Paying extra pension from back pay – explained

How much people pay in pension contributions changes depending on how much pensionable pay they earn. The pension thresholds have never been aligned with NHS pay bands. For example, on 1 st April 2022 pension contributions increased from 7.1% to 9.3% if your earnings passed £26,824, impacting many Band 5 members.

More people have now crossed one of these thresholds. This is because the pay award is late and the Government have chosen not to adjust the pension thresholds in line with the award. So if your pay from April now takes you through a pension contribution threshold you owe the pension scheme for the shortfall in your contributions between 1 st April and 1 st October (e.g. the difference between 7.1% and 9.3% for some Band 5s between April and October).

For many members this shortfall is greater than the amount of back pay they are due and so they actually owe the Government money as a result of the low pay award. This especially impacts members in Band 3, Band 5 and Band 8a, who are most likely to have lost all of their backpay to this issue. We also believe some part time members who’s pensionable pay was close to a pension threshold will be impacted.

The SoR were amongst unions warning Government about this problem, which has also happened in previous years. We are especially concerned that it “targets” people entering their careers, in band 3 and 5, and Band 8a’s who already received the lowest % award. The DHSC undertook to consider changes to the thresholds but have decided not to make any changes for the period between 1 st April and 1 st October 2022. They are saying they will align the contribution thresholds to pay awards in future years, but have not yet said if this will
protect people if future awards are delayed.

This problem isn’t directly related to further contribution rate changes from 1 st October 2022. Separate communications and explanations are being produced to explain these.