NHS Pension Scheme changes from April 2024

Summary of the outcome

DHSC has confirmed the following changes will be implemented.

• The member contribution structure will be reduced to 6-tiers with effect from 1 April 2024.
• Member contribution tiers will automatically increase annually, in line with the Consumer Price Index (CPI) figure from the previous September. 
• If the annual Agenda for Change pay award for England is above CPI, a further change to contribution tiers will be made in line with the pay award. This will help reduce cases of members tipping into higher contribution rates as an unintended consequence.
• The first tier and entry to the second tier will not be increased by either method, as is the case now.
• Real-time re-banding will be considered during a period of further consultation on the detailed requirements and implications, with the intention of implementation from April 2025. This is to give time for payroll systems to implement required changes.

The new member contribution structure from 1 April 2024, after CPI uplift (September 2023 6.7 per cent) will be as follows:

• Overtime for part-time staff will be pensionable up to 37.5 hours per week in the 2015 Scheme, aligning the 2015 Scheme with the 1995 and 2018 Scheme regulations. Overtime would not be pensionable where partial retirement has been taken in the last 12 months.
• Employer contribution rate increase from 20.6 per cent to 23.7 per cent, plus existing 0.08 per cent scheme administration charge. The increase of 3.1 per cent will be met centrally for most employers. Medical schools will receive 2.64 per cent increase in funding. The funding commitment will be reviewed as part of the next spending review.
• Permanent removal of abatement for special class status (SCS) members.
• Members taking unpaid carer’s leave will be treated as having continued in pensionable service during the time they are absent from work.
• Removal of Lifetime Allowance references, which is dependent on the Finance Act, essential changes to ensure existing partial retirement provisions continue to operate as intended and a new category of lump sum can be drawn from the NHS AVC schemes.
• Access to partial retirement for those subject to maximum service limits from 1 April 2024. 
• Excluding salary sacrifice arrangements as an eligible means of managing a 10 per cent reduction in pensionable pay for partial retirement eligibility. 

Proposals that DHSC will not take forward include the following.

• DHSC will not remove the bottom tier of the contribution structure at this time. DHSC will reconsider this once the Scheme Advisory Board (SAB) and DHSC have reviewed the HMRC process of how staff would access top-up payments.
• No freezing of the top tier of the contribution structure. 

Additionally, DHSC has confirmed its intention to review with SAB the current application of annualisation to assess contributions for sessional GPs.

The changes to the member contribution structure have been underpinned by the following principles.

• Protect the lower paid.
• Minimise the risk of opt-outs from the scheme across the whole membership.
• Ensure that the scheme remains sustainable, continued to be a valuable part of the reward package and, is affordable for all members

Information about phase one of member contributions structure reform can be found on our web page.