The government has confirmed that it will proceed to implement significant changes to the NHS Pension Scheme following a consultation in December 2022. The changes include allowing for pensionable re-employment, partial retirement, and removing the 16 hour rule, with some changes expected as early as the 1 April 2023. These sit alongside further changes addressing inflation and access to the NHS Pension Scheme.
The government intends to implement the three elements the DHSC proposed in the consultation.
- Pensionable re-employment: to allow pensioner members of the 1995 Section under the National Health Service Pension Scheme Regulations 1995 (the 1995 Regulations) to join the 2015 section of the Scheme under the National Health Service Pension Scheme Regulations 2015 (the 2015 Regulations) with the aim of removing a significant barrier to staff returning to work after retiring or to continue working once they have claimed their pension;
- Partial Retirement: to allow members to partially retire with a 10% reduction in pensionable pay and an alternative option for the members who do not want to reduce their hours to ‘retire and return.’ The DHSC intends to implement this change from 1 October 2023 to allow employers to prepare and encourage a smooth transition. Given the high level of interest in this proposal following the consultation, it is likely that significant preparation will be needed before its introduction in October this year;
- Removing the 16 Hour Rule: under the 1995 Regulations, members who take their pension benefits and then return to work are limited to work a maximum of 16 hours per week in their first month back. From the 1 April 2023 this requirement will be permanently removed.
The consultation also made two proposals to address inflation. Firstly, to change the yearly in-service revaluation date under the 1995 Regulations from 1 April 2023 to 6 April 2023. Secondly, to move the date dynamising factors are applied to the 1995 Regulations and 2008 sections of the Scheme practitioner pensionable earnings yearly from 1 April to 6 April each year. In light of the overall positive response to the above, the DHSC will proceed with the changes effective from 1 April 2023. However, the DHSC also confirmed that following concerns raised by various organisations over implications for the tax year 2022 to 2023, (including the impact on those retiring that year and receiving the appropriate revaluation) the tax year 2022 to 2023 will be a transitional tax year as to facilitate the change to the scheme revaluation date.
The DHSC changes will also provide permanent access to the NHS Pension Scheme to ‘qualifying’ primary care networks where previously, staff could not access the NHS Pension Scheme.
Many respondents also requested another change to increase the annual allowance and lifetime allowance limits. This hasn’t yet been incorporated into legislation, but there is speculation that this could be announced in this years budget.
If you would like more information on how to take advantage of any of the above changes, please contact Nigel Bolton, Head of Pensions.
This article was co-written by Sadie Goodrum, Trainee Solicitor.