A little trouble understanding NHS contribution percentage

Workerdrone

A colleague of my wife's is having a whinge. She is a band 6 and her contribution has gone up from 9.3% to 12.5%.

I had a look at my wife's payslip and up until August she too was paying 9.3% and is now on 12.5%. Now here's the thing. I don't mind at all. The NHS pension is brilliant value for money but I just wanted to understand the calculation. The following link from the NHS 

https://www.nhsbsa.nhs.uk/member-hub/cost-being-scheme 

Shows that to be paying 12.5% your whole time equivalent wage needs to be between £47,846 and £70630.99

I understand that enhanced hours are included in this figure. What I don't understand is how it works in my wife's case. I need to get to grips with it so I can help her colleague understand.

So Wife is part time band 7. her NHS payslip shows Sal/Wage £40057 and a column for PT Sal/Wage £36852.44

So £36852.44 is her basic. On top of that she earns enhancements for night shift/weekend work etc.

If I look at her Gross Pay at the bottom of the payslip it shows as £27862.91 at this point in the tax year (October). So to my simple laymen's mind she has earned (including pensionable enhanced earning) £27862.91 for this tax year.

To me this is nowhere near the £47,846. Even if we extend her basic earnings up until April 2022, she will have earned £36852.44 basic. She would need to earn a total of £10993.46 in enhancements in the year to take her up to the limit.

Surely the 12.5% can't be made on the basis of an estimate that she will breach the threshold by doing future enhanced hours this year.

Anyone in the know who could set me straight.

Andy_L

She is part time. Contribution Tiers are based on the full time salary

Dazed_and_C0nfused

You can't look at what she earns, it's the whole time equivalent that counts.

Neither band 6 or 7 is £47k but £27,862.91 by October is getting close to £48k annually

Sounds like her enhanced earnings are taking her into the next band.

Workerdrone

Dazed_and_C0nfused said:

You can't look at what she earns, it's the whole time equivalent that counts.

Neither band 6 or 7 is £47k but £27,862.91 by October is getting close to £48k.

Sounds like her enhanced earnings are taking her into the next band.

Its becoming a little clearer in my murky mind. What I don't understand is how/do they effectively forecast it forward. Say for example she stopped doing any enhancements (pretty unlikely). So for the next 6 months until April she earned only basic. So she's earned £27861.92 so far then earns another £18427.22 basic pay only for the remainder of the year. That takes her to £46288.14 which would be under the £47846 limit.

So is there some forward estimate of what earnings will be for the full year which pushes her into the 12.5% band?

Sorry, I just need to really get my head around it. 

Moonwolf

It is worth noting that there is currently a consultation on changes to NHS pension contribution rates.  This won’t change benefits. Part of the proposal is to have rates based on actual salary so part timers will pay less. https://www.gov.uk/government/consultations/nhs-pension-scheme-proposed-changes-to-member-contributions/nhs-pension-scheme-proposed-changes-to-member-contributions-from-1-april-2022

Dazed_and_C0nfused

Try having a read of the document

Cost and contributions from 1 April 2015 to 31 March 2021 (officer) (PDF: 266KB)

On the page you included a link to. 

Failing that I think it would have to be queried with NHS payroll.

Workerdrone

Moonwolf said:

It is worth noting that there is currently a consultation on changes to NHS pension contribution rates.  This won’t change benefits. Part of the proposal is to have rates based on actual salary so part timers will pay less. https://www.gov.uk/government/consultations/nhs-pension-scheme-proposed-changes-to-member-contributions/nhs-pension-scheme-proposed-changes-to-member-contributions-from-1-april-2022

Thanks that's useful, and it seems a sensible move

MX5huggy

I guess they just take her monthly and see if she is on course to hit £47846, looks to me that she is going to be £80 short, but they probably prefer to take 12.5% on boarder line cases and give a refund than take 9.3% then have to take 3.2% extra on the last month, £1500 in one lump would have much flak. 

Your wife should really ensure she does not slip into the higher band. That £1500 of contributions could be worth next to nothing. 

It’s a really crap system, it should be banded like tax thresholds. 

Workerdrone

MX5huggy said:

I guess they just take her monthly and see if she is on course to hit £47846, looks to me that she is going to be £80 short, but they probably prefer to take 12.5% on boarder line cases and give a refund than take 9.3% then have to take 3.2% extra on the last month, £1500 in one lump would have much flak. 

Your wife should really ensure she does not slip into the higher band. That £1500 of contributions could be worth next to nothing. 

It’s a really crap system, it should be banded like tax thresholds. 

It seems my wife's friends query has highlighted an interesting point. My wife is likely to continue as a band 7, and is likely to go up the payscale. From an earlier posters contribution it seems moves are afoot to address the disparity where part time employees are moved into the 12.5% band. I feel my wife as she progresses will for the first time just tip into the 40% tax bracket.

As you have suggested it seems she will gain marginal benefit from the 3.2% extra she is paying, so it strikes me I should at least be looking to see if there is a better use for the money.

I was wondering about an NHS MPAVC. I assume the effect of the MPAVC would be a bit like a salary sacrifice arrangement where it would reduce her pensionable pay, hence moving her back into the 9.3% pension bracket. I also assume that if she tips into the 40% tax bracket her contributions would then attract 40% tax relief. I am wrong in my though process?

Andy_L

MX5huggy said:

I guess they just take her monthly and see if she is on course to hit £47846, looks to me that she is going to be £80 short, but they probably prefer to take 12.5% on boarder line cases and give a refund than take 9.3% then have to take 3.2% extra on the last month, £1500 in one lump would have much flak. 

Your wife should really ensure she does not slip into the higher band. That £1500 of contributions could be worth next to nothing. 

It’s a really crap system, it should be banded like tax thresholds. 

Or the same contribution rate for all. As it's no longer final salary I don't see any compelling reason for tiered contributions anymore

Clare43

I’ve recently asked NHS pensions about contributions and other things.  They told me that contributions are actually based on the whole time equivalent pensionable pay in the previous financial year.  Maybe this helps you work it out.  They also said the contribution tier doesn’t affect how much pension you get.