Consultation outcome

NHS Pension Scheme: proposed amendments to scheme regulations - consultation response

Updated 7 March 2023

Introduction

The NHS Pension Scheme is designed to offer significant value in retirement to people who have chosen to dedicate part or all of their careers to serving the public through the NHS. Backed by the Exchequer, the NHS Pension Scheme offers the security of a guaranteed income in every year of retirement for all its members, on some of the most generous terms available from a pension scheme.

The Department of Health and Social Care (DHSC) keeps the rules of the pension scheme under review to ensure it continues to help the NHS attract and retain the staff needed to deliver high quality care for patients. On 5 December 2022, we launched a consultation on proposed changes to the NHS Pension Scheme:

• new retirement flexibilities
• aligning the timing of Consumer Price Index (CPI) inflation rates used for revaluing pension benefits and the CPI used in annual allowance tax calculation
• scheme access for primary care networks (PCNs)
• technical updates to member contributions provisions

Consultation process

The consultation ran for 8 weeks, beginning on 5 December 2022 and ending on 30 January 2023. A consultation document describing the proposals was published on GOV.UK. The larger NHS trade unions and a number of NHS employers were also formally notified of the consultation.

The department welcomed any comments or views on the proposals and invited those interested to respond through an online platform, by email or by post.

A total of 3,386 responses were received. Of these 1,099 responses were received through the consultation platform, and 2,287 responses were received by email. No responses were received by post.

The responses came from individuals, trade unions, employers and other organisations, including:

• Association of Anaesthetists
• Association of Independent Specialist Medical Accountants
• Association of Local Authority Chief Executives and Senior Managers
• Birmingham Women’s and Children’s NHS Foundation Trust
• Bolton NHS Foundation Trust
• British Dental Association (BDA)
• British Medical Association (BMA)
• British Orthopaedic Association
• British Society for Haematology
• Cardiff University
• Cavendish Medical
• Circle Financial Services Limited
• Epsom and St Helier University Hospitals NHS Trust
• George Eliot NHS Trust
• Great Western Hospitals NHS Foundation Trust
• Greenhead Family Doctors
• Guys and St Thomas NHS Foundation Trust
• Hospital Consultants and Specialists Association
• ISM Pension Services
• Leeds Teaching Hospitals NHS Trust
• Leicestershire Partnership NHS Trust
• Manchester University NHS Foundation Trust
• MediFinTech
• Midlands Partnership Foundation NHS Trust
• Navigo Health and Social Care Community Interest Company
• NHS Confederation
• NHS Employers
• NHS England
• NHS North East London Integrated Care Board
• NHS Providers
• NHS Wales Employers
• NHS Business Services Authority (NHSBSA)
• One Care (Bristol, North Somerset and South Gloucestershire) Community Interest Company
• Pennine Care
• Portsmouth Hospitals University NHS Trust
• Royal College of Midwives
• Royal College of Nursing
• Royal College of Paediatrics and Child Health
• Royal College of Physicians of Edinburgh
• Scheme Advisory Board for the NHS Pension Scheme (England and Wales)
• Shelford Group
• South Warwickshire University NHS Foundation Trust
• St Georges University of London
• Sussex Partnership Foundation Trust
• Tees Esk and Wear Valleys NHS Foundation Trust
• Unison
• University Hospital Southampton NHS Foundation Trust
• University of Sheffield
• Wealthwide Limited
• York and Scarborough Teaching Hospitals NHS Foundation Trust

The BMA also provided their members with template wording to assist them in writing their consultation response. A total of 2,241 responses were made using the BMA’s template, some of which also included additional comments. This is discussed in more detail in the relevant sections of the consultation document.

Some respondents took the opportunity to express views on topics related to the NHS Pension Scheme but outside the scope of proposals presented in this consultation. The majority of these were on the topic of pension tax. For more on pension tax see ‘Changes to the pension rules regarding inflation’ in the section ‘Public sector equality duty’.

New retirement flexibilities

Summary of proposals

The consultation document explained that the department was proposing to introduce a package of new retirement flexibilities to the 1995 Section of the NHS Pension Scheme:

• pensionable re-employment
• partial retirement
• removing the 16-hour rule

These measures were designed to support patient care, by helping to boost capacity if staff choose to work for longer, in a more flexible way. They are also aimed at supporting members’ work-life balance and giving them a greater degree of flexibility around how they take their pension benefits.

The consultation document also proposed making related changes to the 2008 Section and 2015 Scheme.

More information about the proposed changes is provided in the original consultation document.

Responses received

The department is grateful to all the individuals and organisations that participated in the consultation process.

Overall, the majority of consultation responses received were supportive of the proposed new retirement flexibilities. Of the 1,099 responses received through the online consultation platform, in response to the question ‘Do you agree or disagree that the new retirement flexibilities should be introduced as proposed in this consultation document?’, 87% (955) agreed, 9% (102) disagreed and 4% (42) responded ‘don’t know’.

In general, respondents stated in their comments both on the online consultation platform and by email 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 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, stated that it agreed the new retirement flexibilities should be introduced and that they would encourage valued staff members to remain in the NHS. The board concluded that this would ultimately improve service capacity and patient care.

NHSE, which leads and supports the NHS in England, noted that the new flexibilities should be introduced to modernise the rules of the NHS Pension Scheme, which at the moment may encourage members to leave service at age 60. The response highlighted that the flexibilities would support staff members’ work-life balance and give them a greater degree of flexibility around how they take their pension benefits.

Comments were received on each of the 3 elements proposed as part of the package: pensionable re-employment, partial retirement and the permanent removal of the 16-hour rule. The key themes are summarised in separate sections below.

Respondents took the opportunity to comment on broader elements of scheme design, such as the retirement age, which is beyond the scope of this consultation. Some stated that staff may not wish to partially retire or return to employment for reasons unrelated to pensions.

Pensionable re-employment

Respondents were largely in favour of the proposal to introduce pensionable re-employment.

On the whole, the comments received supported the department’s view that allowing pensioner members of the 1995 Section to join the 2015 Scheme upon re-employment could encourage staff to return to the workplace after retiring or to remain in the NHS after claiming their pension.

For example, one respondent stated that the current rules, which restrict members of the 1995 Section from building up further pension once they claim their pension, had discouraged them from claiming their benefits, as their preference would have been to claim their benefits and then continue working. Other respondents stated that they welcomed the proposal and planned to retire and return and make use of the new option to continue building benefits after returning, as would their colleagues.

Some respondents asked how this would work in practice. For example, some respondents asked if they would be automatically enrolled. Others asked what would happen to other pension arrangements they may have made if they have already retired and returned to work. Some responses received from employers also asked if the rule change would be retrospective, meaning that they would need to pay backdated contributions for members who have already retired and returned but previously have not been able to join the NHS Pension Scheme.

The department intends to introduce pensionable re-employment prospectively, which means that pensioner members of the 1995 Section will be able to join the 2015 Scheme for future accrual. This is consistent with the way other changes to pension scheme rules and provisions are normally introduced.

Having considered the consultation feedback, the department recognises that members who wish to be pensionably re-employed (including those who have already resumed employment after retirement and are not currently eligible to join the NHS Pension Scheme) will need to have appropriate information available to them to allow them to do so, and employers will also require suitable guidance. DHSC therefore intends to work with NHS Employers and NHSE to produce a range of resources on the topic of pensionable re-employment.

Partial retirement

The majority of the responses received from both members and employers were supportive of the proposal to introduce partial retirement.

Some respondents commented that they would appreciate having the ability to retire gradually, perhaps working fewer hours while receiving their pension, and that this would help them to bridge the gap between receiving their NHS pension benefits and their State Pension. Some respondents stated that doing so would suit their priorities later in their career, as they no longer wanted to work full time or found it tiring. Other respondents stated that having read the consultation document, they planned to make use of this new option and work for longer in the NHS rather than retiring completely in the near future.

This feedback chimes with the department’s rationale for introducing partial retirement as set out in the consultation document. If experienced staff members choose to delay their retirement by partially retiring instead, they could remain in NHS service, contributing their valuable skills and knowledge. The policy could therefore have a positive impact on NHS capacity and patient care.

However, many respondents commented that while they believed that partial retirement should be introduced, they disagreed with the proposed requirement for staff to reduce their pensionable pay by 10% in order to access this flexibility. Many members who responded using a BMA template stated their view that this requirement was unreasonable and would make returning to work more difficult.

Other respondents commented that requiring staff to reduce their pensionable pay could limit the potential positive impact of the policy on retention. Others said that it would lead to increased pressures on other colleagues if those who took partial retirement decreased their workload. The BDA assumed that the requirement would operate in the same way as it does in the 2015 Scheme, whereby an increase in pensionable pay above the 90% threshold is only considered for the first 12 months after partial retirement.

The department’s view is that in order for staff to partially retire, some reduction in pensionable workload is required, and as the NHS Pension Scheme records members’ pensionable pay, this is a reasonable way of assessing if members are taking steps towards retirement. This is also how partial retirement operates for members of the 2008 Section and 2015 Scheme in the NHS, and similarly for members of other public sector pension schemes. The department therefore intends to implement the policy as planned, with the proposed requirement for a 10% reduction in pensionable pay. This requirement will remain in place for the 12 months after members take partial retirement, such that the partial retirement regulations are aligned across the 1995 Section, 2008 Section and 2015 Scheme. However, it should be noted that overtime worked above contracted pensionable hours is non-pensionable, and returning NHS staff can perform as much non-pensionable additional work as they wish.

However, the department recognises that not all members will want to reduce their hours when they claim their pension. There is the alternative option of ‘retire and return’, improved by the proposal to permit pensionable re-employment. However, this option requires staff to resign and the employer to agree re-employment. The terms of that re-employment offer are a matter for employers. The department published guidance in 2017 on the considerations for NHS employers to think through when agreeing retire and return requests. See Re-employing staff who receive an NHS pension.

Among the consultation responses received from individual members, particularly those who had already claimed their benefits, many mentioned that their employers were reluctant to offer them the same terms and conditions to staff as they had before. For example, some respondents reported that their employer would not offer them a permanent contract, would return them to the bottom of their pay band, or would reduce the annual leave entitlement they had previously built up to the minimum level.

When members take partial retirement, because a break in employment is not required, members can retain the same contract, but when members retire and return, they must enter a new contract. The department would strongly encourage employers to offer staff the same terms and conditions on this new contract should they decide to retire and return, and it has commissioned a programme of work from NHS Employers and NHSE to engage with employers on this. This should help to support staff and will also be of benefit to employers, as offering the same terms and conditions will encourage experienced staff to continue working if they want to claim their pension, and it could help to attract staff who have recently retired back to work.

Some respondents questioned how the requirement to reduce pensionable pay would work in practice for consultants, who work a set number of programmed activities (PAs). Some others also asked for more information on how this would work for those in receipt of local Clinical Excellence Awards or national Clinical Impact Awards.

The department has considered this and has commissioned NHS Employers and NHSE to produce further guidance for members and employers. The guidance will include examples showing how the requirement to reduce pensionable pay can be met through an agreement between the employer and the consultant to make some PAs non-pensionable. This would mean that consultants could continue to deliver the same amount of NHS work as before partial retirement if they wished, while meeting the requirement to reduce their pensionable pay. This guidance will also contain more information on partial retirement for holders of local Clinical Excellence Awards or national Clinical Impact Awards.

Others commented that it was unclear how the requirement would work for GPs. NHSBSA observed that although GPs are mentioned in the consultation document, this same reduction in commitment would also need to apply to dentists, non-GP providers and ophthalmic practitioners, because these groups are treated in the same way according to scheme regulations.

The department can confirm that this is correct, and it is their intention to include dentists, non-GP providers and ophthalmic practitioners within this requirement. Furthermore, the department is working with NHSE to develop tailored guidance to help staff and employers in primary care understand the benefits of these new retirement flexibilities and how to access them.

Turning back to the proposal more generally, some respondents stated that they elected for 2008 Section membership under the Choice 2 exercise because of the lack of retirement flexibility in the 1995 Section at that time, a decision which they may not have made had they known partial retirement would be implemented in the 1995 Section.

The department’s intention is that members who moved their accrued 1995 Section benefits into the 2008 Section will be offered the opportunity to retract their Choice 2 election and to once again have accrued 1995 Section benefits, in order to enable the choice of 2015 Scheme benefits as part of the McCloud remedy.

From 1 October 2023 members will be able to elect to receive 2015 Scheme benefits instead for pensionable service during the remedy period (1 April 2015 to 31 March 2022), as part of the McCloud remedy. More details will be provided in the department’s consultation on further regulations to implement the McCloud remedy for eligible NHS Pension Scheme members, which we anticipate publishing this spring.

Other respondents, including many of those who responded using the BMA template, noted that the while the proposal for partial retirement would be a good option for them later in their careers, it would not help to improve retention of younger staff, some of whom may be impacted by pension tax charges. Pension tax remains a matter for the Chancellor but is discussed in more detail in the section of this document on changes to scheme rules to address inflation.

Many of the respondents who used a template provided by the BMA also mentioned that Late Retirement Factors (LRFs) should be added to the 1995 Section. This was also suggested in the responses received from other stakeholders including NHSE, Unison, the British Orthopaedic Association, NHS Providers and the SAB.

Introducing LRFs to the 1995 Section would mean that the value of members’ benefits are actuarially enhanced if claimed after the 1995 Section’s normal pension age of 60. LRFs apply in the later 2008 Section and the 2015 Scheme but were not part of the original design of the 1995 Section, nor are they a feature of other legacy public sector pension schemes comparable with the 1995 Section. The department’s view is that an ability to take partial retirement will allow members to access their 1995 Section benefits when they are most valuable to them and continue building up pension in the 2015 scheme, means there is no need for LRFs in addition.

Feedback from employers suggested that more information and guidance on the new flexibilities, including partial retirement, would be necessary for employers to be able to implement the new options smoothly and maximise the impact on retention.

NHS Employers, the organisation which represents NHS employers in England, said that employers would need clear guidance on how to implement the policy, and that sufficient notice would be necessary to avoid placing unnecessary pressure on administration teams. It also noted that having additional time would support workforce planning activity and allow employers to have effective conversations with staff about their retirement options. NHS Employers also suggested changes to the partial retirement application process, to enable employers to process potentially larger volumes of applications easily. It recommended streamlining the process of producing pension estimates for members, so that staff can view a projection of their partial retirement benefits quickly and easily before they make this decision.

NHS Wales Employers noted similar points and stated that clear communications with staff will be important to ensure they understand how the flexibilities will work for them. They emphasised the need to for employers to be supported if they are to be able to communicate the changes with staff confidently and implement them successfully.

The scheme administrator observed that partial retirement is likely to be very popular, particularly among members with Special Class (SC) status and those who have exceeded their annual allowance. They concluded that additional time should be invested in developing the pension administration systems to automate the calculations as far as possible and training up additional staff to handle the higher volumes. They also highlighted the need to make relevant estimate tools or modellers easily accessible for members, so staff that can make informed decisions about partial retirement at the appropriate time.

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. In light of the consultation responses it is clear that employers and the scheme administrator would welcome more time to prepare and ensure the process runs smoothly for staff who wish to advantage of the new option. The department therefore intends to implement partial retirement from 1 October 2023. 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.

Finally, the scheme administrator also highlighted a particular issue for 1995 Section members who have a protected minimum pension age of 50. Because of the interaction between their pension benefits and tax regulations, if these members partially retire before age 55 and do not take 100% of their 1995 Section benefits this would be an unauthorised payment, incurring a tax charge for both the member and the scheme administrator. The department therefore intends to modify the proposal and require that these members must take 100% of their 1995 Section benefits if they choose to partially retire before age 55. 1995 Section members who also have pensionable service in the 2008 Section would be unable to partially retire before age 55.

It is important to note that the rules around the normal minimum pension age will change from April 2028, in accordance with section 10 of the Finance Act 2022. For more information see increasing normal minimum pension age.

Removing the 16-hour rule

Respondents widely welcomed the proposal to permanently remove the 16-hour rule. The department therefore intends to implement this as planned from 1 April 2023.

In addition, several respondents suggested that the suspension of abatement rules for SC status members should also be permanently removed. Special Class status abatement was outside the scope of this consultation. The department recently confirmed that the suspension of SC status abatement would be extended to 31 March 2025. This will provide an ongoing capacity boost to the NHS to help deliver elective recovery and address backlogs.

Other proposed changes relating to retirement flexibilities

No substantive comments were received on the other proposed changes to NHS Pension Scheme regulations relating to retirement flexibilities.

The proposed change to allow members of the 2008 Section and 2015 Scheme to claim up to 100% of their pension benefits, rather than 80%, will be implemented from 1 October 2023. This means that when partial retirement for 1995 Section members is implemented on 1 October 2023, all the partial retirement provisions will be aligned across the 1995 Section, 2008 Section and 2015 Scheme.

The proposed correction to Regulation 86(3) in the 2015 Regulations will be implemented from 1 April 2023. As the consultation document set out, under the 2015 Regulations if members who partially retire are subject to draw down abatement, any Additional Pension (AP) is also subject to abatement. The department’s view is that AP should not be subject to draw down abatement, and so the drafting of the 2015 Regulations contains an error. The scheme administrator has confirmed that no members who have partially retired from the 2015 Scheme have been subject to draw down abatement in respect of their AP.

The proposal to allow members who are currently non-pensionable in the 1995 and 2008 Sections because they have breached the maximum service limits to join the 2015 Scheme will be implemented from 1 October 2023, alongside the implementation of partial retirement. Any impacted members who wish to join the 2015 Scheme before this date will be able to do so from 1 April 2023 under the proposed provision for pensionable re-employment.

The proposal to remove Regulation R4(8) from the 1995 Regulations will also be implemented from 1 April 2023. This means that the rules of the 1995 Section, 2008 Section and 2015 Scheme, will be aligned from this date.

Next steps

Subject to the passage of legislation amending scheme regulations, the department will implement pensionable re-employment and permanently remove the 16-hour rule from 1 April 2023.

This will be followed by the implementation of partial retirement on 1 October 2023.

Changes to scheme rules to address inflation

The consultation made 2 proposals:

• 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
• moving the date that dynamising factors are applied to 1995/2008 Scheme practitioner pensionable earnings yearly from 1 April to 6 April

These changes would take effect from 6 April 2023, and apply to the revaluation and dynamisation due for scheme year 2022 to 2023, and subsequent scheme years.

The increase in CPI inflation in September 2022, based on the percentage rise in prices measured between September 2021 and September 2022, has shown there to be a timing mismatch. The mismatch being between the CPI rate that is used as part of the annual revaluation of accrued benefits in the 2015 Scheme, the annual uplift of practitioner pensionable earnings in the 1995/2008 Scheme and the CPI rate that is allowed for in annual allowance tax calculations. Aligning these CPI timings will ensure that the annual allowance measures only the pension growth that occurs above inflation.

Background and consultation proposals

Alongside new retirement flexibilities, Our plan for patients committed to changing NHS Pension Scheme rules to correct this issue.

HM Treasury will make changes to the Public Service Pensions Revaluation Order 2023 to move the revaluation date and align the CPI rates for the 2015 Scheme. The amendments the department proposed to make to the 2015 Regulations are to facilitate the correct application of this Treasury Order and future ones. The Public Service Pensions Revaluation Order 2023 will come into force on 6 April 2023, in respect of the 2015 Scheme. Subsequent Treasury Orders will also come into force on 6 April.

As the 1995 Regulations and the 2008 Regulations do not set a specific date for when the dynamising factors need to be applied to practitioner pensionable earnings, we confirmed that there was no requirement to amend either the 1995 Regulations or the 2008 Regulations to implement the proposed move.

Consultation feedback

Most respondents welcomed these proposals. Of the 1,098 responses received through the online consultation platform, 82% (902) agreed that the proposals should be implemented, 8% (91) disagreed and 10% (105) didn’t know.

While most respondents who agreed did not give further views on the proposals, one individual commented:

I agree that it is essential to align the inflationary rises in the NHS pension with current year inflation to minimise the risk of large AA charges. This step will reduce the likelihood of senior staff leaving NHS service to avoid frighteningly large AA charges over which they have no control. I agree wholeheartedly with the proposal to move the date that the yearly in-service revaluation is applied to 2015 Scheme earned pension from 1 April to 6 April, from 6 April 2023.

Of the 91 respondents who disagreed, many expressed views on how pension growth is calculated, rather than commenting on the proposed change. Some wanted the pension input amount to be solely based on employee and employer contributions, others suggested that the standard annual allowance should be increased.

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 went beyond the template wording to comment on how the annual allowance has affected them personally. Some said that they are already considering a reduction to their sessions and NHS commitments in order to reduce the risk of an annual allowance charge. Others indicated they were considering earlier retirement to mitigate against a breach of their lifetime allowance. Respondents suggested that the intended effect of the proposals could be delivered more straightforwardly by amending the Finance Act, but moreover that the proposals did not go far enough in fully addressing their pension tax concerns.

A further 46 responses were received by email. These included trade unions, employers, medical accountancy firms and individuals.

The BMA and the BDA highlighted that they had raised the issue of “CPI disconnect” early in the 2022 to 2023 tax year and suggested making changes to the Finance Act to address it. While reiterating their preference for that approach, both welcomed the proposed changes. The BMA agreed that moving the effective date of the revaluation of CARE accrued pension in the 2015 Scheme from 1 April to 6 April would align the CPI values being used from the 2023 to 2024 tax year onwards, but had the following concerns:

• the implications of no revaluation, for annual allowance purposes, for the tax year 2022 to 2023
• 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
• that the proposals are a scheme level solution as they only apply to the NHS Pension Scheme in England and Wales, and not to other public service pension schemes including ones for the NHS in Scotland and Northern Ireland

The BMA and the BDA were among several organisations, including the BDA, the Association of Independent Specialist Medical Accountants (AISMA), the NHS Pensions SAB, as well as individuals, 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. The BMA explained that the situation arises as a result of public service pension reforms where, following the introduction of the 2015 Scheme, some individuals are members of both the legacy 1995/2008 Scheme and the reformed 2015 Scheme. These are 2 pension schemes registered separately with HM Revenue and Customs but are “connected pension schemes” for the purpose of actuarial valuation.

AISMA raised concerns that the proposed changes would have an effect on the 1995/2008 Scheme practitioner Flexibility Value Earnings Credit (FVEC), specifically that practitioner earnings and the FVEC are revalued to 5 April using differing methods and CPI from different years.

Furthermore, AISMA pointed out that, while “the proposals are well intentioned to address the current high rates of inflation”, there was no mention of the McCloud remedy and consequently it was “not possible to fully understand the benefit or otherwise of the proposals where the calculations for pension benefits and AA charges will change and need further amendment for tax purposes”.

The BDA expressed concerns about the potential impact of moving the revaluation and dynamisation to a subsequent scheme year and tax year. They highlighted the need for suitable examples of how the proposals would work for individuals in practice, particularly where an individual leaves the scheme.

Overall, the majority of all the consultation responses received were supportive of implementing the proposed changes to the pension rules regarding inflation, with one employer concluding:

The proposal to move the date that the yearly in-service revaluation is applied to 2015 Scheme earned pension from 1 April to 6 April, from 6 April 2023 is welcomed. However, while it will align the CPI percentage rates and help in relation to the annual allowance, it will not solve the issue of high earners receiving pensions tax bills. We do however recognise that while the tax charges will still apply to those who exceed the annual allowance through excess pension growth, the change will mean that these will be based on actual pension growth above inflation which we understand to be the intent of the tax law.

Response

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.

The consultation explained that the process by which the dynamising factors are applied to practitioner pensionable earnings in the 1995/2008 Schemes is set out in paragraph 11 of Schedule 2 in the 1995 Regulations and Regulation 1 of Part 3D in the 2008 Regulations, with both the 1995 Regulations and 2008 Regulations drawing on the Pensions (Increase) Act 1971 and the Social Security Pensions Act 1975, for explanation as to how the CPI annual increase figure is defined. Our analysis of the legal framework is that the 1995 Regulations and 2008 Regulations only rely on these Acts for the amount of annual increase that is calculated under these provisions.

Consequently, the department has latitude to change the application date without needing to amend the 1995 Regulations and the 2008 Regulations. We will therefore move the date that dynamising factors are applied to practitioner pensionable earnings in 1995/2008 Scheme, from 1 April to 6 April, from 6 April 2023, and all subsequent years. This is not a retrospective change, consequently any dynamising factors already applied to practitioner pensionable earnings in the 1995/2008 Scheme on 1 April, before 6 April 2023, will remain unchanged. The 1995/2008 Scheme includes practitioner flexibilities which mean that practitioners are awarded the most favourable pension by allowing certain periods of officer service to be treated as though it were practitioner CARE benefits. As practitioner flexibilities are not part of the 2015 Scheme any 1995/2008 Scheme flexibility rights are protected on moving to the 2015 Scheme, this is achieved by calculating an earnings credit, the FVEC, which represents the value of the practitioner flexibilities in the 1995/2008 Scheme.

We do not believe that changing the date that dynamising factors are applied will affect the calculation of an FVEC. An FVEC is calculated as at the last day of pensionable service in the 1995/2008 Scheme, the very last day being 31 March 2022. Where there is ‘historic’ practitioner service (that is, practitioner service which has closed before the last day of pensionable service in the 1995/2008 Scheme), dynamising factors are applied to the last day of the historic practitioner service. The FVEC is then uprated by 2% each year. More information on the FVEC can be found on the NHS Pension Scheme website.

The department notes the concerns expressed by the BMA around the implications of ‘no revaluation, for annual allowance purposes, for the tax year 2022 to 2023’. 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. This means that for this tax year only the calculation of the pension input amount will be calculated using:

• the opening value benefits (calculated on 5 April 2022) that will include the in-service revaluation applied on 1 April 2022 to the accrued pension up to 31 March 2022
• the closing value benefits (calculated on 5 April 2023) that will exclude the in-service revaluation due to be applied on 6 April 2023 to the accrued pension up to 31 March 2023

The in-service revaluation to accrued pension up to 31 March 2023 will instead be applied on 6 April 2023 and for active members will be included in the closing value benefits of the 2023 to 2024 tax year (calculated on 5 April 2024). This means that the in-service revaluation using a CPI of 10.1% will be in the same tax year that the opening value benefits (calculated on 5 April 2023) are uplifted by a CPI of 10.1%.

The department wants to reassure members who retire during tax year 2022 to 2023 that they will receive the appropriate proportion of the in-service revaluation, known as the ‘leaver index adjustment’, on 6 April.

In relation to concerns that the change applies only to the NHS Pension Scheme in England and Wales, this is a matter for the relevant responsible authorities in other public service pension schemes to take a view on in the context of their own workforces and requirements.

The department notes the concerns raised by the BDA. We will 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. While this measure has been welcomed, we note the concerns that it does not go far enough and remove clinicians from scope of tax on their NHS pension. Pension tax is a progressive measure to limit the very expensive tax incentive to save into pensions, which costs the Exchequer around £67 billion a year.

The proposals set out in this consultation protect staff from unintentionally higher annual allowance charges driven by inflation. This is in addition to our work with NHS England to support NHS trusts to offer their clinicians the option to receive the employer pension contributions as extra pay where they no longer wish to continue pension saving due to pension tax.

Prior to this, the government raised the annual allowance taper thresholds in April 2020 by £90,000, giving doctors lots more headroom to take on extra non-pensionable work. The taper now only reduces the tax allowance for those earning over £200,000 - the very highest earners in society. This removed an estimated 97% of consultants and 86% of GPs from scope of the taper based on latest earnings data from NHS England.

We have also ensured pension tax does not affect take home pay by extending the Scheme Pays facility to cover annual allowance charges of any size. This allows staff to meet annual allowance charges from their pension pot. Although this reduces the value of pension earned that year, for many the growth in their pension benefits net of tax may still represent a good return on contributions.

In relation to ‘negative’ pension input amounts, defined benefit schemes are more difficult to compare against the annual allowance than defined contribution schemes. Where individuals accrue rights to future pension arrangements, it is necessary to calculate a figure for their savings to test against the annual allowance to ensure fairness between those in defined contribution and defined benefit schemes. Pension tax is a matter for the Chancellor, and the design of the tax system is outside the scope of this consultation.

It is possible, when calculating a pension input amount in the 1995/2008 Scheme, that where an annual pay award for the NHS is less than inflation from the previous year, the use of a higher CPI figure to uprate the opening value may leave the opening value higher than the closing value, leading to a negative pension input amount. This would be shown on an individual’s pension savings statement as zero.

But this is only for the purposes of the annual allowance calculation, which is intended to measure growth in pension accrual over a tax year. The pension scheme member has not had a reduction in their actual pension benefits, in fact they will have increased as long as there has been an increase in pensionable pay.

Changes to scheme access policy

Background

Access to the NHS Pension Scheme can be provided in multiple ways depending on the organisation and the type of service being delivered. The majority of NHS Pension Scheme members qualify for automatic access to the scheme because of their NHS employment with one of the following organisations:

• a special health authority (SpHA)
• a local health board
• an NHS trust
• an NHS foundation trust
• an NHS commissioning board (now legally known as NHS England)
• an integrated care board (ICB)

Within the primary care sector, access to the NHS Pension Scheme is provided to staff working for or in:

• a general medical services (GMS) practice
• a personal medical services (PMS) practice
• an alternative provider medical services (APMS) contractor
• an out of hours (OOH) provider (voluntarily through application)
• a non-GP provider

Within dentistry, scheme access can be provided to dental contractors and practitioners.

In addition to the above ‘automatic’ routes into the scheme, scheme access is also provided on application to independent providers (IPs) and direction or determination employers.

An IP is an organisation that holds a qualifying contract and that, before April 2014, would not have qualified as an NHS Pension Scheme Employing Authority (EA) under any access route.

Qualifying contracts are:

• NHS standard contract
• NHS standard sub-contract
• APMS contract
• local authority contract

With effect from 1 April 2014, an organisation that holds any of these contracts and does not qualify as an employing authority under any other access route may apply, if it so wishes, to become an IP.

NHS Pension Scheme access in IPs is restricted to staff who satisfy the ‘wholly or mainly’ criteria, which means they must spend at least half of their time working on the qualifying contract.

Access for direction or determination employers is also provided upon successful application to the scheme. A direction or determination can be ‘closed’ or ‘open’. Closed access means access is restricted to the individual listed on the document and is typically provided following a TUPE (transfer of undertakings, protection of employment) transfer. Open access is provided to certain staff groups who support the delivery of NHS services, such as clinical academics working in university medical schools. Open access allows new recruits to access the scheme on the condition that they satisfy the terms of the direction or determination.

The department strives to ensure the NHS Pension Scheme access policy and corresponding regulations accurately reflect the way in which services are structured and delivered. In recent years, the structure of primary care has developed significantly, which means that pension scheme regulations require an update.

Summary of consultation proposals

The department conducted a review of scheme access policy within primary care, working with NHS England to propose amendments to NHS Pension Scheme regulations. These amendments were summarised in the recent public consultation, with the aim of ensuring scheme regulations accurately reflect the way primary care services are delivered and structured.

The consultation set out proposals to provide NHS Pension Scheme access to primary care networks (PCNs) and PCN sub-contracting arrangements. PCNs are formed when GP practices work together with community, mental health, social care, pharmacy, hospital and voluntary services in their local areas.

PCNs build on existing primary care services and enable greater provisions of proactive, personalised, coordinated and more integrated health and social care for people closer to home. They aim to shift primary care services from reactively providing appointments to proactively caring for the people and communities they serve.

There are currently around 1,250 PCNs across England. These are based on GP-registered patient lists, and typically serve communities of between 30,000 to 50,000 people. PCNs are small enough to provide personal care but large enough to have impact and economies of scale through better collaboration between GP practices and others in the local health and social care system.

The purpose of PCNs is to integrate care by the formation and continued operation of networks that deliver care in a more personalised way. NHS England has produced further information on PCNs, which is accessible on the website.

PCNs are led by clinical directors who may be GPs, general practice nurses, clinical pharmacists or other clinical professionals working in general practice from within the PCNs core network practices.

As set out in the consultation, the flexible and integrated design of PCNs has created issues regarding NHS Pension Scheme access. PCNs may arrange themselves in a number of different ways of employing staff and holding contracts. The difficulty for the NHS Pension Scheme is that it can be unclear whether staff are working directly on a qualifying contract if their employer is in a different part of the network to the organisation who holds the contract. PCNs are not legal entities but are instead a cluster of GP practices. This makes it harder for the scheme to assess whether staff are working on a qualifying contract.

The NHS Pension Scheme requires a single point of contact for participating employers to ensure that staff who are accessing the scheme are delivering NHS services. This accountability is also important in ensuring participating employers comply with NHS Pension Scheme regulations, and that the scheme can hold them accountable for any potential issues such as non-payment of contributions and issues that require intervention from The Pensions Regulator (TPR).

However, it is also important that the NHS Pension Scheme continues to act as a valuable component of the total reward package provided to NHS staff, and that pension access issues are not a barrier to the delivery of services.

In recent years, the department has provided time-limited access to PCNs to 31 March 2023 on the basis of conducting this policy review. Following discussions with NHS England, the scheme has developed 8 PCN scenarios which capture the most common ways in which PCNs can be organised to comply with the above principles of NHS Pension Scheme administration. The consultation set out proposals to provide permanent NHS Pension Scheme access to PCNs who meet one of the 8 scenarios. (See the 8 scenarios in the original consultation document.)

Each of the scenarios set out in NHSBSA’s guidance, except scenarios 3 and 6, would be given automatic access to the scheme and would not need to make an application. Scenarios 3 and 6 do not qualify for automatic access because the organisation delivering NHS services does not hold a qualifying contract. However, permanent access to the scheme will be granted through a direction or determination order, or through IP status, to PCNs under scenarios 3 and 6 who can show that they meet the requirements of the scheme regulations.

In addition, the consultation noted the need for PCN sub-contracting arrangements to have access to the NHS Pension Scheme to ensure continued service delivery. It was proposed that NHS England’s recently published standard PCN sub-contract would be added to the list of qualifying contracts in NHS Pension Scheme regulations at Regulation 150(3) of the 2015 Regulations.

The consultation proposed that clinical organisations that qualify for NHS Pension Scheme access through an existing alternative route, such as by holding a qualifying contract, will be given ‘classic’ access to the scheme through the standard PCN sub-contract. This means that all practice staff working on the sub-contract can access the scheme. GP providers and salaried GPs would be eligible to access the scheme as practitioner members. Practice staff would access the scheme as officer members. In addition, locum GPs could pension income received from their work on the sub-contract.

Organisations that hold the standard PCN sub-contract but who do not qualify for NHS Pension Scheme access through an alternative route would be able to join the scheme through the IP route. This means that only staff who meet the ‘wholly or mainly’ criteria of spending at least 50% of their time working on the qualifying contract could access the scheme.

Organisations who hold the standard PCN sub-contract would be required to apply to the NHS Pension Scheme for access. Access would be considered on the same basis as is currently done for the NHS standard sub-contract, whereby:

• employers would be required to follow the standard PCN sub-contract to access the scheme, and scheme access would not be provided as a result of using any other type or form of sub-contract
• the employer who subcontracts out the work would be required to be an NHS Pension Scheme employing authority

The consultation was clear that the above proposed changes would not extend access to the NHS Pension Scheme to any staff groups or professions that have not previously had access to the scheme. Instead, the policy changes intend to ensure continued scheme access is provided to clinical and practice staff working in primary care.

Consultation feedback

The department was pleased to note that these proposals received broad approval and support from consultation respondents. Of 1,099 respondents to the online survey 81% agreed with the proposals to amend scheme regulations to provide permanent NHS Pension Scheme access to PCNs and PCN sub-contracting arrangements.

Portsmouth Hospitals NHS Trust and University Hospital Southampton NHS Foundation Trust both agreed that it was sensible to extend NHS Pension Scheme access to wider parts of the NHS infrastructure. They highlighted that this was particularly important as a future focus on integrated care board (ICB) working will lead to greater fluidity of roles between acute and primary care settings. Similarly, the British Orthopaedic Association and UNISON both agreed that the proposals to formalise NHS Pension Scheme access for PCNs would provide a recruitment and retention boost.

The NHS Pension Scheme Advisory Board welcomed the proposals as they are keen to encourage pension scheme participation and ensure all eligible staff can join. NHS Employers highlighted that workforce leaders were generally supportive of the proposals but did not share any detailed or opposing views on the issue.

The BMA agreed with the proposed changes but argued that PCNs and staff working in PCNs which meet scenarios 3 and 6 should not be disadvantaged by having to apply for direction and/or determination access. They also suggested greater standardisation of PCNs to ensure all are eligible for scheme access.

The Royal College of Nursing agreed with the proposals, but on PCN subcontracting expressed concerns about the extended use of subcontractors to deliver NHS services. This view was also shared by respondents to the consultation survey, who stated that this should not be a means of privatisation. The RCN suggested that pension access for sub-contractors should be reviewed every 12 months.

NHS England agreed that the proposed changes should be introduced as proposed, but set out some comments on NHS Pension Scheme access for primary care organisations who have established management organisations to provide administrative oversight to multiple practices. Under this model, groups of GP practices form a high-level management organisation which employs GP practice staff and is responsible for administration of pensions and management of staff. In this scenario, the management organisation which employs staff does not hold a qualifying contract for the purpose of NHS Pension Scheme access, as contracts remain with individual GP practices.

This presents an issue for NHS Pension Scheme access. As set out in the consultation document, employers who participate in the scheme are required to hold a qualifying NHS contract from which income can be pensioned by staff.

Many primary care organisations who use management organisations have been given time-limited access to 31 March 2023. NHS England argue that allowing this access to expire could cause service delivery and continuity issues, and hinder the ability to recruit staff. They suggest an extension of temporary access arrangements to permit time for NHS England, the department and the scheme administrator to consider how access could be provided on a permanent basis.

The scheme administrator agreed with this position and suggested that consideration be given to introducing a further qualifying subcontract which covers GMS, PMS and APMS services. This would go beyond the scope of the proposed PCN subcontract which covers Direct Enhanced Services (DES) and will allow PCN subcontractors to access the scheme. A further qualifying subcontract for GMS, PMS and APMS services would allow management organisations to access the NHS Pension Scheme as an independent provider.

Response

The department is pleased to note the strong support for these proposals and intends to implement the changes as consulted on. This will provide qualifying PCNs with permanent access to the NHS Pension Scheme and will allow them to offer scheme access to newly recruited staff. Qualifying PCNs (with the exception of those who meet scenario 3 or 6) will have automatic access to the scheme.

The department notes the concerns from stakeholders regarding access for employers who meet scenario 3 or 6. Such employers will still be required to apply for direction and/or determination or IP access to the scheme as they do not hold a qualifying contract. However, this access would be granted on a permanent rather than time-limited basis. PCNs who meet scenario 3 or 6 of the guidance document would be required to hold the standard PCN subcontract in order to access the NHS Pension Scheme.

The department is grateful for the consultation responses on these proposals, and the support received underlines our rationale for introducing the changes. Therefore, the department intends to proceed with the proposals, as consulted on, to amend NHS Pension Scheme regulations to provide scheme access for staff working in qualifying PCNs and on qualifying PCN subcontract arrangements.

Updated guidance will be published which sets out how qualifying PCNs can access the scheme through NHSBSA.

The department notes the concerns expressed by the RCN and individual consultation respondents regarding the extension of the scheme to subcontractors, who may be non-NHS organisations. It is worth noting that the NHS Pension Scheme regulations were changed from 1 April 2014 to allow access for independent providers, many of whom are non-NHS organisations. However, access for these organisations is sufficiently monitored and restricted through the ‘wholly or mainly’ criteria and a pensionable pay cap on the qualifying contract. The wholly or mainly criteria ensures that only staff who spend at least 50% of their time working on the qualifying contract can access the scheme. The pensionable pay cap on the contract ensures that independent providers can only pension income from staff up to the total value of the contract. These measures ensure NHS Pension Scheme access for non-NHS organisations can be tightly controlled by the scheme and will be applied to holders of the qualifying PCN subcontract.

The department is also grateful to NHS England and the scheme administrator for their suggestion of a wider qualifying subcontract of GMS, PMS and APMS services which would provide independent provider access to management organisations set up to perform management and administration functions on behalf of GP practices.

It is clear that allowing current temporary access arrangements for these organisations to expire would present a risk to recruitment and retention, and ongoing service delivery. On this basis, the department will extend current direction and/or determination access for management organisations to 31 March 2024. This will allow time for a further review of access arrangements for these organisations, and for NHS England to propose a qualifying subcontract to cover them.

Technical updates to member contributions provisions

Background

From 1 October 2022, the department introduced changes to the member contribution structure, including changing the amount that members pay for their pension benefits. This was the subject of a previous consultation document: NHS Pension Scheme: proposed changes to member contributions

Following these changes, some technical updates are required to ensure that practitioners have paid the correct amount of member contributions for the 2022 to 2023 scheme year. Amendments were also proposed to reflect the start of the scheme year 2023 to 2024, which involve amending the scheme year dates and clarifying the fact that there has been a change to the contribution rates that happened mid-scheme on 1 October 2022, part way through the scheme year 2022 to 2023.

Consultation feedback

77% of respondents to the online survey agreed with the proposed changes to the member contributions provisions (6% disagreed and 17% didn’t know).

The respondents who disagreed or responded that they didn’t know whether to agree or disagree, did so for a number of reasons. The majority of these reasons were unrelated to this proposal , for example respondents expressed concerns around the impact of pension tax. A number of respondents felt unable to answer the question because they either weren’t a practitioner themselves or didn’t employ practitioners and therefore did not explicitly agree or disagree with the proposal.

Some respondents also chose to comment on the use of tiered contribution rates more generally, whether because they felt that tiering was inappropriate and everyone should pay the same rate, or because they felt that member contributions should have steeper tiering, with high earners paying higher contribution rates than they currently do. A small number of respondents asked that the move away from using whole-time equivalent earnings should be backdated and that some part-time members should receive refunds on their contributions.

The majority of organisations who provided responses, agreed with the proposed amendments, including AISMA, the British Society for Haematology, Manchester University NHS Foundation Trust, Midlands Partnership NHS Foundation Trust, MediFintech, the scheme administrator, the RCN, the SAB and UNISON.

While agreeing with the proposals, some organisations suggested that further flexibility should be made available within the NHS Pension Scheme. NHS Employers said that employers were supportive of the changes. They also advocated for staff to have flexibility over the rate at which pension builds up, to make sure that the scheme is attractive and valuable for all staff. Similar views were expressed by Portsmouth Hospitals University Trust and the University Hospital Southampton.

The BDA agreed with the approach overall but suggested that the amending regulations and associated guidance could have been published earlier, so members could better identify and earmark their earnings prior to 1 October 2022.

The BMA and the British Orthopaedic Association provided feedback agreeing that it is reasonable to ensure the correct contribution rate is paid and to broadly mirror arrangements for officers. However, they also raised concerns around changing member contribution rates in the middle of the scheme year. The BMA asked for the second phase of contribution changes to come into effect at the start of the 2023 to 2024 scheme year. This was also echoed in the responses provided from practitioners through the BMA template.

Response

The department notes that respondents raised concerns in relation to the member contribution structure itself including the use of tiered contribution rates and the changes made on 1 October 2022. Those changes were subject to engagement with the Scheme Advisory Board and a public consultation which ended on 7 January 2022. For more information, including the outcome of that consultation and the equality impact assessment, see NHS Pension Scheme: proposed changes to member contributions.

We welcome the points made around communications with members and the timing of those communications. The department and the scheme administrator continually review how best to communicate these messages with members to facilitate their accounting processes and will take that feedback on board.

It is helpful to have feedback from respondents on the impact of a mid-year change to the member contribution rates. The timescale for the second phase of member contribution changes (which implements the table outlined in the original consultation, which can be found online at NHS Pension Scheme: proposed changes to member contributions) is under review and further updates will be provided in due course. The contribution tiers and rates will be updated by amending legislation to implement the new tier thresholds and to continue to uplift the tiers in accordance with the Agenda for Change pay increase in England.

Finally, a number of members asked for examples on how the proposed changes will work for practitioners. Examples were provided in the consultation document to aid respondents understanding of the changes.

Following consideration of the consultation responses, the department will proceed to make the amendments described in the consultation document. These amendments will ensure that practitioners have paid the correct amount of member contributions for the 2022 to 2023 scheme year and provide a continuing mechanism for member contribution rates to be determined in the 2023 to 2024 scheme year.

Public sector equality duty

The public sector equality duty (PSED) is set out in section 149 of the Equality Act 2010 and requires public authorities, in the exercise of their functions, to have due regard to the need to:

• eliminate unlawful discrimination, harassment and victimisation and other conduct prohibited by the 2010 Act
• advance equality of opportunity between people who share a protected characteristic and those who do not; and
• foster good relations between people who share a protected characteristic and those who do not.

This involves having due regard, in particular, to the need to:

• remove or minimise disadvantages suffered by people due to their protected characteristics
• take steps to meet the needs of people from protected groups where these are different from the needs of other people

The equality duty covers the 9 protected characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex (gender) and sexual orientation.

NHS Act 2006 duties

These proposals have been considered in regard to the NHS Act 2006, but are unlikely to be relevant to these duties:

• promoting a comprehensive health service (section 1)

• quality improvement (section 1A)

• the NHS Constitution (section 1B)

• health inequalities (section 1C)

• promoting autonomy (section 1D)

• research (section 1E)

• education and training (section 1F)

• reporting on and reviewing treatment of providers (section 1G)

The Family test

The then Prime Minister David Cameron announced in August 2014 the introduction of a new Family Test. While not a legal requirement, the test is designed to ensure policy is developed with a family perspective. Strong and stable families and family relationships, in all their forms, play an important role in society. Whether intended or not, a wide range of government activity has a direct or indirect impact on family. The family test evaluates the potential impact of policies on family relationships.

The primary purpose of an occupational pension scheme is to provide an income for a member in retirement. This provides financial security in retirement that can be key to a family unit. The aim of this policy change is to ensure access to the NHS Pension Scheme, which is a valuable vehicle for retirement saving, is protected for staff working in primary care.

Analysis

The department considered the impact of the proposed changes in the context of this duty as part of the consultation. The department invited respondents to help refine this initial analysis by contributing further perspectives or identifying where there might be other equality impacts to consider.

Most respondents did not provide views in relation to PSED on the proposals specifically. However, some respondents raised points in relation to other areas of policy.

The response received from the Royal College of Nursing (RCN) noted that while the new retirement flexibilities could benefit female members by providing an opportunity for them to increase their pension benefits, because these members can only do so by working longer, more work would be necessary to address the root cause of this. The RCN also stated in its response that the normal abatement rules and the closed nature of SC status could discriminate against staff on the basis of age. In order to remedy this, it suggested that the abatement rules should be permanently removed and SC status restored.

Unison stated in its response that it supported the proposals the department set out and that they would help to address equality issues. However, it expressed disagreement with the abatement policy for SC status members, which it said could discriminate against women.

Individual respondents to the consultation also noted that the abatement policy could be discriminatory on age and/or sex grounds, as the majority of SC status members are older and female.

Furthermore, a number of individuals who responded to the consultation using the BMA template suggested that the annual allowance could be seen as discriminatory against women on the basis that women are more likely to work part time. Some respondents argued that the annual allowance is discriminatory to women because it restricts the speed of pension accrual within a scheme year. These respondents argued that women who have taken career breaks or worked part time in order to raise children wish to accelerate their pension accrual later in career, and that the operation of the annual allowance prevents them from doing so.

These issues are outside the scope of this consultation exercise, but the department has noted them, and will share them across government as appropriate.

The department’s PSED analysis of the proposals is below.

New retirement flexibilities

Sex

The Equalities Act 2010 lists ‘sex’ as a protected characteristic. Data for the NHS Pension Scheme is also divided by sex. However, it is important to note that sex and gender are 2 different concepts. A person’s gender identity is not always the same as the sex assigned to them at birth, and some people may not identify as having a gender or as non-binary. Gender reassignment is also a protected characteristic under the Equality Act 2010.

The proposed retirement flexibilities will be available to all members regardless of sex. However, in developing the proposals, the department has considered the potential impacts of the new retirement flexibilities on members from this perspective, taking into consideration members’ salary progression, career breaks and work patterns.

The NHS is a female dominant workforce, and the majority of NHS Pension Scheme membership is female. Including pensioner members, approximately 1.9 million people have service in the 1995 Section of the NHS Pension Scheme. Of these members, approximately 79% are female and 21% are male.

Within the NHS Pension Scheme as a whole, male members tend to receive higher pensions than female members. The National Audit Office’s (NAO) 2021 report on public sector pensions stated that, in 2019, the average pension for male members of the NHS Pension Scheme was £17,541, compared with £6,440 for female members. The difference in average pension payments from the NHS Pension Scheme is 63%, which is greater than the average of 29% (Teachers’ Pension Scheme) and 47% (Civil Service Pension Scheme), which also have a more equal ratio of male and female members.

The gap between the average pension for male and female members may be attributed to several factors, including differences in pay, working patterns and career breaks due to maternity and caring responsibilities. As well as receiving higher pay than female employees, generally across the public sector male employees are less likely to work part time and have gaps in their length of service. This is partly due to female members being proportionally more likely to have career breaks due to maternity and caring responsibilities. However, it is worth noting that not all female members will take parental leave or have caring responsibilities.

If the proposals for partial retirement and pensionable re-employment are not implemented, members who claim their 1995 Section benefits will be unable to accrue any further pension benefits in the 2015 Scheme. However, in light of the information above on average pension payments from the NHS Pension Scheme, it is possible that female members may be more likely to need to build up further pension than male members.

Therefore, the department has considered that the new retirement flexibilities are likely to benefit female members. They may also help to reduce the current gap in average pensions for male and female members of the NHS Pension Scheme. If the retirement flexibilities are not implemented and members cannot build up any further pension after taking their 1995 Section benefits, female members may be more likely to feel the impact of this than male members.

Age

The department has also considered the potential impact of the new retirement flexibilities on members in different age cohorts.

As this consultation document sets out, to introduce the new retirement flexibilities DHSC plans to amend the 1995 Section regulations. Because the 1995 Section closed to new members in 2008, the membership of this section is typically older.

Therefore, if the proposed retirement flexibilities are implemented then it would be primarily older members who would benefit from them. The chart below shows the breakdown of all members, including pensioner members with service in the 1995 Section by sex and age group.

Chart 1: age and sex breakdown for members with service in the 1995 Section (source: NHSBSA)

Age	Female	Male
Age 25 to 34	5,287	1,596
Age 35 to 44	169,086	44,087
Age 45 to 54	326,242	98,519
Age 55 to 64	458,672	120,047
Age 65 to 74	324,173	94,321
Age 75 and over	231,146	73,488

If implemented, the new retirement flexibilities will allow older members to retire more flexibly, in a way that supports their work-life balance later in their career. They will also give members the ability to build further pension in the 2015 Scheme after claiming their 1995 Section benefits.

Provisions for partial retirement and pensionable re-employment already exist within the 2008 Section and 2015 Scheme. This means that younger members, who are more likely to be members of the 2008 Section or the 2015 Scheme, will already have access to flexible retirement and would not be negatively impacted by the introduction of this option in the 1995 Section. The 16-hour rule, which the department is proposing to permanently remove, has never been a feature of the 2008 Section or the 2015 Scheme, and so this change should not impact on members of the 2008 Section or 2015 Scheme, who are more likely to be younger.

If the new retirement flexibilities are not implemented then members of the 1995 Section, who are more likely to be older, will not have the same retirement flexibilities when they retire as other members who are more likely to be younger. However, younger members are also more likely to be further from retirement due to their age and it is therefore difficult to draw a direct comparison.

The 1995 Section regulations currently require members to leave service to claim their pension and do not provide late retirement factors. This means that members who claim their pension at a later age do not benefit from doing so through increased pension. Under the current regulations, if members do choose to leave service and crystallise their benefits, then they won’t be able to build up further benefits in the 2015 Scheme. Therefore, retiring at a later age means that some members might miss out on the pension benefits they could have accrued during this time.

The department therefore designed the proposal for partial retirement to address this issue. This approach ensures that no element of members’ benefits is required to be left unclaimed. If the proposal for partial retirement is not implemented, it is possible that this benefit would not arise for some younger members of the 1995 Section.

Furthermore, the proposal to amend the 2008 Section and 2015 Scheme to allow for 100% draw down will ensure that the partial retirement provisions are aligned across the 1995 Section, 2008 Sections and 2015 Scheme. This means that while the new retirement flexibilities will be of most benefit to members of the 1995 Section, they will not benefit from any more flexibility than members of the 2008 Section or the 2015 Scheme, who are likely to be younger.

Special Class (SC) status

Special Class (SC) status is a historic provision awarded to certain professions which, subject to qualifying criteria being met, allows members to retire at age 55 without a reduction to their benefits. It is a continuation of the arrangements that existed before the start of the NHS in 1948 and closed to new members on 6 March 1995. As SC members therefore tend to be older, the department has considered the impact of the new retirement flexibilities on members with SC status as part of the age section of this analysis.

The department’s view is that, given these members already benefit from getting to take their pension early, without actuarial reduction, it is proportionate for them to be subject to abatement under normal circumstances if they decide to make use of the proposed provision for partial retirement or pensionable re-employment between the ages of 55 and 60. This is in line with existing abatement provisions in the 1995 Section, which ensure fairness to all scheme members and protect the public purse from the impact of staff continuing to work full time while in receipt of generous pension benefits.

Because SC status does not exist in the 2008 Section or 2015 Scheme, the implementation of the flexibilities for SC members will not have an impact on members of the 2008 Section and 2015 Scheme, who are more likely to be younger.

Given that the majority of SC members are female, there is also some read across to the analysis on sex. However, as the proposals will apply to SC members regardless of sex, the department has considered that the flexibilities will not impact members beyond the ways outlined above.

Disability

The proposals will apply to all members regardless of disability. However, the department has considered the potential impact of the new retirement flexibilities on members with disabilities.

The 2021 NHS Workforce Disability Equality Standard (WDES) states that 3.7% of staff (52,007) in NHS trusts and foundation trusts in England declared a disability through the NHS Electronic Staff Record (ESR). This is significantly lower than the 21% of working-age adults in the UK who reported having a disability in the Family Resources Survey for financial year 2020 to 2021.

There is some evidence to suggest that disabled people are more likely to work part time. Office for National Statistics (ONS) data on disability and employment shows that working disabled people were more likely to work part time than non-disabled people, with 32% of disabled people working part time in comparison with 21.3% of non-disabled people.

Given that those who work part time are more likely to have accrued smaller pensions and so may be more likely to need accrue further pension after taking their 1995 Section benefits, the department has considered that the proposals are likely to benefit members with disabilities.

For the same reason, the department has considered that if the proposals are not implemented this benefit would not arise for members with disabilities.

Pregnancy and maternity

There is limited data available on this group specifically in relation to the NHS workforce. However, the department has considered the potential impact of the proposals on members who have this protected characteristic as part of our analysis on sex. Women are more likely to have breaks in service during their career which may therefore lead to smaller pension benefit accrual. This measure will allow them to have the benefits of drawing down legacy pension benefits at age 55 or 60, while continuing to build up more pension.

Ethnicity, sexual orientation, religion, marital or civil partnership status, and gender re-assignment

The proposed retirement flexibilities will be available to members regardless of ethnicity, sexual orientation, religion, marital, or civil partnership status and gender. The department does not consider that the proposals raise any specific equality issues for members in relation to these characteristics.

Changes to the pension rules regarding inflation

The proposed changes are primarily a technical amendment to address the CPI disparity between the pension input amount calculation, for AA purposes, and CARE revaluation in both the 2015 Scheme and 1995/2008 Scheme.

The department has considered the impact of the proposed changes and has concluded that they do not directly engage with any protected characteristics. Moreover, to leave the pension rules regarding inflation unchanged may lead to higher tax charges for older members, who have more service in the NHS Pension Scheme and more potential to have higher pensionable earnings. Without the proposed changes these members are more likely to have a tax charge or a higher tax charge when, like in September 2022, inflation is higher than usual.

Changes to scheme access policy

The primary purpose of the proposed changes to NHS Pension Scheme regulations with effect to scheme access policy is to ensure staff working in primary care can continue to access the NHS Pension Scheme.

The department intends that the impact of these changes is that the same staff groups that have previously had access to the NHS Pension Scheme will continue to do so when working for PCNs.

Staff working in or for GP practices, such as GP providers, salaried GPs, GP locums and medical and non-medical practice staff, have previously had access to the NHS Pension Scheme. It is our intention that these groups continue to access the scheme when working in or for PCNs.

The NHS Pension Scheme is a key part of the total reward package for NHS staff, and it is important that the pension scheme is not a barrier to the delivery of services.

The department has regard for ensuring that individuals with protected characteristics are not disproportionately impacted by policy changes. However, the department does not believe that any considerations regarding protected characteristics are engaged by these proposed changes.

Technical updates to member contributions provisions

One respondent raised that an equality assessment should have been developed for member contribution rates that affect different members in different ways. The member contribution structure has been the subject of a previous consultation document. For more information, including the outcome of that consultation and the equality impact assessment, see NHS Pension Scheme: proposed changes to member contributions.

Conclusion and next steps

DHSC is grateful for the responses received during the consultation process, which have provided valuable insight from a wide range of NHS Pension Scheme members, employers and other relevant parties.

Overall, the proposed changes were well received and most of the respondents agreed that they should be implemented. DHSC therefore intends to proceed with the proposals it set out.