download as a poster for you to share with staff.

Tax relief

NHS Pension Scheme members will receive tax relief on their pension contributions up to a certain amount. This is because contributions are taken from pay before tax is taken off, therefore contributions reduce the amount of pay subject to tax.

The tax relief available for pension savings is subject to certain limits known as the annual and lifetime allowances, which are restrictions put in place by HMRC. You can find out more about these allowances on our annual and lifetime allowances web pages.

For more information you can watch our video below which explains, how much the NHS Pension Scheme costs staff, the employer contributions and describes how pensions tax relief works on pensions contributions.