GPs with pensionable earnings of £75,633 and above per year will have their NHS pension contributions rates reduced from April 2024.
New changes to NHS Pension Scheme contribution rates from April next year have been confirmed by the Government.
The contribution structure is currently being reformed following a comprehensive review in 2021.
The number of contribution ‘tiers’ – which specify how much of a pension contribution GPs pay depending on their salary levels – have been reduced from the previous seven to six in a two-step process.
As part of the review, the actual amount that GPs pay in contributions at each tier is also changing.
Now the Government has confirmed the member contribution threshold structure which will come into force from 1 April 2024 to 31 March 2028, as part of a consultation.
The changes mean that members on the whole move closer to paying the required 9.8% yield, but lower earners ‘continue to benefit from a reduced rate in order to encourage participation’ and that the gaps between contribution tiers are lessened.
And members with pensionable earnings of more than £75,633 per year will have their contribution rate cut from 13.5% to 12.5%.
The implementation of the updated member contribution structure is not subject to the current consultation, as it has already been agreed, but the Government is seeking views on other reforms, including the level of employer contributions paid to staff members’ NHS pension pots rising from April 2024.
From 1 October last year, the DHSC 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, NHS Pension Scheme: proposed changes to member contributions.
At the time, the Government agreed that the reforms to member contributions would be implemented over two phases ‘to give members time to adjust to the changes’.
In the first stage, which happened in October last year, the tiers increased to 11 before being reduced to the final six. The member contributions also made their first change from 1 October 2022.
In May, the contribution thresholds in England and Wales for 2023/24 were revised following responses to the consultation that raised concerns about the calculations.
Earlier this year, changes were made to the GP pension scheme as part of the Spring budget, aimed at retaining doctors.
The changes were:
- The Lifetime Allowance charge will be removed before being abolished altogether, ‘removing barriers to remaining in work and simplifying the tax system by taking thousands out of the complexity of pension tax.’
- The Annual Allowance will be increased from £40,000 to £60,000, in order to ‘incentivise highly-skilled workers to remain in the labour market.’
According to new data analysis, the number of NHS staff members opting out of their pension scheme due to lifetime or annual allowance tax reasons has almost halved following changes in the Spring Budget.
The changes in full:
Proposed NHS Pension Scheme member contribution threshold structure from 1 April 2024 to 31 March 2028 (before any future increases in thresholds in those years)
| Pensionable earnings thresholds | Contribution rate from 1 April 2024 |
|---|---|
| Up to £13,246 | 5.2% |
| £13,247 to £25,146 | 6.5% |
| £25,147 to £30,638 | 8.3% |
| £30,639 to £45,996 | 9.8% |
| £45,997 to £58,972 | 10.7% |
| £58,973 and above | 12.5% |
Member contribution structure since 1 October 2022
| Tier | Pensionable earnings (rounded down to the nearest pound) | Contribution rate from 1 April 2023 |
|---|---|---|
| 1 | Up to £13,246 | 5.1% |
| 2 | £13,247 to £17,673 | 5.7% |
| 3 | £17,674 to £24,022 | 6.1% |
| 4 | £24,023 to £25,146 | 6.8% |
| 5 | £25,147 to £29,635 | 7.7% |
| 6 | £29,636 to £30,638 | 8.8% |
| 7 | £30,639 to £45,996 | 9.8% |
| 8 | £45,997 to £51,708 | 10.0% |
| 9 | £51,709 to £58,972 | 11.6% |
| 10 | £58,973 to £75,632 | 12.5% |
| 11 | £75,633 and above | 13.5% |
Source: DHSC
Well, I dunno, but if it was me organising this, I think I would have used slightly more, smaller, steps, and a lot rounder figures! but who would want it simplified?
Dear All,
Oh dear guys read it all in full, you are being hoodwinked. As partners you’ll personally be paying less “employee” contributions (so more profit to be taxed) but as employers of other employees your employer contributions to their pensions will be going up. Which do you think will be larger, the 1% reduction in partner’s personal pensions earnings contributions or the 1% increase across the board increase in the employers pension contributions you’ll have to fund from profits?
Regards
Paul C