11.11.16
New pensions levy will cost NHS organisations £35m a year
Under new DH plans NHS organisations will soon have to take responsibility for the funding administration of their employees’ pensions from next April, in a move that could cost £35m a year.
The DH has opened a consultation into proposals to introduce an NHS Pension Scheme administration levy. The scheme is currently administered by the NHS Business Services Authority and funded by the department.
However, the department said employers should pay the cost of the administration, which is “normal practice” in the wider pensions industry.
The consultation is open until 9 January 2017, but the department noted that it “intends to introduce” the levy from 1 April.
According to the department’s own figures, the cost of administering the scheme for the next two years will be £35m annually. This will translate into a levy rate of 0.08% of a member's annual pensionable earnings for each of the pension scheme’s 1.5 million members.
The DH said that the rate will be fixed until 31 March 2019 and reviewed by the department every four years. It added that it could reduce at the next review because of cost savings and efficiencies from the Business Services Authority programme.
Current participants in the scheme, who will have to pay the levy, include 7,630 GP practices and 281 trusts.
The department explained that it made sense to introduce the fee as a percentage of earnings, rather than a fixed fee, to avoid disadvantaging smaller employers such as GP practices. It recommended adding the fee to existing monthly employer contributions as the simplest way to administer it.
The additional cost comes as NHS providers are struggling to deliver £22bn of efficiency savings by 2020. According to the latest figures, 153 trusts are in deficit with a total in-year deficit of £461m. In addition, BMA research has found that 10% of GP practices are financially unsustainable.
2.45pm UPDATE
An NHS Confederation spokesperson said: "The approach adopted effectively shunts the costs of the new pension levy to employers already struggling to balance the books. Once again, as with increases to CQC fees, providers of direct patient care will carry most of the financial burden at a time when we need to be maximising investment in frontline care."
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