Govt pushes ahead with planned changes for NHS pension scheme

The government has confirmed that it will proceed with 'major' changes to the NHS Pension Scheme, with plans to implement pensionable re-employment and permanently remove the 16-hour rule from 1 April 2023.

This is alongside further changes to the scheme rules from 1 April 2023 to address inflation, and will be followed by the implementation of partial retirement on 1 October 2023.

In its consultation response, the Department of Health and Social Care (DHSC) revealed that, overall, the majority of consultation responses received were supportive of the proposed new retirement flexibilities.

In particular, the government revealed that 87 per cent of the 1,099 responses received agreed that new retirement flexibilities should be introduced as proposed in the consultation document, while just 9 per cent disagreed and 4 per cent were unsure.

According to the government response, respondents comments suggested that the proposed flexibilities could help the NHS to retain experienced staff, give NHS Pension Scheme members more options for their retirement and make the rules of the scheme fairer.

The DHSC revealed that the Scheme Advisory Board (SAB) for the NHS Pension Scheme, which is made up of representatives from NHS trade unions and employers from across England and Wales, also agreed that the new retirement flexibilities should be introduced and confirmed that they would encourage valued staff members to remain in the NHS.

In light of this, the government confirmed plans to proceed with all three proposals, with the implementation of pensionable re-employment and permanently removing the 16-hour rule expected in 1 April 2023.

However, plans to implement partial retirement will be pushed until 1 October 2023, to ensure that employers and the scheme administrators are given time to prepare and ensure the process runs smoothly for staff who wish to advantage of the new option.

Indeed, the DHSC suggested that, given the level of interest in the partial retirement proposal, the department anticipates that a substantial number of members will choose to partially retire when this option becomes available.

However, it also clarified that members who wish to claim their 1995 Section pension before this date but want to continue building further pension benefits will be able to do so by making use of the proposal for pensionable re-employment from 1 April 2023.

Alongside retirement flexibilities, the DHSC provided an update on proposals that sought to address inflation.

The initial consultation outlined two potential approaches, amending the 2015 regulations to move the date that the yearly in-service revaluation is applied to 2015 scheme earned pension from 1 April to 6 April, or moving the date that dynamising factors are applied to 1995/2008 Scheme practitioner pensionable earnings yearly from 1 April to 6 April.

The DHSC revealed that most respondents welcomed these proposals, with 82 per cent of the 1,098 responses received agreeing that the proposals should be implemented, while 8 per cent disagreed and 10 per cent didn't know.

It also revealed that, of the 91 respondents who disagreed, many expressed views on how pension growth is calculated, rather than commenting on the proposed change.

It stated: "The department welcomes the overall positive reception to its proposals to change the revaluation date in the 2015 regulations and move the date that dynamising factors are applied to 1995/2008 scheme practitioner pensionable earnings from 1 April to 6 April from April 2023.

"The department therefore intends to proceed with these changes to the 2015 regulations which will become effective on 1 April 2023."

However, the DHSC confirmed that rather than responding through the online consultation platform, 2,241 respondents submitted responses by email, using template wording provided by the BMA.

A number of respondents also went beyond the template wording to comment on how the annual allowance has affected them personally, with some stating that they are already considering a reduction to their sessions and NHS commitments in order to reduce the risk of an annual allowance charge.

The BMA also raised a number of specific concerns around the implications of no revaluation, for annual allowance purposes, for the tax year 2022 to 2023, and the impact for members retiring during tax year 2022 to 2023 and whether they will receive the appropriate proportion of the revaluation that they are entitled to under the existing arrangements.

In addition to this, the BMA was among several organisations, including the British Dental Association, and the Association of Independent Specialist Medical Accountants (AISMA), the NHS Pensions SAB, to raise the issue of ‘negative pension growth’ in annual allowance calculations and advocated for amendment of section 234 of the Finance Act to address this.

In light of these concerns, the DHSC confirmed that the tax year 2022 to 2023 will be a transitional tax year to facilitate the change in the scheme revaluation date from 1 April to 6 April.

It also confirmed that plans to work with the scheme administrator to provide guidance for members on the annual allowance pages of the NHS Pension Scheme website, particularly with regards to individuals who leave the 2015 Scheme or retire.

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