Employer contribution rate arrangements to remain for 2020/21
The NHS Pension Scheme employer contribution rate increased on 1 April 2019 from 14.38% to 20.68%. The Department of Health and Social Care’s consultation response announcing the rise, published in March 2019, confirmed the available funding to meet the associated costs and that a transitional arrangement would operate in 2019/20 where employers in the Scheme would continue to pay 14.38%.
Although our expectation was that this arrangement would only be in place for 2019/20, we can now confirm that the transitional approach will continue in 2020/21 in order to maximise stability for employers in the sector.
This means that for 2020/21, all employers should continue to pay 14.38% in employer contributions under their normal monthly payment process to the NHS Pension Scheme. NHS England will continue to make payments to the scheme for organisations covered by the commitment to the NHS.
As referenced in the consultation response, the 6.3% increase was split into two elements: i) a 2.5% foreseen element, which was the increase expected at the time of Budget 2016, and ii) an unforeseen element accounting for the remaining 3.8%. Organisations outside the scope of the commitment to the NHS will receive funding for the unforeseen costs and will have to manage the impact of the foreseen element, in a continuation of the 2019/20 arrangement.
For 2020/21, non-NHSE ALBs will continue to receive the same available funding support. However, there will be an adjustment to the administrative arrangements which will be communicated directly to relevant organisations.
Pensions Revaluation Organisation Operational Arrangements
In 2019/20, the Department for Health and Social Care (DHSC), NHS England and Improvement (NHSE&I) and the Pension Scheme administrator, the NHS Business Services Authority (BSA), agreed a transitional arrangement to distribute the pensions revaluation funding following an increase to the employer contribution rate from 14.38% (inclusive of the 0.08% admin levy) to 20.68% from 1 April 2019.
Although our expectation was that this arrangement would only be in place for 2019/20, we can confirm that the transitional approach will continue through 2020/21 in order to maximise stability for employers in the sector.
As in 2019/20, funding will be available for 2020/21 to support employers with either the full amount or the unforeseen costs being funded, depending on employer type. The details of the funding arrangements are described below.
Funding arrangements for organisations within full funding scope
Employers that receive funding allocations from the budget set out in NHS England’s mandate are in scope of the commitment to the NHS. Similarly, non-NHS organisations that receive funding from the NHS for the delivery of NHS services are in scope. These organisations include:
- NHS Trusts and Foundation Trusts
- Clinical Commissioning Groups (CCGs)
- Commissioning Support Units (CSUs)
- GPs and GP Practice staff
- Dentists
- Independent Providers
- Social Enterprises
- New Fair Deal
- Charities and Hospices
For these organisations there will be no change to the 2019/20 transitional arrangements in 2020/21. These organisations should continue to pay 14.38% in employer contributions under their normal monthly payment process. The outstanding 6.3% will continue to be paid centrally by NHS England.
Funding arrangements for organisations outside full funding scope
The increase of 6.3% was split into two types of payments in the consultation response:
- 3.8% as unforeseen costs,
- 2.5% as foreseen costs, as initially expected and referenced in Budget 2016.
Organisations outside the scope of the commitment to the NHS will continue to receive funding for the unforeseen costs and will have to manage the impact of the foreseen element. This principally applies to:
- Non-NHSE Arm’s Length Bodies of DHSC,
- Local Authorities and County Councils,
- University Medical Schools.
The specific contribution from university medical schools will remain as advised by the BSA in 2019/20.
These organisations should continue to pay 14.38% in employer contributions under their normal monthly payment process.
For Local Authorities and University Medical Schools, the Department of Health and Social Care will continue to make payments to the Scheme for the unforeseen element (3.8%) and the scheme administrators will collect the outstanding element directly from employers. In line with the consultation response, for University Medical Schools, this will continue to reflect that a combination of both NHS and other funding sources (including non-NHS) usually contributes towards overall costs.
For all ALBs excluding NHS England, there will be a change to the administrative arrangement for 2020/21, as the Department will make the funding for the unforeseen element (3.8%) available to these organisations and the NHS Business Services Authority will collect the full amount (6.3%) directly from the organisations.