Phase 2 of new contribution structure proposed from 1 October 2024

The Scottish Public Pensions Agency (SPPA), acting on behalf of Scottish Ministers, has set out proposals for a revised member contribution structure for the NHS Pension Scheme (Scotland), to be introduced in two phases: the first from October 2023 and the second from October 2024¹. The consultation on the proposals ran for twelve weeks from Tuesday 23 May to Tuesday 15 August 2023¹.

The scheme currently requires employers to contribute 20.9% of each member's pensionable pay, while members are required collectively to contribute 9.8% across the whole scheme membership, known as the member contribution "yield"¹. The document states 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 consultation followed 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 Scottish Government response 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 percentage, and committed to consult further on rebalancing the structure and on whether implementation should be phased¹.

The proposed structure replaces the existing contribution table with two new tables used to assess members' contribution rates from 1 October 2023¹. The tiers and rates set out in the document are:

The document also lists a Tier 1 rate of 5.8% for pay up to £13,330¹. The consultation 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 also covers a draft Scottish Statutory Instrument allowing members who take benefits in the 1995 Section to return to work and build further pension in the 2015 Scheme, the permanent removal of the 16-hour rule, and changes to scheme rules on inflation¹. 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.

Why it matters for households

The proposals affect members of the NHS Scotland Pension Scheme, whose contribution rate is set by their whole-time equivalent pensionable pay rather than their actual pay¹. Under the proposed tables, the highest tier would reduce to 12.7% for pay from £66,018 to £92,423, with rates of 13.7% and 14.7% above that¹. The document states that abatement for Special Class Status holders in the 1995 Section of the scheme would remain suspended until 31 March 2025¹. The consultation also addresses the treatment of members who take benefits in the 1995 Section and return to work, and the removal of the 16-hour rule¹.

What happens next

The consultation closed on Tuesday 15 August 2023¹. The document sets out a first phase from October 2023 and a second phase from October 2024¹. No further implementation dates beyond those phases are given in the document.