Govt fixes NHS scheme rules to avoid hefty retirement bills

“Similarly, there are now a number of practice managers who are also partners in their GP practice,” he continued. 

“This means their pensionable pay fluctuates each year, depending on the profitability of the GP practice — however, the majority still have final salary-linked pensions, so if the profits have a spike, then not only can the practice manager have an annual allowance charge, but it can trigger a final pay control charge if the pay forms part of their final pension award.”

The government’s response to the consultation specifies a number of additional exemptions to be included, clarifying, for instance, which pay increases are accepted to be outside an employer's control.

Increases approved by the secretary of state are to be spared, as well as those that come as part of “nationally agreed contracts and framework agreements”, those received as a result of a National Clinical Excellence Award, and those that come about following a promotion “on the basis of fair and open competition”, the response stated.

Rebecca Smith, managing director of NHS Employers, part of the NHS Confederation, said employers “agree that the changes, now confirmed in the outcome of the consultation, will help to make sure employers are only charged where they give a pay increase that is within the aim of the final pay control policy".

However, Moira Warner, senior intermediary development and technical manager at Royal London, said that, though the changes were “entirely reasonable”, it seemed "perverse that the NHS final pay controls have been reviewed by government due to concerns raised by the scheme administrator in 2018 that the volume of these charges was creating an 'administrative burden'. It’s a little like the tail wagging the policy dog”.

“Otherwise, whether the change in the threshold where these controls apply from CPI plus 4.5 per cent to CPI plus 7 per cent is reasonable depends on our sense of perspective. In the current environment, CPI plus 4.5 per cent is probably already a level of pay-rise most workers can only dream of, but would be much more normal in a higher interest rate environment,” she said. 

“Scheme regulations are made for the longer term, not just the here and now. But whether the level is set at CPI plus 4.5 per cent or CPI plus 7 per cent, it’s important that there’s visibility of these employer final pay control charges to the taxpayers who ultimately underwrite them.”