The consultation document can be found at the following link: NHS Pension Scheme: proposed amendments to scheme regulations - GOV.UK (www.gov.uk)
Proposed Changes:
• A new partial retirement option to support staff to work more flexibly up to and beyond retirement age. This may enable older staff to partially retire, or for those that have already retired to return to work, and either claim all or part of their pension whilst continuing to work and build more pension benefits.
• Allowing retired staff to re-join the NHS Pension Scheme if they return to work, making returning to work in the NHS more attractive.
• Removing the limits on the number of hours recently retired staff can work in the first calendar month after returning to work.
• Fixing the interaction between the pension tax system and inflation to ensure senior clinicians have more headroom against the £40,000 pension tax annual allowance. If introduced, this would mean senior doctors would either be less likely to receive a tax charge or may receive a smaller tax charge.
• Allowing staff working in PCNs, such as GPs and general practice staff, to access the NHS Pension Scheme. Previously they have had to apply for time-limited access on an ad-hoc basis.
• Technical update to member contributions provisions.
Consultation Response:
Retirement Flexibilities
1) Pensionable Re-employment
It is intended that pensionable re-employment will be introduced prospectively, therefore pensioner members of the 1995 section will be able to join the 2015 scheme for future accrual. Proposal to be implemented 1st April 2023.
2) Partial Retirement
The policy will be implemented with a requirement for a reduction in pensionable pay by 10%. This is to assess that members are taking steps towards retirement. This requirement will remain in place for 12 months after member takes partial retirement. There is no detail around requirements after 12 months has passed after partial retirement.
The 10% reduction in pensionable pay requirement may be met by splitting the number of PAs (for consultants) between pensionable and non-pensionable and there is further guidance to follow in the treatment for holders of Clinical Excellence Awards. For GPs, a 10% reduction in commitment would be required.
For returning NHS staff after taking partial retirement, overtime worked above contracted pensionable hours (after partial retirement) will be non-pensionable, but they can perform as much non-pensionable additional work as they wish.
When members take partial retirement there is no break in service and they retain the same contract. This differs to the option for ‘retire and return as members effectively enter into a new contract. However, the DHSC has commissioned a programme of work from NHS Employers and NHSE to engage with employers to encourage them to offer the same terms and conditions should a member decide to retire and return.
It is intended that partial retirement will be implemented from 1st October 2023. Members who wish to claim their 1995 benefits before this date can do so by making use of the pensionable re-employment proposal (1) from 1st April 2023.
3) 16-hour rule
The 16-hour rule will be permanently removed effective from 1st April 2023. The 16-hour rule is currently suspended (since 25 March 2020) and the suspension is due to continue until 31 March 2023, so the rule will essentially not be reinstated.
Other Retirement Flexibilities
Members of the 2008 and 2015 sections will be able to claim up to 100% of their pension benefits, rather than 80% and this will be implemented from 1st October 2023. This means that all partial retirement provisions will be aligned across the 1995 section, 2008 section and 2015 scheme.
It was also noted that members of the 2008 section who moved their accrued 1995 benefits to the 2008 section will be offered the opportunity to retract their Choice 2 election and to once again have accrued their 1995 section benefits, in order to enable the choice of 2015 scheme benefits as part of the McCloud remedy.
Scheme rules to address inflation
HM Treasury will amend the revaluation date from 1st April to 6th April in the 2015 scheme from 6th April 2023. This will align the CPI rates used for Annual Allowance calculations.
The 1995/2008 Scheme dynamisation date will also be moved from 1st April to 6th April from the 6th April 2021, but no amendment is required to the regulations as the regulations do not set a specific date for the dynamising factors.
Consequently, practitioner ‘pot of earnings’ will be uplifted by the same CPI rate (+1.5%) as the CPI rate used to increase the opening value of the pension for Annual Allowance purposes. By way of example, before the amendments are enacted, for 2022/23 the practitioner pot would have increased by 10.1% + 1.5% (11.6%) in 2022/23, and the opening value of the pension for Annual Allowance purposes would only be increased by 3.1. After the amendments, the 2022/23 practitioner pot will not increase for dynamisation, having already increased by 3.1% +1.5% in 2021/22, and the Annual Allowance will still use 3.1% to increase the opening value for Annual Allowance purposes. In 2023/24, the practitioner pot will increase by 10.1% + 1.5% (at the 6th April 2023), and the opening value of the pension for Annual Allowance purposes will also increase by 10.1%, aligning the CPI rates.
Note that this is not a change to the Annual Allowance calculations, it is merely a movement of when the dynamisation (1995/2008 Scheme) and revaluation (2015 Scheme) uplift is applied.
In most circumstances, this will substantially reduce the Annual Allowance tax charge in 2022/23 as it eliminates the excess growth caused by different CPI rates. Growth will then be determined from the earnings contributed to the practitioner pot and the additional 1.5% received above the CPI rate.
Scheme Access Policy – Primary Care Networks
Updated guidance will be published setting out how qualifying PCNs can access the scheme through NHSBSA, so PCNs should keep an eye out for this guidance.
Technical update to member contributions provisions
Amendments will be made to regulations so that earnings can be apportioned into 2 periods in 2022/23 due to mid-year rate change. Examples are provided in the consultation document for practitioners.
This is for information purposes only. Please seek regulated financial advice from an adviser who understands the complexities of the NHS Pension Scheme so you can make informed financial decisions.
