Paul Carberry
Partner
Article
14
We look at the provisions and restrictions for Independent Providers in more detail and the new financial controls placed on all employers in the NHS Pension Scheme.
The National Health Service Pension Scheme (Amendment) Regulations 2014 (the Amendment Regulations) further amend the National Health Service Pension Scheme Regulations 1995 (SI 1995/300) (the 1995 Regulations) and the National Health Service Pension Scheme Regulations 2008 (SI 2008/653) (the 2008 Regulations) to, amongst other changes[1], introduce the new scheme access requirements for independent providers of NHS clinical services.
From 1 April, an Independent Provider (IP) is, in NHS pension terms, an organisation that holds a Standard NHS contract, a contract as an Alternative Provider of Medical Services ("APMS") or public health related local authority NHS contract and who did not previously qualify as an employing authority.
Previously only healthcare professional-led contractors had access to the NHS Pension Scheme (the Scheme). However, from 1 April 2014, an IP who meets the relevant eligibility criteria will be able to apply to become an employing authority in the Scheme.
The process for approval is set out in the Regulations[2] and NHS Business Services Authority has also produced a guide to administering the NHS Pension Scheme for Independent Providers and their employees and an application form.
In summary, IPs who require access to the Scheme will need to:
We look at these requirements in more detail below.
The Regulations define a 'qualifying contract' as, for NHS Pension purposes, a contract between a relevant commissioning party and an IP, the primary purpose of which is the provision of clinical health care services for the NHS and which is either:
Once an IP has decided to become an employing authority in respect of a qualifying contract, it must decide if it wants to apply for approval on either a 'closed approval' or an 'open approval' basis.
This will be a strategic decision taking into account market position, costs and any recruitment and retention issues. However, it is important to note that the approval and the basis of that approval will be extended to any other qualifying contract to which the IP is or subsequently becomes a party to. It is not possible to pick an approval basis for a specific contract only.
A 'closed approval' basis means that access to the Scheme is restricted to those eligible employees who:
An 'open approval' basis covers all eligible employees performing services under the qualifying contract.
Where approval is granted it will take effect from a later nominated date or the date it is granted, if no date is specified. Approval cannot be granted retrospectively.
The Regulations also seek to restrict IP companies which are associated to each other from obtaining approval on different bases. These restrictions have been put in place specifically to restrict an IP's ability to pick and choose a level of pension access for a specific contract or in relation to a particular group of individuals.
The Department of Health believes that the Regulations now reflect the concerns expressed during consultation, that giving maximum flexibility to IPs to choose who could access the Scheme would be unacceptable to current NHS bodies who are obliged to offer membership of the Scheme to all staff. The general consensus was that the use of the Scheme in such a manner would lead to a two-tier workforce, pay and other equal treatment issues.
The Regulations allow however, for an IP to apply for a modification notice and move from one approval basis to another and back again. The notice will be effective in respect of all qualifying contracts.
The process for changing the approval basis is prescribed in the Regulations[3]. In relation to a change from an open approval to a closed approval basis, the notice must be in writing and requires a minimum period of six months to take effect. The notice will only take effect in relation to a particular member if his consent is given; otherwise he remains a member of the Scheme.
A notice to change from closed to open must also be made in writing with a minimum notice period of three months. Such a change will apply in respect of all employees (and future employees) of the IP engaged to perform services on qualifying contracts provided that they satisfy the 'wholly or mainly condition' (see below).
As with the initial approval application, a modification notice that is given in respect of one or more qualifying contracts is effective in respect of all existing and subsequent qualifying contracts.
To be an eligible employee, the employee must:
The 'wholly or mainly condition' is satisfied where the employee spends more than 50% of their actual working pensionable hours employed on a qualifying contract over the Scheme year (from 1 April until 31 March) or part year, where the services under a contract start or finish part way through a year.
All staff employed on a qualifying contract are covered, including non-clinical support staff and those in back office functions.
IP Scheme members will become entitled to the same personal and dependents benefits as other Scheme members and will be treated as 'officers' in the Scheme.
This includes redundancy pensions for staff over minimum pension age, provided that the capitalised sum (representing the cost of the early payment of the benefits) is made before the benefits are paid.
The NHS Business Services Authority has stressed that the full cost of opening the Scheme to IPs will be closely monitored, in particular at the four yearly valuations.
There are also routine controls in place to protect the taxpayer and existing NHS employers:
New controls will also apply to all Scheme employers from 1 April 2014:
When a provider is granted a 'New Fair Deal Direction' by the Secretary of State, the 1995 Regulations and/or the 2008 Regulations as applicable are modified to grant the provider employing authority status as a person who is subject to a direction made under section 7 of the Superannuation (Miscellaneous Provisions) Act 1967[4]. The New Fair Deal Direction then makes other modifications to the Regulations for employers referred to in a New Fair Deal Direction and for employees subject to that Direction.
The difference between the methods of access to the Scheme is essentially one of 'obligation' or 'choice'.
Where staff are compulsorily transferred from an NHS body, an IP is obliged to comply with New Fair Deal and offer transferred staff access to the Scheme. This will normally be by means of a New Fair Deal Direction
An IP has the choice whether to offer staff, who join them voluntarily to work on a qualifying contract, access to the Scheme and this is a strategic decision.
New Fair Deal Directions are closed, in that they are restricted to those employees who transfer from the public sector and who are named in the Schedule to the Direction. If an IP wants to offer all staff working on the qualifying contract access to the Scheme then it will need to separately apply for IP employing authority status in the Scheme.
Footnotes
[1] The Amendment Regulations also increase employee contributions from 1 April 2014, accommodate the HMRC Fixed and Individual Protection 2014 facilities and make other miscellaneous and technical amendments.
[2] See regulation 2.M.3 'Approval Applications' in the 2008 Regulations and see para s 13 to 23 of Schedule 2B in the 1995 Regulations 'Approval and Approval Applications'
[3] Regulations 2.M.4 and 2.M.5 of the 2008 Regulations and paras 24 34 of the 1995 Regulations
[4] Regulation A2 (interpretation) of the 1995 Regulations is modified at paragraph (k) at a Regulation 2.A.1 (interpretation: general) at paragraph (l) of the definition of employing authority to insert, after "Act 1967" the wording "including one made in pursuance of the New Fair Deal Guidance issued by the Treasury and Dated 4 October 2013 (a New Fair Deal Direction")
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