Part-time staff whose overtime hours previously didn’t count towards their NHS pension will have the choice of retrospectively being able to convert them into ‘pensionable hours’, under new Government plans.
Until April this year, members of the 2015 NHS Pension scheme working part-time were prevented from treating any additional hours as pensionable – putting them at a disadvantage compared with members in the older 1995 and 2008 schemes, who didn’t face this restriction.
Although this anomaly has been rectified under pension rules going forward, the Department of Health and Social Care (DHSC) has laid out proposals to correct the issue retrospectively.
In its consultation paper launched last week covering the pension scheme in England and Wales, it was suggested that where members didn’t have extra hours pensioned during the period 1 April 2015 and 31 March 2024, they should have the option to ‘elect’ that they now be pensionable’ and pay the contributions they would have owed.
Only additional hours up to a ceiling of contracted full-time hours would be eligible.
The onus would be on employers to identify affected members, inform them about their choices and provide details about the contributions owed – all before 1 October 2025. A staff member would have three months from being notified to make a decision. If none is made the default position would be to keep their hours non-pensionable.
The retrospective amendment would ‘regularise and ensure no disruption’ to members’ accrued rights, the consultation said.
The DHSC consultation also seeks to clarify an important issue on GP and practice manager partners’ annual certificates of pensionable profit, which are used to calculate their pension benefits.
A revised process has been proposed because of tax reforms that came into effect this April, which move the time period that a businesses’ taxable profits are calculated to align with the standard tax year (April to March), rather than their own accounting year-end, which can be whatever date they choose.
The change known as ‘basis period reform’ has a knock on effect on the tax affairs of GP, practice manager or other non-clinical partners, whose surgery prepares accounts for a period that does not coincide with the tax year. It means they will need to apportion profits or losses of the next or previous accounting periods to determine the tax year profits, and could involve having to use a provisional figure in their self-assessment tax return.
Since this tax return information is used for the annual certificate of pensionable profits, it is being proposed that from April 2025, affected partners must also complete a revised certificate that includes the actual figures on pensionable income rather than provisional ones.
The DHSC has said this will affect partners in around 30% of practices in England and Wales.
The Association of Independent Specialist Medical Accountants (AISMA) has welcomed this move saying it had recommended that pension rules be changed to allow for the certificates to be updated.
Deborah Wood, Chairman of AISMA said: ‘We are pleased to see that this recommendation has been carried through to the consultation, which will bring clarity for the way pensionable earnings are calculated in line with taxable profits. The amendment also recognises that not all practices will change their year-end to prepare accounts annually to the 31 March.’
The consultation closes on 4 February 2025, with responses being invited via this online survey.
Other key changes included in the consultation are:
- Allowing those affected by the McCloud remedy to have more flexibility around the choice they make at retirement (called the ‘deferred choice underpin‘) on pension benefits. The DCU enables a member to keep legacy scheme benefits or choose 2015 equivalent scheme benefits for their service during the seven-year period from 1 April 2015 to 31 March 2022. Now the consultation proposes that this ‘deferred choice election’ can be revoked up to two weeks before benefits are paid out. In addition, if a scheme member who has made a deferred choice election dies more than two weeks before first the benefit payments are due, that decision should lapse, the DHSC has said. This would mean the member’s ‘designated person’ (a surviving adult dependant, for example) could then make the decision on benefits to be paid.
- A lowering of pension contribution rates for those on reduced pay such as when on maternity, paternity, parental, adoption, carers’ or sickness leave. Currently, members on certain types of leave (as mentioned) have to pay the pension contribution rate based on their full pay, even when not receiving that. The DHSC wants to change this so the contribution rate is adjusted according to actual, reduced pay. This wouldn’t affect a person’s pension benefits since these would continue to build up ‘as if they are in receipt of their full pay’, the consultation says. It would simply reduce the amount some members pay into the pension scheme. Since this arrangement would be backdated to 1 October 2022, some people could receive a refund in contributions.
