Pensions  

Members on lower incomes to pay more in NHS pensions overhaul

“This is more appropriate in view of the career average revalued earnings scheme accrual method [introduced in 2015], and means that high earners would pay lower contribution rates.

“Rebalancing the rates will mean that lower earners will be asked to contribute more than they currently do. The department therefore proposes that adjustments to contribution tiers are done gradually to dampen the impact on take-home pay for staff and mitigate the risk of staff leaving the scheme on grounds of affordability,” it said.

The proposals would reduce the number of tiers from seven to six. Under the revised system, staff earning up to £13,231 would be placed in tier one and pay 5.1 per cent from April 2022, rising to 5.2 per cent in 2023, up from 5 per cent at present.

Tier two encompasses those earning between £13,232 and £22,548, paying 6.5 per cent.

The highest tier, tier six, would encompass those earning upwards of £54,764, and members in this tier would see their contributions rates cut by 2 percentage points, from 14.5 per cent to 12.5 per cent from 2023.

For example, a consultant earning £114,003 would pay £85 less a month, after tax relief, but would still be paying £160 a month more than on the average 9.8 per cent rate.

The government said it would phase in these changes over two years to minimise opt-outs and reduce the impact on take-home pay.

benjamin.mercer@ft.com, additional reporting by amy.austin@ft.com