01/04/2025
Various amendments to the NHS Pension Scheme (“NHSPS”) are being introduced from the beginning of
April 2025. This includes changes to the pensionable treatment of additional hours worked by part-time staff
and clarification surrounding the calculation of member contribution rates for individuals in receipt of reduced
pay. In this article, we explore these amendments in detail alongside other relevant changes and what this
may mean for employers.
Pensionability of additional hours for members who work part-time
The NHSPS Regulations 2015 (“2015 Regulations”) provide that overtime is non-pensionable. For part-time staff this has historically meant that additional hours worked up to their whole time equivalent hours (“WTE”) are pensionable but any hours worked in excess of this is overtime and is non-pensionable. However, the wording in the 2015 Regulations, prior to the current amendments, had resulted in additional hours of those working part-time being considered non-pensionable. Unsurprisingly administrative practice and scheme literature had typically diverged from this and in reality, many of these additional hours have been treated as pensionable. Amendments to the 2015 Regulations in 2024 provided that additional hours up to WTE would be pensionable in the future, but omitted to apply this retrospectively. The current amendments therefore seek to clarify this position to reflect longstanding policy intention and practice. This will mean that part-time staff who worked additional hours between 1 April 2015 and 31 March 2024 will have the option to have their additional hours treated as pensionable.
If the affected members chose to have these additional hours treated as pensionable, they will be required to make payment of backdated member contributions. NHSBSA will review each case individually to provide workable solutions based on the member’s circumstances. The government suggests that possible approaches to support members include utilising payment plans and / or allowing backdated payments to be made over longer periods.
However, it is not clear how the payment of backdated contributions will be dealt with in situations where members have left employment, are off on long-term sickness, or are no longer members of the NHSPS. Equally, the government’s response does not explore the practicalities of implementing the changes. For example, where a member decides to make backdated payments, it may be necessary to give effect to this long term arrangement by amendment to their employment contract. Furthermore, employers will need to communicate with affected members and will have until 1 January 2026 to notify them that they are able to retrospectively elect to have their additional hours treated as pensionable. Employers should therefore begin reviewing and identifying affected members and consider how they intend to effectively communicate with them.
Method for calculating member contributions on reduced pay
Amendments have also been made to clarify how member contribution rates are determined in instances where the member is on reduced pay (due to certain types of authorised absence). As it currently stands, member contribution rates are calculated by reference to actual pensionable pay but, prior to 1 October 2022, contribution rates were based on WTE. Since the 1 October 2022 changes, there has been some ambiguity surrounding how member contribution rates are calculated for those in receipt of reduced pay. It has been noted that since 1 October 2022 some employers have been calculating member contribution rates based on actual reduced pay, whilst others have continued to calculate this based on what the member would have been paid if they were on full pay (otherwise known as deemed pay). Where contribution calculations are being determined by reference to the member’s actual reduced pensionable pay, no further action is required. However, where deemed pay has been used, payroll providers will need to take steps to backdate the position to reflect the changes from 1 October 2022. Employers should confirm with their payroll providers whether these contributions rates have been administered correctly.
Where members will be impacted, clear communication is pivotal. Plainly setting out what the changes mean, what calculations will be made, and what the member can expect to receive will provide certainty and clarity and will ultimately reduce the risk of delay and disruption to the implementation of the changes. It is also important to note that these changes do not affect benefit accrual and benefits will continue to accrue as if the member was in receipt of full pay. The change only impacts the member contribution rate and ultimately the member contributions payable where members are in receipt of reduced pay.
Revocation or lapsing of deferred McCloud remedy choices
As part of the amendments, members will also be able to revoke their McCloud deferred choice election up to 2 weeks before their benefits are put into payment and if a member dies more than 2 weeks before their first benefit payment is due, this will cause their deferred choice election to lapse.
Qualifying service
Previously, deferred members of the 1995 Section who returned to NHS employment between 1 October 2008 and 31 March 2015 after a break of 5 years or more could join the 2008 Section and their previous qualifying service in the 1995 section would count as qualifying service in the 2008 section. However, when changes were made in 2015 on the opening of the 2015 Scheme this provision was erroneously removed, the amendments therefore seek to retrospectively remedy this. Employers should consider whether wider communications to members are required.
Neonatal Care Leave and Parental Bereavement Leave
Neonatal care leave will be included in the 2015 Regulations alongside references to other types of authorised leave. This will allow members on neonatal care leave to continue to build up pension benefits in the NHSPS.
The amendments also insert cross references to parental bereavement leave into the NHSPS Regulations 2008 retrospectively (these were erroneously omitted in a prior amendment). This change will ensure that members on parental bereavement leave are treated in the same way as members on other types of leave.
Next steps
It is highly likely that some of the changes outlined above may require amendments to contracts of employment, updated internal policy guidance, and the preparation various communications to members. If you require any support in respect of any of the amendments, or if you require assistance with understanding the possible implications please get in contact with the pensions team here at Bevan Brittan. We have extensive experience of working with a range of employers with employees in the NHSPS.
