NHS pensions: changes could impact lower paid healthcare staff

Rises in contribution rates could prompt greater levels of pension opt-outs and disproportionately affect lowest paid and part-time nurses, warn employers

Proposed changes to NHS pensions could impact lower paid healthcare workers, employers have warned.

Changes to NHS pension could increase opt-out rates among the lowest paid

Responding to a government consultation on planned changes to the NHS pension scheme, which closed on 7 January, NHS Employers said amendments to member contributions could affect lower paid nurses and other healthcare staff leading to an increase in opt-out rates.

The latest changes outlined in the consultation include reducing the number of tiers in the pension structure meaning some nurses, particularly those on lower bands, could see their contributions go up slightly while others will put in a bit less.

• RELATED: NHS pensions: think twice before opting out, nurses warned

Under the proposed new structure, those earning up to £13,246 of pensionable income will see their contribution rate rise slightly from 5.1% to 5.2% in April. Those earning up to £17,673 of pensionable income will see their contributions increase from 5.7% to 6.5% in April.

The government proposes eventually removing the first tier completely so that everyone with pensionable earnings of up to £25,146 will pay a 6.5% contribution rate.

Warning of disproportionate effect on part-time nursing staff

People earning to up £13,250 pensionable income will be eligible for a tax rebate from HMRC to offset the increase in their contribution.

NHS Employers warned in its response to the consultation that removing the first tier could cause those earning less to become ‘uncertain or overwhelmed’ by the process of getting their rebate, or leaving their pension scheme entirely.

‘Employers are concerned this may lead to low uptake of the rebates and more opt outs from the scheme due to the detrimental impact on take-home pay,’ it said.

It urged the government to monitor this closely and ensure lower paid members still found the scheme to be a ‘valuable vehicle for retirement savings’.

• RELATED: Rise in retired NHS nurses returning to work after pension change

The RCN warned that removing this tier would ‘disproportionately’ affect part-time nursing staff.

RCN national officer Chris Musgrave said: ‘While members can claim tax relief to offset the increase in their contributions, this measure may lead to confusion and create higher levels of opt-out.’

Abatement rules could be permanently ditched

The proposals also include the permanent removal of abatement for nurses with special class status, meaning they can continue working for the NHS after retirement without taking a hit to their pension.

Abatement rules were suspended during the pandemic to enable recently retired staff to return to work and this was extended as the NHS continued to grapple with the COVID backlog.

• RELATED: Flexible working: some nurses can gain early access to pension

NHS pensions expert Graham Crossley, from wealth management firm Quilter, told Nursing Standard: ‘The permanent end to abatement is something pretty much everyone has wanted to get rid of to aid retention of staff.’

But he said the government should go further and scrap a rule that means members who take partial retirement must reduce their pensionable pay by at least 10% for the first 12 months. The rule affects nurses who have reached normal retirement age but wish to carry on working as before.

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