Pay and Pensions

Changes to GP pension contributions postponed until October

Changes to the amounts GPs and staff will contribute to their NHS pension will be implemented from 1 October, six months after the planned implementation date, the Government has announced.

The Department of Health and Social Care yesterday published its response to a consultation on proposed changes to NHS pension scheme member contribution rates and structures.

Accountants have warned this could cause problems for GPs’ own pensions contributions, and how partners manage staff pay.

From October, the top rate of contribution will be gradually reduced from 14.5% to 12.5%, with the maximum rate being set at 12.5% after two years, giving GPs a reduced pension contribution cost.

The DHSC’s consultation response said: ‘In line with the department’s view that a cautious pace is appropriate and following responses from consultees regarding pressures on take-home pay from 1 April 2022, the department has decided that these changes will be postponed until 1 October 2022.’

The changes to regulations, which remain subject to parliamentary approval, will also see contribution tiers reduced, in order 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’.

But Andrew Pow, partner at accountancy firm Mazars, said: ‘By reducing the number of pension tiers, this means there are steeper increases between tiers. For example, if you earn £22,548 of income, you will pay 6.5% on all your income, whereas if you earn £22,549 – only £1 more – you will pay 8.3% on all your income.

‘This needs to be carefully managed when looking at pay increments or staff could end up being worse off with a pay rise.’

And Luke Bennett, chartered accountant at Francis Clark, said he was ‘not impressed’ by the delay to reduced GP contributions. 

He said: ‘The thought of changing contribution rates in the middle of an NHS year just seems like asking for more and more mistakes to be made by PCSE. Clearly, they’ve left it too late to introduce changes from first of April, why couldn’t they just have pushed it on a year and done it from first of April 2023?’

Mr Bennett also questioned how the new October 2022 enforcement date will fit in with producing annual certificates.

He said: ‘You’re going to have some income at some rates, so income at another rate. It’s just adding complexity to what’s already a system at breaking point because PCSE can’t cope.

Chairman of the Association of Independent Specialist Medical Accountants Deborah Wood agreed that the implementation of changes from April 2023 would be ‘preferable’.

‘Moving the tiered rate contribution closer to the 9.8% overall cost of funding required for the pension scheme is sensible and will benefit most GPs whose earnings are in the higher bandings. Sensible too is the reduction in due course of the number of tier bands.’

GP contribution rates will also be based on actual annual rates of pensionable pay, replacing the current system. Currently, the NHS calculates rates for salaried GPs ‘based on their notional whole-time equivalent (WTE) pensionable earnings’, and GP partners ‘based on their actual annual rates of pensionable earnings’.

Ms Wood added: ‘We also welcome the move to basing tiers and contributions on actual pensionable pay, rather than whole time equivalent pay. However, it is disappointing that the opportunity was not taken to also remove the need for annualisation for GPs who are members of the pension scheme.’

Proposals the DHSC will implement following the consultation:
  • use actual annual rates of pensionable pay to determine members’ contribution rates, instead of members’ notional whole-time equivalent pay
  • change the member contribution structure to the structure that was proposed by the consultation document
  • increase the thresholds within the member contribution structure in line with annual AfC pay awards
  • phase in the new member contribution structure, with the first phase to be implemented on 1 October 2022

Source: NHS Pension Scheme: proposed changes to member contributions: consultation response, 15 February 2022

As previously published in our sister title, Pulse.

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