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Consultation leads to greater protection for lower paid

Over half a million extra staff will not need to pay any extra into their pensions next year, the Department of Health announced today.

Following a consultation, the threshold for freezing pension contributions will be raised from 拢15,000 to 拢26,557 for 2012/13, affecting 630,000 staff in the NHS in total - almost half of all those in the NHS Pension Scheme.

This change will protect the lower paid in the NHS.听 The increases in employee contributions have been distributed among higher earners where they will be significantly offset by the benefit of tax relief for higher rate taxpayers.听 So someone earning 拢60,000 would no longer contribute less as a proportion of their salary towards their pension after tax relief than someone earning 拢15,000.

Health Secretary Andrew Lansley said:

鈥淗aving listened to staff and stakeholders, we have improved our proposals so that an extra 530,000 NHS staff will not pay any more into their pensions next year.

鈥淧ublic service pensions will remain among the very best available, providing a guaranteed pension level for all employees - today very few private sector employers still offer this.听 But people are living longer and pensions are costing taxpayers more and more every year.

鈥淭hese changes alone will not be enough to ensure that NHS pensions are affordable in the long term.听 We are continuing to discuss wider changes to pensions with Trades Unions and hope to reach an agreement by the end of the year.听 But we are clear that people will also keep whatever they have already earned.听 We will honour in full benefits earned through years of service - which means little, if any, change for those close to retirement.鈥�

Examples of how the proposed changes could affect individual members include:

As a healthcare assistant working full-time earning 拢15,000 a year:
鈥⑻齓ou would pay no extra for your pension.
鈥⑻齀n 2012-13 you would continue to contribute 5% compared to the current employer contribution of 14%.
鈥⑻齌his means that for every 拢1 you contribute, the employer contributes 拢2.80. For your overall yearly contribution of 拢750, your employer pays 拢2,100.

As a nurse working full-time earning 拢25,000:
鈥⑻齓ou would pay no extra for your pension.
鈥⑻齀n 2012-13 you would contribute 6.5%, compared to the current employer contribution of 14%.
鈥⑻齌his means that for every 拢1 you contribute, the employer contributes 拢2.16. For your overall yearly contribution of 拢1,625, your employer will pay 拢3,500.

As a scientist working full-time earning 拢30,000:
鈥⑻齀n 2012-13 you would contribute 8%, compared to the current employer contribution of 14%.
鈥⑻齌his means that for every 拢1 you contribute, the employer contributes 拢1.75. For your overall yearly contribution of 拢2,400, your employer will pay 拢4,200.

As a manager working full-time earning 拢60,000:
鈥⑻齀n 2012-13 you would contribute 8.9%, compared to the current employer contribution of 14%.
鈥⑻齌his means that for every 拢1 you contribute, the employer contributes 拢1.57. For your overall yearly contribution of 拢5,340, your employer will pay 拢8,400.

As a consultant earning 拢130,000:
鈥⑻齀n 2012-13 you would contribute 10.9%, compared to the current employer contribution of 14%.
鈥⑻齌his means that for every 拢1 you contribute, the employer contributes 拢1.28. For your overall yearly contribution of 拢14,170, your employer will pay 拢18,200.

Proposals for employee pension contributions in 2013/14 and 2014/15 and other changes following the Hutton review will be subject of further discussion with Trades Unions.

Notes to Editors

1.听The new breakdown of pension contributions are:

_2012/13 employee contributions__ before tax relief (gross)__ _

Full-time 2010/11 pay** ** 2010/11 contribution **rate **(gross)** **2012/13** **contribution **rate **(gross)** **Contribution **rate **increase **(percentage points)**

Up to 拢15,000 5% 5% 0

拢15,001 to 拢21,175 5% 5% 0

拢21,176 to 拢26,557 6.5% 6.5% 0

拢26,558 to 拢48,982 6.5% 8% 1.5

拢48,983 to 拢69,931 6.5% 8.9% 2.4

拢69,932 to 拢110,273 7.5% 9.9% 2.4

Over 拢110,273 8.5% 10.9% 2.4

_ _

2012/13 contributions__ after__ tax relief__ (net)__

Full-time 2010/11 pay** **2010/11 contribution **rate **net of tax relief** **2012/13 contribution **rate **net of tax relief** **Net听 contribution **rate **increase **(percentage points)** Additional cost per month (拢)**

拢10,000 4% 4% 0 0

拢15,000 4% 4% 0 0

拢20,000 4% 4% 0 0

拢25,000 5.2% 5.2% 0 0

拢30,000 5.2% 6.4% 1.2 30

拢40,000 5.2% 6.4% 1.2 40

拢60,000 3.9% 5.34% 1.44 72

拢80,000 4.5% 5.94% 1.44 96

拢130,000 5.1% 6.54% 1.44 156

听

听

2.听These changes will still deliver the same overall level of savings of 拢530m in 2012/13.

3.听For media enquiries only, please contact the DH Press Office on 020 7210 5221.