The government will extend amendments to the NHS Pension Scheme designed at boosting health worker numbers, prolonging measures that were introduced in response to the coronavirus pandemic.
The measures were initiated in recognition of three scheme rules that limit the ability of some retired NHS staff to work.
The amendments suspend a 16-hour weekly limit on working hours for members of the scheme’s 1995 section, along with barriers for some staff aged 55 to 60, who have claimed their pension benefits, from returning to work without having their pension benefits suspended.
The Department of Health and Social Care ran a brief consultation between August 28 and September 12 to consider extending these amendments beyond their scheduled expiry on October 31 2022.
While this is a good start, it provides just a small fix to one part of the major workforce retention issues caused by NHS Pensions and taxation
Graham Crossley, Quilter
With 98 per cent of respondents agreeing that the easements should continue beyond the end of October, the lifting of the 16-hour limit will now be prolonged until March 31 2023. Additional proposals for its permanent removal will be made from April 1 2023.
The suspension of “abatement” for drawdown members of the 2008 section and 2015 scheme will be suspended to March 31 2023. Meanwhile, abatement exemptions for “special class status” members will be extended until March 31 2025.
These are chiefly nurses, physiotherapists, midwives and health visitors who were members of the scheme before March 1995, and who were eligible to retire at age 55 rather than 60 with no actuarial reduction in their pension.
SCS abatement will return
The government received 1,299 responses to its consultation, including from organisations such as the British Medical Association and NHS Employers. The easements were originally extended in February until the end of October.
Some respondents argued that the relaxation in rules should temporarily carry on beyond the end of March 2023, or the relevant scheme rules should be removed entirely. Thirty-two per cent of respondents agreed with the suggested duration of the extension, with 68 per cent against.
The NHS Pension Scheme Advisory Board said that the 16-hour rule limiting 1995 members’ ability to work should be scrapped entirely, on the basis that “it serves little practical purpose for staff, employers, or the pension scheme”.
The remaining easements should be extended beyond the end of March, it added. The Royal College of Nursing was in favour of extending the easements, supporting a lengthier extension than those proposed.
NHS Employers backed removing the 16-hour limit permanently. It also argued for the removal of abatement for SCS members beyond the end of March in order to give employers time to address backlogs and find other ways to retain staff.
The government countered: “In the longer term, there are good policy reasons for abatement applying to SCS members who return to work before age 60.
“There have been concerns from stakeholders that the eventual reintroduction of abatement would force returning SCS members to retire,” it continued.
“This is not the case, as it is still possible for SCS members to perform significant amounts of work without exceeding their abatement ceiling, even for members with long careers.”
All members can work at least half-time when in receipt of benefits before abatement applies, the government claimed.
SCS status was withdrawn for new entrants from March 6 1995 when the NHS Pension Scheme was being restructured.
“In the interests of fairness to all scheme members, it is right that abatement applies to SCS members under normal circumstances,” the government said.
‘Just a small fix’
The DHSC stated that it will lay the final regulations before parliament in time for the rules’ extensions beyond the end of October.
Quilter NHS pensions expert Graham Crossley welcomed the extension of changes to the abatement rules.
“However, while this is a good start, it provides just a small fix to one part of the major workforce retention issues caused by NHS Pensions and taxation,” he said.
“We are still awaiting details of the short-term fix that will amend NHS regulations to purportedly fix the ‘[consumer price index] disconnect’, instead of fixing the Finance Act, which could have addressed the CPI disconnect and ‘negative growth’ for all.
“What’s more, there also remains ongoing concern as to the lack of a long-term fix, such as the BMA’s suggestion of a tax-unregistered scheme for senior healthcare workers impacted by pensions taxation.”
Govt to fix NHS inflation link and mandate pensions recycling
The government will be correcting pension rules regarding inflation and will mandate NHS trusts to offer pensions recycling by 2023, as part of its bid to prevent punitive pension rules from encouraging workers to leave the NHS.
In August, the Policy Exchange think tank called for a reassessment of the link between CPI inflation and the annual allowance for public sector pensions.
As a result of changes in legislation, when CPI rises, members are assessed for their growth in benefits including inflation. When CPI falls, the annual allowance growth may be negative.
“Negative growth is zeroed and cannot be carried across to other pension schemes within the same tax year or carried back to previous tax years to offset historic tax charges,” Policy Exchange stated.
