New tiered contribution rates proposed from 1 October 2023

The Scottish Public Pensions Agency (SPPA), acting on behalf of Scottish Ministers, has set out draft regulations that would replace the existing member contribution table in the NHS Scotland Pension Scheme with two new tables used to assess members' contribution rates from 1 October 2023¹. The proposals form the first phase of a phased introduction of contribution changes, with the first phase from October 2023 and the second phase from October 2024¹.

The consultation ran for twelve weeks, commencing on Tuesday 23 May and ending on Tuesday 15 August 2023¹. It follows an initial consultation run by SPPA between 24 January 2022 and 27 February 2022, in which the majority of respondents rejected proposals to flatten the tiered contribution structure, and implementation of all proposals was postponed because of concerns about cost-of-living pressures on NHS staff¹.

The scheme's current contribution structure has seven tiers, ranging from 5.2% for whole-time equivalent pay up to £21,614 to 14.7% for pay of £123,148 and above¹. The draft regulations propose replacing that table with two new tables¹. The document also sets out a first tier under the revised structure of 5.8% for pay up to £13,330¹.

The document states the scheme's cost-sharing position: employers contribute 20.9% of each member's pensionable pay towards the cost of scheme benefits, while members are required collectively to contribute 9.8% across the whole scheme membership, known as the member contribution yield¹. It records that the yield rose from 6.6% to the present 9.8%, phased in over the three years from 2012/2013 to 2014/2015, and that over the last three years the contribution yield from the scheme has continued to drop from 9.6% to around 9.3%¹. The employer contribution rate was set at 20.9% in the context of a lower expected employee contribution yield of 9.6% up to March 2023¹.

The draft amending instrument attached to the consultation also covers other measures. It would allow members who take their benefits in the 1995 Section to return to work and build further pension in the 2015 Scheme, permanently remove the 16-hour rule, and make changes to scheme rules regarding inflation, as confirmed in a consultation response published on 28 March 2023¹. It would retrospectively extend the suspension of retire and return restrictions, as set out in a consultation response published on 21 October 2022¹. Abatement for Special Class Status holders in the 1995 Section would remain suspended until 31 March 2025¹.

The document also covers miscellaneous amendments, including changes to final pay control regulations in the 1995 Section, changes to opt out rules for Practitioner members, and small amendments to the definition of a Practitioner and rules around pensionable pay¹. It notes that the final salary NHSPS(S) closed to further accrual from 1 April 2022, with all members moved into the 2015 CARE scheme for future service from that point¹. The final pay control policy was introduced from 1 April 2014, and the NHS Pension Scheme in England and Wales confirmed changes to the final pay control rules from 1 July 2021¹.

Why it matters for households

The proposals concern the contributions paid by members of the NHS Pension Scheme (Scotland), which are deducted from pensionable pay. Under the current structure, the rate a member pays depends on their notional whole-time equivalent pensionable earnings, not their actual earnings¹. The draft regulations would replace the existing table with two new tables used to assess contribution rates from 1 October 2023, with a second phase from October 2024¹. The document states that the Scottish Government response to the initial consultation confirmed the intention to move to using actual rates of pensionable pay to determine members' contribution rates and to increase contribution thresholds annually in line with a single annual pay award percentage¹. The consultation also sought views on whether implementation should be phased¹.

What happens next

The consultation closed on 15 August 2023¹. The document does not state when the regulations would be laid or when a response to this consultation would be published; that has not been reported¹.