NHS Pension Scheme
Annual Report and Accounts
2022-2023
For the period 1 April 2022 to 31 March 2023
HC1470
NHS Pension Scheme
(Incorporating the NHS Compensation for Premature
Retirement Scheme)
Annual Report and Accounts
2022-2023
For the period 1 April 2022 to 31 March 2023
Accounts presented to the House of Commons pursuant to Section 6(4) of the Government
Resources and Accounts Act 2000
Annual Report presented to the House of Commons by Command of His Majesty Ordered
by the House of Commons to be printed on 14 September 2023
HC 1470
NHS Pension Scheme Annual Report & Accounts 2022-23
© Queen’s Printer and Controller of HMSO 2023
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To
view this licence, visit:
www.nationalarchives.gov.uk/doc/open-government-licence/version/3
Where we have identified any third party copyright information you will need to obtain permission from the copyright
holders concerned.
This publication is available at: www.gov.uk/official-documents
Any enquiries regarding this publication should be sent to us at:
The Scheme Administrator
NHS Business Services Authority - Pensions
PO Box 2271
Bolton
BL6 9JU
ISBN 978-1-5286-4436-5
E02922689 09/23
Printed on paper containing 40% recycled fibre content minimum
Printed in the UK by the HH Associates Ltd. on behalf of the Controller of His Majesty’s Stationery Office
Page 3
NHS Pension Scheme Annual Report & Accounts 2022-2023
Contents
Page
ACCOUNTABILITY REPORT
Corporate Governance Report
Report of the Managers 5
Statement by the Actuary 22
Statement of Accounting Officer’s Responsibilities 28
Annual Governance Statement 29
Parliamentary Accountability Disclosures and Audit Report
Statement of Outturn against Parliamentary Supply 46
Losses and Special Payments disclosures 51
The Certificate and Report of the Comptroller and Auditor General to the 52
House of Commons
FINANCIAL STATEMENTS
Combined Statement of Comprehensive Net Expenditure 59
Combined Statement of Financial Position 60
Combined Statement of Changes in Taxpayers’ Equity 61
Combined Statement of Cash Flows 62
Notes to the Financial Statements 63
Page 4
NHS Pension Scheme Annual Report & Accounts 2022-2023
Accountability
Report
Page 5
NHS Pension Scheme Annual Report & Accounts 2022-2023
Corporate Governance Report
Report of the Managers
This report provides a summary of the arrangements to ensure the NHS Pension Scheme affairs
are managed effectively and gives a broad outline of the major benefits offered by the NHS
Pension Scheme (the Scheme).
1. Background to the Scheme
1.1 Statutory basis for the Scheme
The NHS Pension Scheme is a statutory, unfunded, defined benefit occupational pension scheme
backed by the Exchequer, which is open to all NHS employees and employees of other approved
organisations. The Scheme provides pensions for officer members based on final salary for
employees in the 1995 Section and 2008 Section; whilst a career average revalued earnings
(CARE) arrangement is in place for General Medical Practitioners and General Dental
Practitioners.
From 1 April 2022, all active members moved to the NHS Pension Scheme 2015. This Scheme
provides pensions for all members calculated on a CARE basis. The formula is not the same as
that used for practitioners in the 1995 Section and 2008 Section. Members with periods of service
in more than one part of the Scheme are eligible to receive a pension calculated under the
provisions of the Scheme applicable to those periods of service.
Contributions due to the Scheme are set at rates determined by the Scheme’s Actuary and
approved by the Secretary of State for Health and Social Care. The Scheme receives contributions
from employees and employers to defray the costs of pensions and other benefits.
The Scheme Accounts represent the combined position for both the 1995 and 2015 schemes.
Scheme provisions are governed by the following sets of Regulations:
• The NHS Pensions Scheme Regulations 1995, 2008 and 2015, as amended;
• The NHS (Compensation for Premature Retirement) Regulations 2002 (as amended);
• The Pensions (Increase) Act 1971;
• NHS Additional Voluntary Contributions (AVC) Regulations 2000 (as amended); and
• NHS Gratuitous Expectations Regulations (as amended).
The Schemes provide a range of defined benefits as expected from a contributory occupational
pension scheme such as lump sum, annual pension and dependants benefits. Details of these
along with the recent changes and other benefits can be found on the NHS Pensions website
http://www.nhsbsa.nhs.uk/pensions.
Page 6
NHS Pension Scheme Annual Report & Accounts 2022-2023
1.2 Eligibility to join the Scheme
The employers of the Scheme’s contributing members are classified as Employing Authorities.
Employing Authorities are defined in the Regulations and their staff have automatic entry to the
Scheme. Non-NHS employers can apply for Direction Body status in order that their staff may join
the Scheme provided they meet specified criteria, whereas Independent Provider employers have
the option to choose to enter their staff into the Scheme.
At 31 March 2023 there were 7,857 participating employers falling into the following categories:
Employer category
As at
31 March
2023
As at
31 March
2022
As at
31 March
2021
NHS Trusts and Local Health Boards (Note 1)
222
223
230
GP practices
6,376
6,516
6,590
Arm’s length bodies
14
14
14
Direction bodies
541
517
524
Integrated Care Boards (from 1 July 2022
replacing Clinical Commissioning Groups) and
Support Units
47
103
133
Local Authorities
126
130
133
New Fair Deal contracts
381
326
271
Independent Providers contracts (Note 2)
150
166
162
Total
7,857
7,995
8,057
Note 1: Local Health Boards are only applicable in Wales.
Note 2: Independent Provider employers are subject to a pensionable earnings ceiling of 75% of
the total value of NHS contract value.
Page 7
NHS Pension Scheme Annual Report & Accounts 2022-2023
2. Management of the Scheme
2.1 Organisations responsible for managing the Scheme
The NHS Business Services Authority (NHSBSA) is the body responsible for the administration of
the NHS Pension Scheme for England and Wales. The administration of the Scheme includes
calculation of benefits, collection of contributions from employers, maintenance of member records
and payment of benefits.
In support of the NHSBSA, NHS employers are required to comply with Scheme Regulations and
explain the Scheme to their employees. In addition, they submit pension data to the NHSBSA, and
a significant number of employers calculate pensions benefit estimates for their employees.
2.2 Cost of administering the Scheme
The cost of administering the Scheme for 2022-23 was met from the Scheme and was included in
the Parliamentary Supply Estimate submitted to Her Majesty’s Treasury (HMT). Further details can
be found at note 3.4 of the Report of the Managers.
2.3 Cost of audit of the Scheme
The Comptroller and Auditor General is appointed by statute to audit these accounts and his
certificate and report appears on pages 52 to 57. The notional cost for these financial statements in
2022-23 is £160,250 (2021-22 £139,000), which is recognised in the NHSBSA’s accounts. The
National Audit Office (NAO), as the Scheme’s external auditors, provided no other services during
the year.
2.4 Corporate governance of the Scheme
The governance arrangements of the NHSBSA, who are responsible for the administration of the
Scheme, can be found in the Governance Statement on pages 29 to 45.
2.5 Arrangements governing determination of contribution rates and benefits
Actuarial valuation reports set out the rate of employer contributions required to meet the cost of
Scheme benefits, calculated in accordance with valuation Directions made by HM Treasury. The
balance of funding required to meet Scheme benefits is provided by Parliament.
A full actuarial (funding) valuation is undertaken every four years and its purpose is to assess the
liability in respect of the benefits due under the Scheme (taking into account recent demographic
experience), and to recommend contribution rates payable by employees and employers.
The latest actuarial valuation undertaken for the NHS Pension Scheme was completed as at 31
March 2016. The results of this valuation set the employer contribution rate payable from 1 April
2019 at 20.6% of member pensionable pay.
The 2016 funding valuation was also expected to test the cost of the Scheme relative to the
employer cost cap set following the 2012 valuation, however, on 30 January 2019 the Government
announced a pause to the cost control mechanism which was to form part of the valuation. This
was due to a Court of Appeal ruling in December 2018 relating to the transitional protection offered
to some members in the 2015 pension reforms. On 4 February 2021, the Government announced
that the cost cap mechanism calculations would be completed allowing for the transitional
protection remedy costs. HMT published valuation directions dated 7 October 2021 that set out the
Page 8
NHS Pension Scheme Annual Report & Accounts 2022-2023
technical detail of how the costs of remedy are included in the 2016 valuation process. Following
these directions, the Scheme Actuary has completed the cost control element of the 2016 funding
valuation for the NHS Pension Scheme.
The results for the Scheme were set out in the Government Actuary’s Department report of 7
February 2022, which stated that the cost cap cost was within the +/-2% corridor specified in the
HMT regulations and so no changes to benefits or member contributions were required. The
treatment of the transitional protection remedy cost as a member cost for cost cap purposes was
challenged in a judicial review which was heard in early 2023, an update on this review is detailed
in note 5.4. A ruling against this remedy approach could have potentially resulted in higher costs
of accrual from 1 April 2019 onwards.
The Government has set out changes to the operation of the employer cost cap that will be
effective from the valuation of the Scheme as at 31 March 2020. The new mechanism will only
allow for the reformed Scheme, will have an increased cost cap corridor of +/-3% and will also now
include an economic check, which means that a breach would only result in changes if there was
still a breach once the impact of any change in the discount rate has been taken into account.
There is no impact to the 2022-23 accounts as a result of these reforms.
The next actuarial valuation is due with an effective date of 31 March 2020 and is due to be
completed later in 2023. Changes to employer contribution rates as a result of the 2020 valuation
are expected to take effect from April 2024.
Page 9
NHS Pension Scheme Annual Report & Accounts 2022-2023
3. Key developments in year
3.1 Changes to Scheme contribution rates
Employee contribution rates changed from 1 October 2022 to the rates detailed below. Part time
member contribution rates were also amended to actual pensionable pay as of 1 October 2022,
and were previously based on whole time equivalent (WTE) pensionable pay.
Pensionable Pay
Contribution rate from 1 October 2022
£0 to £13,246
5.10%
£13,247 to £16,831
5.70%
£16,832 to £22,878
6.10%
£22,879 to £23,948
6.80%
£23,949 to £28,223
7.70%
£28,224 to £29,179
8.80%
£29,180 to £43,805
9.80%
£43,806 to £49,245
10.00%
£49,246 to £56,163
11.60%
£56,164 to £72,020
12.50%
£72,031 and above
13.50%
3.2 Changes to Scheme benefits
The relaxation to the suspension Regulation for members of the 1995 Section continued before
being completely removed from 1 April 2023. Abatement Regulations will also continue to be
relaxed during 2023-24 except for those retiring prematurely on ill health or interest of efficiency of
the service grounds. These provisions were introduced by the DHSC as part of the Coronavirus
Act 2020.
The Public Service Pensions Revaluation Order 2023 prescribed the date revaluation applied to
2015 Scheme pension benefits as 6 April 2023. Pension benefits built up in the 2015 Scheme up to
31 March 2023 were revalued on this date rather than the 1 April 2023.
Page 10
NHS Pension Scheme Annual Report & Accounts 2022-2023
3.3 Membership statistics (movement in year)
Active members
Total active members at 1 April 2022 (note 1)
1,742,809
Add:
New entrants
237,249
Deferred members who re-join in the year
104,224
Re-employed pensioners
3,916
Total joiners
345,389
Less:
Retirements
(31,984)
Leavers with deferred pension rights
(174,851)
Members who opt-out with deferred pension rights
(64,780)
Deaths
(1,273)
Total leavers/death in service
(272,888)
Total active members at 31 March 2023
1,815,310
Deferred members
Total deferred members at 1 April 2022 (note 1)
746,230
Add:
Members leaving active membership with deferred pension rights
239,631
Total new deferred and unclaimed benefits
239,631
Less:
Members taking up deferred pension rights
(14,115)
Members who re-join the scheme
(104,224)
Movement to unclaimed refund (note 2)
(50,394)
Members taking a refund of contributions during year
(42,313)
Transfers out
(1,421)
Death of member
(834)
Total removed from deferred population
(213,301)
Total deferred members at 31 March 2023
772,560
Pensioners in payment (including Compensation Scheme)
Total pensions in payment at 1 April 2022 (note 1)
1,068,205
Add:
Members retiring from active
31,984
Members retiring from deferred
14,115
Widows and dependants
7,723
Total benefits into payment
53,822
Deaths
(23,415)
Less:
Other cessations (note 3)
(149)
Child dependants leaving full time education
(75)
Total benefits ceased in the year
(23,639)
Total pensions in payment at 31 March 2023
1,098,388
Page 11
NHS Pension Scheme Annual Report & Accounts 2022-2023
Membership Statistics Notes
Note 1: The opening balance includes an adjustment to take account of member records that were
updated retrospectively after the year end and after the original data extract was taken to prepare
the membership statistics for the accounts. This is due to the volume of data required to be
uploaded onto the pension administration systems from employers and the resolution of any
subsequent data errors.
Note 2: Where a period of membership is insufficient to qualify for pension entitlement and the only
benefit due in respect of that membership is a refund of employee contributions paid into the
scheme, it is classified as an unclaimed refund and does not appear in the membership statistics.
Note 3: This figure includes cessations due to remarriage or co-habitation and due to commutation
of pensions on grounds of trivial value.
Note 4: The membership data at 31 March 2022 differs from that disclosed in the Report of the
Actuary as the data extract provided to GAD was taken in November 2022, whereas these
statistics were taken from a data extract provided in April 2023 and member data is continually
updated after the year end.
3.4 Scheme administration levy
Contributions made by employers and employees to the Scheme meet the cost of the pension
rights for members building up under the Scheme but do not cover the cost of administering the
Scheme.
On 1 April 2017 the Department of Health and Social Care (DHSC) introduced a levy to cover the
cost of the administration of the Scheme. DHSC has determined that participating employers will
be required to pay 0.08% of pensionable pay for their staff who are members of the Scheme. In
introducing the levy, it is anticipated that the relationship between employers and the Scheme
should become more client focussed, leading to an administration service that is more responsive
to employer needs. The Scheme Regulations were amended when the levy was introduced so that
the rate of the levy will be reviewed every four years in conjunction with the Scheme Funding
Valuation. The rate is now under consideration in conjunction with the 2020 Funding Valuation.
During 2022-23 the cost of Scheme administration was £43.26 million (see note 10 to the
accounts), and £40.75 million was received from NHS employers via the levy (see note 5 to the
accounts). Due to the nature of the funding arrangement, the cost of administration and the income
received will not net off in any one year.
Page 12
NHS Pension Scheme Annual Report & Accounts 2022-2023
4. Performance and Position
4.1 Financial position at 31 March 2023
4.1.1 Resource Outturn to Supply Estimate
The 2022-23 net resource outturn was £44.69 billion and was within the voted estimate of £47.15
billion. Details can be found in the Combined Statement of Comprehensive Net Expenditure (page
59) contained within the financial statements. An explanation of the variance is provided in the
SoPS1 note on page 48.
4.1.2 Net cash requirement
In cash terms, the Scheme recorded a Net Cash Requirement (NCR) of minus £4.32 billion against
the voted estimate of minus £3.45 billion, this means the Scheme has surplus cash due to income
exceeding pension benefit payments, and the £4.32 billion will be returned to Treasury during
2023-24.
The Scheme is currently operating with a net cash surplus (negative Net Cash Requirement), due
to receipts exceeding the payments made, and this surplus is returned to HMT during the following
financial year. If payments are forecast to exceed income within a financial year the balance of the
funding required is requested from Parliament through the annual Supply Estimates process.
The cash flows of the Scheme are classed as Annually Managed Expenditure (AME) for
government accounting purposes.
4.1.3 Financial position and key movements
As at 31 March 2023 the pension liabilities of the Scheme were valued at £460.6 billion. This is a
decrease of £380.3 billion from the liabilities at 31 March 2022 of £840.9 billion. As the NHS
Pension Scheme is an unfunded scheme, these liabilities are underwritten by the Exchequer.
Details of the key movements are shown in the diagram below and within Note 17.4 to the
accounts.
Page 13
NHS Pension Scheme Annual Report & Accounts 2022-2023
4.1.4 Service Cost
The service cost is the increase in the present value of the Scheme liabilities arising from
members’ service in the current period. It is calculated annually using the accounting assumptions
adopted at the start of each year.
The 2021-22 service cost of £40.8 billion was calculated using the accounts assumptions at 31
March 2021, and the 2022-23 service cost of £50.1 billion was calculated using the accounts
assumptions at 31 March 2022. The change in service cost from year to year reflects the change in
the accounts assumptions at each date. The assumptions at 31 March 2022 are set out in Table D
of the Statement by the Actuary.
4.1.5 Prior period adjustment
The above notes 4.1.3 and 4.1.4 contain restated figures for 2021-22 due to a prior period
adjustment. Details for the reason for restatement can be found at note 18 within the Notes to the
Financial Statements.
4.1.6 Contingencies Fund Advance
A combination of factors contributes to the Scheme requiring additional funding outside of the main
Parliamentary Estimate process to ensure benefits are paid on their due date each month. The
primary reason for this relates to the timing of the receipt for the majority of the contributions paid
by employers being due by the 19
th
of the month, for the previous month’s payroll. The Scheme
receives on average over £1.2 billion near to or on this payment deadline date. The Scheme also
has to surrender any surplus cash at year end to HMT, within the first quarter of the following
financial year, and this cannot be utilised in subsequent cash flow requirements.
To meet the cash flow requirement to pay member benefits from the 1
st
to the 18
th
of the month,
the Scheme submitted a request for £1.23 billion to HMT to draw money from the Contingencies
Fund (under section 5.14e of the Supply and Estimates Guidance manual). The funds were drawn
down on 1 April 2022 and repaid to the Contingencies Fund in full during 2022-23 with the final
payment being made on 1 August 2022.
The Scheme has requested to draw down £1.395 billion from the Contingencies Fund in 2023-24,
as the same scenario exists as described above. The full amount will be repaid in 2023-24.
Page 14
NHS Pension Scheme Annual Report & Accounts 2022-2023
5. Key activities during 2022-23
5.1 Customer satisfaction surveys
The Scheme completed Monthly Customer Satisfaction Surveys during the year with active and
deferred pension members, and Scheme employer organisations. The surveys were answered on
a scale of 1 to 10 where 1 is not at all satisfied and 10 is completely satisfied.
The Monthly Customer Satisfaction Survey is one of the ways in which the business gathers
customer feedback. It provides both scheme members and employers with the opportunity to
provide insight on our key responsibilities as a business and provide feedback on their thoughts,
feelings, and opinions on the service that they receive. The key question on the survey that we ask
is for the overall satisfaction with all aspects of the service provided by NHS Pensions. This allows
us to calculate the Net Promotor Score (NPS) – overall satisfaction with the service.
The member and employer surveys are maintained on a rolling monthly basis. This allows us to act
on any feedback received in a timely manner. We are using the feedback received to review and
improve the service that we provide. Key themes and trends are identified, and possible
improvements are considered. We have a central dashboard to capture all the survey results, and
this also includes an action plan.
Our score average compared to previous years has remained similar. Key themes for members
include improving processing times and communication as well as providing accessible and easy
to understand information. For employers it was to improve the employer website, provide more
training opportunities and improve the quality and efficiency of employer queries.
A new team who are solely focussed on Customer Improvement has been introduced during 2022-
23. This team, with the support of the Stakeholder Engagement Team, will work through any
agreed actions and implement any changes and improvements that are identified from the Monthly
Customer Satisfaction Surveys.
Active and deferred
pension members
Retired pension
members
Pension employers
2022-23
2021-22
2020-21
2022-23
2021-22
2020-21
2022-23
2021-22
2020-21
Number of
completed
surveys
16,755
12,556
8,203
2,043
3,854
n/a*
1,390
1,427
1,342
Net promotor
score (NPS)
5.6
5.5
5.6
7.0
8.1
n/a*
7.2
7.2
7.2
* The retired pensions members survey was not conducted in 2020-21. It was last conducted in March 2020 (although
not reported until June 2020 due to the pandemic) and was not requested to be conducted during the COVID-19
pandemic.
5.2 Pensions Digital Transformation – Member Services
Following the decision in 2020-21 to move from an in house build for a Member Services portal to
a product supplied by the incumbent pensions administration system supplier there has been minor
finalisation work in the digital arena during 2022-23.
Page 15
NHS Pension Scheme Annual Report & Accounts 2022-2023
The My NHS Pension member portal was delivered into private Beta for all NHSBSA employees
who were members of the scheme in July 2022 to allow for early adopter testing. Further
development based on user feedback and continued development from the Minimum Viable
Product (MVP) was completed in order to support the intent to roll out to further members during
the latter part of 2022-23. Onboarding plans were created for the further rollout but had to be
paused due to issues with accessibility that were deemed to be present in the solution.
The accessibility issues were resolved before the end of 2022-23, with the intention to
recommence onboarding of further members from during the start of 2023-24.
5.3 NHS Pensions McCloud Programme
An outcome of the development and implementation of the new NHS 2015 Pension Scheme was
that all members were automatically moved to the new Scheme in April 2015, unless they were
covered by ‘transitional protection’ which was granted to some members based upon their
proximity to retirement. Members of the Judicial and Firefighters’ pension schemes challenged the
application of transitional protection aspects of the move to the 2015 scheme, and in December
2018 the Court of Appeal ruled that the difference in treatment provided by transitional protection
was not objectively justified and constituted unlawful age discrimination.
Following the Supreme Court’s decision to deny the Government leave to appeal, the Government
announced that all public sector pension schemes would need to rectify any discrimination suffered
by its members.
There are two aspects to address the implications of this ruling:
• Addressing the discrimination suffered by members of the NHS Pension Scheme through
the application of the transitional protection; and
• Ensuring the long-term sustainability of the NHS Pension Scheme, as per the original
findings and recommendations made by the 2011 Independent Public Service Pensions
Commission Report, led by Lord Hutton.
In response to this the Department of Health and Social Care (DHSC) have established a
Programme with three core projects:
• NHS Pensions Reform Project to ensure the long-term viability of the NHS Pension
Scheme beyond 2022;
• NHS Pensions McCloud Remedy Project to rectify any discrimination suffered by
members through the application of transitional protection; and
• NHS Pensions McCloud Engagement Project to ensure timely, accurate and effective
engagement with all stakeholders throughout the implementation of all NHS pensions
McCloud projects.
5.3.1 NHS Pensions Reform project
The main areas of delivery for the McCloud Reform project during 2022-23 were as follows:
• Member contribution changes - delivery of changes to member contribution tiers,
• Legacy Scheme changes - changes to 1995 section re-employment options.
Page 16
NHS Pension Scheme Annual Report & Accounts 2022-2023
Member Contribution Changes
DHSC proposed through a formal public consultation to make changes to the member contribution
tiers and tables and a change from basing contributions rates on Notional Whole Time Equivalent
pay to a system based on actual earnings. The original intent was for changes to be delivered from
1 April 2022.
Following the conclusion of the consultation in January 2022 DHSC advised that the changes
would be implemented from 1 October 2022.
A full project plan was produced to support this work, including briefings and the provision of
requirements to all payroll providers for the system changes, the direct mailing to 1.7 million
members, and wider communication products including a dedicated contact line for this specific
change to reduce impact on Contact Centre work.
The changes were successfully implemented on 1 October 2022.
Legacy Scheme Changes
DHSC proposed through a formal public consultation to implement a number of changes to the
Scheme to help retain more experienced clinicians and remove barriers to staff returning to work
following retirement.
Following the conclusion of the consultation in January 2023 DHSC advised that the following
changes would be implemented from 1 April 2023:
• A change in regulations to allow 1995 section pensioners who had become re-employed in
the NHS to re-join the Scheme and build up further benefits in the 2015 Scheme,
• A change in regulations to allow members who choose to re-join the NHS following
retirement to work as many hours as they want straightaway. Previously members of the
1995 section were limited to working 16 hours per week in the first month after retirement to
avoid having their pension payments affected,
• A change in regulation to align the increases used in pension benefit revaluation with the
CPI used to calculate the pension growth for annual allowance tax calculation. On 1 April
each year, 2015 Scheme pensions are revalued by a Treasury Order plus 1.5% to ensure
their value will be above inflation. However, from this year (2023) onwards it will happen
from 6 April instead, meaning the pension growth calculation will only consider growth in
pension benefits above inflation.
A full project plan was produced to support this work, including briefings and the provision of
requirements to the pensions systems supplier for the relevant changes, the direct mailing to 1.7
million members, and the wider communication products for employers and members.
The changes were successfully implemented on 1 April 2023.
Following the conclusion of the consultation in January 2023 DHSC also advised that the following
changes were required to be implemented from 1 October 2023:
• A change in regulation to introduce partial retirement options for members with 1995
section benefits so that they can claim (drawdown) up to 100% of their 1995 section
benefits once they reach minimum pension age, whilst they continue to work and accrue
further pension in the 2015 Scheme,
Page 17
NHS Pension Scheme Annual Report & Accounts 2022-2023
• A change in regulation to expand partial retirement options for members with 2008 Section
and 2015 Scheme benefits, to increase the maximum amount of pension they can claim (or
drawdown) from 80% to 100%.
A full project plan has been produced to ensure that implementation is achieved on 1 October
2023.
5.3.2 NHS Pensions McCloud Remedy project
Initial expectations were that the McCloud Remedy project would be delivering Immediate
Detriment cases during 2021-22 for those members most affected by the discrimination that had
been identified by the McCloud ruling.
Due to continued delays that were experienced in the production and release of the suite of
Provision Definition Documents (PDD) from HMT, which were required by all public sector
schemes to enable them to commission system suppliers and complete resource and budget
plans, the commencement of McCloud Remedy has not taken place during 2022-23.
Scheme Regulation changes are to be produced based on the interpretation of the PDDs and were
laid before Parliament in August 2023 following a public consultation.
This has meant a replan of the McCloud Remedy project with the current Go-Live date now being
2024.
5.3.3 NHS Pensions McCloud Engagement project
The McCloud Engagement project runs in parallel with both the Reform and Remedy projects and
supplements them with dedicated Engagement and Communications products and workstreams.
Due to the delays outlined above there has been limited engagement work on Remedy, however,
there has been an extensive communication and engagement exercise that has supported the
delivery of those elements of Reform that have taken place.
5.4 Events after the reporting period
Judicial Review – McCloud Remedy Costs
In December 2021 several unions filed for a joint judicial review against the Government on the
inclusion of the McCloud remedy costs within the cost control mechanism at the 2016 valuations
(refer to note 2.5). The judicial review was heard in early 2023 and the claims made in the judicial
review were dismissed by the High Court, in a judgment handed down on Friday 10 March 2023.
Permission to appeal this judgement was granted by the Court of Appeal on 26 May 2023, the
outcome of this appeal will become known in due course.
Page 18
NHS Pension Scheme Annual Report & Accounts 2022-2023
6. Key activities arising for 2023-24
6.1 Pensions Digital Transformation- Member Services
During 2023-24 we will deliver our onboarding programme to enrol members onto the My NHS
Pension portal following the completion of the changes identified by user testing and accessibility
at the end of 2022-23.
Onboarding will initially be focussed on non ESR members who will require access to the portal to
enable them to view their TRS statement due to the de commissioning of Gov.UK Verify.
In addition to delivering against the onboarding plans we will be working with stakeholders to
iteratively develop additional functionality and features to drive the transformation of how our
services are delivered in a more digital format.
6.2 NHS Pensions McCloud Programme
During 2023-24 the McCloud Programme will deliver the second phase of member contributions
(due from 1 April 2024) and legacy scheme reforms and will continue the preparation work on
Remedy for delivery in 2024-25, with the Engagement project supporting both.
6.2.1 NHS Pensions McCloud Reform project
The Reform project will support the delivery of the partial retirement legacy scheme changes which
are due to come into force on 1 October 2023.
6.2.2 NHS Pensions McCloud Remedy project
During 2023-24 the McCloud Remedy project will move from the preparatory phase and
commence delivery preparations including High Level Business Requirements (HLBRs) for
engagement with our system supplier to support the commencement of both Retrospective
Remedy for those members who have already retired, died or had a benefit crystallisation event,
and Choice at Retirement for those members who will retire after October 2023 and are eligible for
a McCloud Remedy Choice.
The main areas of work will be as follows:
• Assessment of Provision Definition Documents for Scheme (PDDs) specific impact,
• Specific work on priority rejected ill-health cases,
• Creation of requirements for systems development based on PDDs,
• Creation of requirements for modeler based on PDDs,
• HLBRs created and passed to system supplier based on suite of PDDs,
• Retrospective Remedy pre-work including staff training and process guide development,
• Pipeline Remedy pre-work including staff training and process guide development,
• Development, testing and release of Retrospective Remedy Systems,
• Development, testing and release of Pipeline DCU Systems,
• Development, testing and release of Modeler.
6.2.3 NHS Pensions McCloud Engagement project
Following supporting of the Reform project, the Engagement project will move on to working in
conjunction with the Remedy project to ensure that a substantive and comprehensive suite of
Page 19
NHS Pension Scheme Annual Report & Accounts 2022-2023
support products are available for members, employers, and all stakeholders so that the various
journeys through McCloud Remedy delivery are understood by all who are affected.
The project will support in the identification of required communication products, liaison with the
Remedy project with respect to supporting procurement of a third-party print supplier for Remedy
delivery, and actively manage stakeholder engagement throughout the pre delivery period running
up to commencement of Remedy in April 2024.
Page 20
NHS Pension Scheme Annual Report & Accounts 2022-2023
7. Information for members
7.1 Pension Increase
The Pensions increase rate was 3.1% (2021-22 0.5%) with effect from 11 April 2022 (2021-22 12
April 2021) which applies to the NHS Pension Scheme and NHS Compensation for Premature
Retirement Scheme.
7.2 Supplementary Information available to members
Information regarding the provisions of the Scheme can be found on the website of the NHSBSA
as well as copies of Pension Accounts and Actuarial Valuation Reports. The website address is as
follows: http://www.nhsbsa.nhs.uk/pensions
7.3 Information about Free Standing Additional Voluntary Contributions (AVC) and
Stakeholder Pensions
The Scheme has continued to offer a broad range of in-house top up money purchase AVCs,
including AVC and Stakeholder Pension facilities from Standard Life Assurance Company and an
AVC only facility from Prudential PLC and Utmost Life and Pensions (formerly Equitable Life
Assurance Society). These contributions are not contained within the cash flows of the Scheme but
paid directly to the approved provider (please see note 11 to the Financial Statements).
7.4 Management structure and advisors
Accounting Officer:
Michael Brodie
NHS Business Services Authority
Stella House, Goldcrest Way
Newcastle upon Tyne NE15 8NY
Auditors:
Comptroller and Auditor General
National Audit Office
157-197 Buckingham Palace Road
London SW1W 9SP
Scheme Administrator:
NHS Business Services Authority
Hesketh House
200-220 Broadway
Fleetwood FY7 8LG
Legal advisers:
DHSC Legal Services
5
th
Floor The Adelphi
Area 159 5
th
Floor
1-11 John Adam Street
London WC2N 6HT
Actuary:
Government Actuary’s Department
Finlaison House
15-17 Furnival Street
London EC4A 1AB
Bankers:
Government Banking Team
NatWest Bank
Brampton Road
Newcastle-under-Lyme
Staffordshire ST5 0QX
In-house AVC Providers:
Utmost Life and Pensions
Walton Street
Aylesbury
Buckinghamshire HP21 7QW
Standard Life Assurance Company
Standard Life House
30 Lothian House
Edinburgh EH1 2DH
Prudential PLC
250 Euston Road
London NW1 2PQ
Page 21
NHS Pension Scheme Annual Report & Accounts 2022-2023
7.5 Further information
Any enquiries about the NHS Pension Scheme should be addressed to:
Scheme Administrator
NHS Business Services Authority - Pensions
PO Box 2271
Bolton
BL6 9JU
7.6 Disclosure of audit information to the auditors
As far as I am aware, there is no relevant audit information of which the Scheme auditors are
unaware. I have taken all steps that I ought to have taken to make myself aware of any relevant
audit information and to establish that the Scheme auditors are aware of that information.
I take personal responsibility for the Annual Report and Accounts and the judgements required for
determining that they are fair, balanced, and understandable. I can confirm that the Annual Report
and Accounts as a whole are fair, balanced, and understandable.
Michael Brodie
Chief Executive, NHS Business Services Authority
5 September 2023
Page 22
NHS Pension Scheme Annual Report & Accounts 2022-2023
Statement by the Actuary
1. Introduction
This statement has been prepared by the Government Actuary’s Department (GAD) at the request
of the NHS Business Service Authority (NHSBSA). It provides a summary of GAD’s assessment of
the scheme liability in respect of the NHS Pension Scheme (NHSPS) as at 31 March 2023, and the
movement in the scheme liability over the year 2022-23, prepared in accordance with the
requirements of Chapter 12 of the 2022-23 version of the Financial Reporting Manual.
The NHSPS is a defined benefit scheme providing pension and lump sum benefits on retirement,
death, and resignation. The scheme is wholly unfunded. I am not aware of any informal practices
operated within the scheme which lead to a constructive obligation.
The assessment has been carried out by calculating the liability as at 31 March 2022 based on the
data provided as at 31 March 2022 and rolling forward that liability to 31 March 2023.
2. Membership data
Tables A to C summarise the principal membership data as at 31 March 2022 used to prepare this
statement.
Table A – Active members
Number
thousands
Total pensionable pay* (p.a.)
£ millions
Males
395
16,917
Females
1,363
40,348
Total
1,758
57,265
* Pensionable pay is the actual figure.
Table B – Deferred members
Number
thousands
Total deferred pension* (p.a.)
£ millions
Males
169
798
Females
540
1,640
Total
709
2,438
* Pension amounts include the pension increase granted in April 2022.
Table C – Pensions in payment
Number
thousands
Annual pension* (p.a.)
£ millions
Males
212
4,162
Females
730
5,634
Spouses &
dependants
106
642
Total
1,048
10,438
* Pension amounts include the pension increase granted in April 2022.
Page 23
NHS Pension Scheme Annual Report & Accounts 2022-2023
3. Methodology
The present value of the liabilities as at 31 March 2023 has been determined using the Projected
Unit Credit Method (PUCM), with allowance for expected future pay increases in respect of active
members, and the demographic and financial assumptions applying as at 31 March 2023. The
current service cost (expressed as a percentage of pensionable pay) in respect of accruing costs in
the year ended 31 March 2023 was determined using the PUCM and the demographic and
financial assumptions applicable at the start of the year, that is, those adopted as at 31 March
2022 in the 2021-22 accounts.
This statement takes into account the benefits normally provided under the scheme, including age
retirement benefits, ill-health retirement benefits and benefits applicable following the death of the
member. It does not include the cost of injury benefits (in excess of ill-health benefits). It does not
include premature retirement and redundancy benefits in respect of current active members,
although the assessment of liabilities includes pensions already in payment in respect of such
cases.
4. Financial assumptions
The principal financial assumptions adopted to prepare this statement are shown in Table D.
Table D – Principal financial assumptions
Assumption
31 March 2023
p.a.
31 March 2022
p.a.
Nominal discount rate
4.15%
1.55%
Rate of increase in pensions in payment
and deferred pensions (assuming CPI
inflation)
2.40%
2.90%
Rate of general pay increases
3.65%
4.15%
Rate of short-term general pay increase
n/a
n/a
Real discount rate in excess of:
• CPI inflation
1.70%
(1.30)%
• Long–term pay increases
0.50%
(2.50)%
Expected return on assets
n/a
n/a
The assessment of the liabilities allows for the known pension increases up to and including April
2023.
5. Demographic assumptions
Table E summarises the mortality assumptions adopted to prepare this statement, which were
derived from the specific experience of the scheme membership and other relevant sources. The
table refers to the standard mortality tables prepared by the Continuous Mortality Investigation
(part of the Actuarial Profession) known as the ‘S3 tables’ with the percentage adjustments to
those tables derived with reference to scheme experience.
Page 24
NHS Pension Scheme Annual Report & Accounts 2022-2023
Table E – Post-retirement mortality assumptions
Baseline mortality
Standard table
Adjustment
Males
Retirements in normal health
S3NMA
91%
Current ill-health pensioners
S3IMA
134%
Future ill-health pensioners
S3IMA
134%
Dependants
S3DMA
82%
Females
Retirements in normal health
S3NFA
103%
Current ill-health pensioners
S3IFA
134%
Future ill-health pensioners
S3IFA
134%
Dependants
S3DFA
89%
These assumptions in Table E above, and the other demographic assumptions such as
commutation and family statistics, are in line with those recommended for the 31 March 2020
funding valuation of the scheme. The 2021-22 accounting results have been restated to provide an
updated assessment of scheme liability, costs, and contributions to reflect a revision to the post-
retirement mortality assumptions. The same post-retirement mortality assumptions apply at 31
March 2022 as at 31 March 2023.
Mortality improvements are assumed to be in line with the 2020-based projections for the United
Kingdom published by the ONS in December 2022. This is a different assumption to that used for
the 2021-22 accounts.
Our advice on the selection of assumptions can be found in our assumptions and methodology
report dated 13 June 2023.
6. Liabilities
Table F summarises the assessed value as at 31 March 2023 of benefits accrued under the
scheme prior to this date based on the data, methodology and assumptions described in the
sections below. The corresponding figures for the previous year are shown for comparison. The
liabilities at 31 March 2022 and 2023 both include an allowance for the higher cost of benefits
accruing under McCloud.
Table F – Statement of Financial Position
31 March 2023
£ billion
31 March 2022
£ billion
Total market value of assets
nil
nil
Value of liabilities
460.6
840.9
Surplus/(Deficit)
(460.6)
(840.9)
of which recoverable by employers
n/a
n/a
Page 25
NHS Pension Scheme Annual Report & Accounts 2022-2023
7. Accruing costs
The cost of benefits accrued in the year ended 31 March 2023 (the current service cost) is
assessed as 82.0% of pensionable pay.
For the avoidance of doubt, the actual rate of contributions payable by employers and employees
is not the same as the current service cost assessed for the accounts. A current service cost below
(or above) the total contribution rate does not indicate that employers and employees have
collectively paid contributions more (or less) than the costs of benefits accrued during the year.
Members contributed between 5.0% and 14.5% of pensionable pay, until 1 October 2022, then
5.1% and 13.5% of pensionable pay, depending on the level of their pay. The actual employer
contribution rate was determined as part of a funding valuation using different assumptions. Table
G shows the employer and employee contributions during the year 2022-23 as a percentage of
pensionable pay and compares the total contributions with the current service cost assessed for
the 2022-23 accounts.
Table G – Contribution rate
2022-23
% of pay
2021-22
% of pay
Employer contributions
20.6%
20.6%
Employee contributions (average)
10.0%
9.9%
Total contributions
30.6%
30.5%
Current service cost (expressed as a % of pay)
82.0%
71.8%
The key difference between the assumptions used for funding valuations and accounts is the
discount rate, although price inflation and salary increases are also determined differently and the
assumption for future improvements in life expectancy has been updated. The discount rate for
accounts is set each year by HM Treasury to reflect the requirements of the accounting standard
IAS 19.
The pensionable payroll for the financial year 2022-23 was £61.1 billion (derived from contributions
payable by employers over the year). Based on this information, the accruing cost of pensions in
2022-23 (at 82.0% of pay) is assessed to be £50.1 billion. This includes an allowance for the
higher cost of benefits accruing over the year under McCloud.
Past service costs arise when an employer undertakes to provide a different level of benefits than
previously promised. I am not aware of any other events that have led to a material past service
cost over 2022-23.
I am not aware of any events that have led to a material settlement or curtailment gain or loss over
2022-23.
Page 26
NHS Pension Scheme Annual Report & Accounts 2022-2023
8. Sensitivity analysis
The results of any actuarial calculation are inherently uncertain because of the assumptions which
must be made. In recognition of this uncertainty, I have been asked to indicate the approximate
effects on the actuarial liability as at 31 March 2023 of changes to the most significant actuarial
assumptions.
The most significant financial assumptions are the discount rate, general earnings increases and
pension increases (currently based on CPI). A key demographic assumption is pensioner mortality.
Table H shows the indicative effects on the total liability as at 31 March 2023 of changes to these
assumptions (rounded to the nearest 0.5%).
Table H – Sensitivity to significant assumptions
Change in assumption
Approximate effect on total liability
Financial assumptions
(i) discount rate*: +0.5%
p.a.
- 9.0%
- £41.5 billion
(ii) (long-term) earnings increase*: +0.5%
p.a.
+ 1.0%
+ £4.6 billion
(iii) pension increases*: +0.5%
p.a.
+ 9.0%
+ £41.5 billion
Demographic assumptions
(iv) additional 1 year increase in life
expectancy at retirement
+ 3.0%
+ £13.8 billion
*
Opposite changes in the assumptions will produce approximately equal and opposite changes in the liability.
The discount rate sensitivity shown implies a scheme duration of c.19 years.
9. Covid-19 implications
As with the accounts last year, the 2022-23 Resource Accounts are being produced when the UK
continues to deal with the impacts of the Covid-19 pandemic. I have considered the potential
implications of how this pandemic could impact on the actuarial calculations required for the
Resource Accounts.
The current population mortality projections make a short-term allowance for the impact of the
Covid-19 pandemic. When deriving the ONS 2020-based mortality improvement projections, a
panel of mortality experts gave their views on the impact of the Covid-19 pandemic on mortality
rates in the short term. Based on this, short term adjustments were made to the 2019 to 2024
period to allow for estimated deaths in 2021 and an averaging of the experts’ views on estimated
improvements by age group over this period. Long term rates of future mortality improvement are
not projected to change as a result of Covid-19. A death rate from Covid-19 in excess of that
already allowed for in the mortality assumptions would emerge as an experience gain in future
accounting periods. I expect that the long-term impact of the Covid-19 pandemic on life expectancy
will continue to evolve as experience and evidence emerges into the future.
Page 27
NHS Pension Scheme Annual Report & Accounts 2022-2023
The assumptions for the discount rate and pension increases are specified by HM Treasury in the
PES (2022) 08, dated 2 December 2022, and remain unchanged from these accounts. The PES
assumptions reflect market conditions at the previous 30 November and are typically not amended
for any changes between November and the accounting date.
The long-term salary assumption is set by the NHSBSA, having taken actuarial advice, and is
intended to be an average over the future careers of Scheme members, with a recognition that
increases in any particular year may be lower or higher than the assumption. The assumption
allows for a reduction in our view of the long-term salary increases as well as lower short-term
forecasts from the Office for Budgetary Responsibility.
Aimee Chadha FFA
Actuary
Government Actuary’s Department
5 July 2023
Page 28
NHS Pension Scheme Annual Report & Accounts 2022-2023
Statement of Accounting Officer’s Responsibilities
Under the Government Resources and Accounts Act 2000, HMT has directed the NHS Pension
Scheme and NHS Compensation for Premature Retirement Scheme to prepare, for each financial
year a statement of accounts in the form and on the basis set out in the Accounts Direction. The
accounts are prepared on an accruals basis and must give a true and fair view of the state of
affairs of the combined Schemes at the year end and of the net resource outturn and cashflows for
the financial year.
In preparing the Accounts the Accounting Officer is required to comply with the requirements of the
Government Financial Reporting Manual (FReM) and in particular to:
• Observe the Accounts Direction issued by HMT including the relevant accounting and
disclosure requirements, and apply suitable accounting policies on a consistent basis,
• Make judgements and estimates on a reasonable basis,
• State whether applicable accounting standards, as set out in the Government Financial
Reporting Manual have been followed, or disclose and explain any material departures in
the financial statements,
• Prepare the financial statements on a going concern basis; and
• Take personal responsibility for the annual report and financial statements and the
judgements required for determining that as a whole are fair, balanced, and
understandable.
The Principal Accounting Officer for the DHSC has appointed the Chief Executive of the NHSBSA
as the Accounting Officer for the NHSBSA and NHS Pension Scheme (incorporating the NHS
Compensation for Premature Retirement Scheme). The responsibilities of an Accounting Officer,
including responsibility for the propriety and regularity of the public finances for which the
Accounting Officer is answerable, for keeping proper records and for safeguarding the assets of
the pension scheme, are set out in Managing Public Money published by HMT.
Page 29
NHS Pension Scheme Annual Report & Accounts 2022-2023
Annual Governance Statement
Introduction
The Accounting Officer for the NHS Business Services Authority (NHSBSA) is the Accounting
Officer for the NHS Pension Scheme and is required to provide assurances about the stewardship
of the organisation and the NHS Pension Scheme. These assurances are provided in this
Governance Statement, in line with HMT guidance.
The Accounting Officer for the NHSBSA and the NHS Pension Scheme is Michael Brodie, Chief
Executive Officer.
Scope of Responsibilities
The NHSBSA’s Board is accountable for internal control, ensuring that its business is conducted in
accordance with the law and proper standards. It also ensures that public money is safeguarded,
properly accounted for, and used economically, efficiently, and effectively in accordance with
HMT’s Managing Public Money. In discharging this responsibility, the Board is also responsible for
putting in place proper arrangements for the governance of its affairs and facilitating the exercise of
its functions. This includes ensuring that a sound system of internal control is maintained
throughout the year which supports the achievement of the NHSBSA’s policies, aims and
objectives and arrangements are in place for the management of risk.
As Accounting Officer for the NHSBSA, the NHSBSA Chief Executive has overall responsibility for
ensuring that contracted administrators for any outsourced activity manage risks effectively, and for
reviewing the effectiveness of the administrator’s systems of internal control.
The purpose of the Governance Framework
The NHSBSA operates an integrated governance framework and, as the body responsible for the
administration of the scheme, this incorporates the NHS Pension Scheme. This framework
comprises the systems and processes by which the NHSBSA leads, directs, and controls its
functions and accounts to, and engages with, the DHSC and the wider NHS community. The
NHSBSA takes its responsibilities seriously, striving to be a good corporate citizen. In aiming to
embed this, the corporate governance framework is underpinned by the culture, values and
behaviours adopted across the NHSBSA.
A significant element of the framework is the system of internal control, which is designed to
manage risk to a reasonable level. It cannot eliminate all risks of failure to achieve policies, aims
and objectives and can therefore only provide reasonable and not absolute assurance of
effectiveness. The system of internal control is based on an ongoing process designed to:
• identify and prioritise the risks to achieving our policies, aims and objectives,
• evaluate the likelihood of those risks being realised, the impact should they be realised, and
to manage them efficiently, effectively, and economically.
The governance framework and system of internal control have been in place for the year ended
31 March 2023 and up to the date of the approval of the Annual Report and Accounts.
Page 30
NHS Pension Scheme Annual Report & Accounts 2022-2023
NHSBSA Governance Framework
The overarching Corporate Governance Framework has been approved and adopted by the Board
and is subject to annual review. The framework incorporates the following elements:
• Statutory Instruments and Directions which describe and govern the NHSBSA’s core
operations, processes, and structure,
• Code of Conduct for Board Members of Public Bodies, setting out clearly and openly, the
standards expected from those who serve on the Board,
• Matters determined by the Board which ensure that the NHSBSA has appropriate decision-
making processes in place, including:
o Standing Orders
o Standing Financial Instructions
o Scheme of Delegation
• Other management information which supports effective governance and operation, i.e.,
corporate policies and procedures.
The Director of People and Corporate Services and Corporate Secretary is responsible for
ensuring that all decisions made are legal and comply with the NHSBSA Corporate Governance
Framework. The NHSBSA complies with the Corporate Governance Code for Central Government
Departments where it applies to us.
NHSBSA Board
The Board is responsible for the strategic direction and integrated governance of the NHSBSA,
including the stewardship of its finances. In fulfilling these responsibilities, the Board reserves
certain decision-making powers, including decisions on strategy and budgets, but other key duties
have been delegated to the NHSBSA’s two standing committees:
• Audit and Risk Management Committee,
• Remuneration and Nominations Committee.
The roles and responsibilities of the Audit and Risk Management Committee are described more
fully below.
Board membership and responsibilities
Membership of the Board is currently made up of a non-executive Chair, four non-executive
directors (five until 31 December 2022), Chief Executive and five executive directors (three until 1
September 2022), one of which is a finance director. The key roles and responsibilities of the
Board are:
• To set and oversee the strategic direction of the NHSBSA,
• Continued appraisal of the financial and operational performance of the NHSBSA,
• To discharge their duties of regulation and control,
• To receive reports and updates from the Standing Committees,
• To approve and adopt the Annual Report and Accounts.
The Board has met eleven times up to the end of March 2023 and is responsible for approving the
business plan and budget. Subsequent reporting is based on an exception principle ensuring that
the Board focuses on key issues and utilises its time effectively.
Page 31
NHS Pension Scheme Annual Report & Accounts 2022-2023
The Board receives regular updates from its standing committees on the business covered, risks
identified, and actions taken. These updates are delivered by the non-executive Chair of the
respective Committee.
At each meeting, the Board receives an integrated balanced scorecard which summarises:
• Performance against the identified key performance indicators and strategic goals including
critical measures,
• The current financial position,
• People related issues,
• Customer insight including satisfaction, complaints, and contact volumes,
• Digital take up,
• Progress against key change projects,
• Business development pipeline,
• Corporate risks and issues.
The data presented to the Board is produced and quality assured by the NHSBSA's Performance
and Data & Insight teams adopting the six dimensions of data quality (Accuracy, Validity,
Reliability, Completeness, Relevance and Timeliness).
The NHSBSA’s Senior DHSC Sponsor is also invited to Board meetings to ensure members of the
Board, in particular non-executive directors, are able to get an understanding of the key
stakeholders’ views.
Board members must declare their interests to the Chair and Head of Governance in any matter
relating to the NHSBSA’s business at the time that they become aware of a potential conflict.
Members will normally be excluded from the discussion after declaring an interest related to that
issue. The minutes of the meeting will record the member’s declaration. The Register of Board
Member’s Declared Interests for the financial year is available on the NHSBSA website.
NHSBSA Board review of effectiveness
The NHSBSA Board is required to consider its own effectiveness on a regular basis. The NHSBSA
undertakes such a review annually.
The Board engaged an independent and experienced assessor to undertake the review for 2022-
23. The review also incorporated a review of Chair Effectiveness. The process included interviews
with all Board members and meeting observation.
The results of the review indicated that the requirements of the Code of Good Practice for
Corporate Governance and FRC Guidance on Board / Chair Effectiveness where relevant for
NHSBSA as an ALB were being met. All required responsibilities were being suitably discharged
with members consistently expressing positive affirmations against all key areas covered. In the
spirit of continuous improvement, the reviewer identified some opportunities to further enhance the
effectiveness of arrangements. These included continuing to develop the format of Board papers
and further developing opportunities for Board member engagement outside formal meetings. The
recommendations were accepted by the Board and actions taken forward.
During 2022-23, the Board continued to operate within its governance framework and codes of
conduct. Furthermore, the NHSBSA has:
• Achieved its financial targets,
• Delivered against the majority of its agreed key performance indicators,
• Continued to operate its assurance process through the assurance map process,
• Maintained its robust performance reporting mechanism using a dashboard style approach,
Page 32
NHS Pension Scheme Annual Report & Accounts 2022-2023
• Maintained its risk management procedures using dashboard reporting giving an overview
of the risk profile of the whole organisation yet focusing attention on relevant areas; and
• Maintained an effective, risk-based internal audit programme, ensuring internal audit
recommendations are addressed appropriately.
Audit and Risk Management Committee
The Committee is chaired by a non-executive director and has met five times during 2022-23.
Membership of this Committee is made up of three non-executive directors including the Chair, one
of whom is required to have recent and relevant financial experience. Kathryn Gillatt provides this
experience and chairs the Committee. There is also a requirement for regular attendance from the
Executive Director of Finance and Commercial Services and representatives from both internal and
external audit. The Chief Executive and Accounting Officer also attends the meeting, included
specifically to discuss the assurance processes which support the production of the Annual Report
and Accounts. Other staff are invited to attend meetings as appropriate.
Audit and Risk Management
Committee
Meetings
A
ttended
Non-executive Directors:
Kathryn Gillatt (Chair of Committee)
Debra Bailey
Mel Tomlin
Executive Directors
:
Michael Brodie (Chief Executive)
Mark Dibble (Executive Director of People and
Corporate Services)
Andy McKinlay (Executive Director of Finance and
Commercial Services)
5 of 5
4 of 5
5 of 5
5 of 5
5 of 5
4 of 5
The Committee is responsible for providing the Board with an independent and objective view of
the adequacy and effectiveness of the NHSBSA’s governance and assurance arrangements,
including the governance framework, risk management, controls, and related assurances. Updates
are provided to the Board following each meeting and subsequent Board meetings receive copies
of the confirmed minutes. An annual report is submitted to the Board which summarises the work
undertaken by the Committee during the previous year. In addition, the Committee receives an
annual review of the NHSBSA Risk Management Framework. This is reviewed annually at the
June Audit and Risk Management Committee. The most recent review concluded that the
framework was effective and fit-for-purpose.
The Audit and Risk Management Committee’s key responsibilities are:
• Monitoring financial governance and reviewing the draft financial statements of the
NHSBSA and the Scheme,
• Reviewing the effectiveness of internal controls,
• Monitoring the effectiveness of risk management controls,
• Monitoring the effectiveness of fraud and security management,
• Seeking assurance regarding the control environment,
• Reviewing the effectiveness of internal audit arrangements.
Page 33
NHS Pension Scheme Annual Report & Accounts 2022-2023
These standing items are complimented by a series of risk-based presentations on ‘Areas of
Focus’ providing an opportunity for members to seek more detailed assurance from senior leaders
(see Assurance Arrangements).
The Committee has reviewed the Scheme’s Annual Report and Accounts which includes the
Annual Governance Statement as required by HM Treasury’s Managing Public Money Annex 3.1.
Audit and Risk Management Committee review of effectiveness
The Committee reviewed its effectiveness using an online survey sent to each member and regular
attendee. Overall, the results were highly positive and confirmed the continued effectiveness of the
Committee.
The full terms of reference for this Committee can be found in the NHSBSA’s Corporate
Governance Framework which is published on the NHSBSA website:
www.nhsbsa.nhs.uk/our-policies/governance-framework
NHSBSA Sponsorship Arrangements
The NHSBSA manages a complex range of business activities on behalf of the DHSC.
Accountability arrangements with the Department comprise an overall Senior Departmental
Sponsor, with individual sponsors providing policy direction for each core service stream, including
the administration of the NHS Pension Scheme.
A clear ongoing accountability framework is in operation, which includes formal reviews with Senior
Sponsors. This is consolidated through a formal framework agreement between the NHSBSA and
DHSC. Strategic, policy and operational issues are reviewed alongside the corporate risk register,
assurance arrangements and the latest financial position at review meetings. Additionally, regular
scheduled meetings are held with the individual service sponsors.
External Auditors
The Comptroller and Auditor General (C&AG) is appointed by Statute as external auditor for the
NHS Pension Scheme Annual Report and Accounts. The C&AG does not undertake any non-audit
services on behalf of the NHSBSA.
NHSBSA management
Other than those matters reserved for the Board, responsibility for the day-to-day management of
the NHSBSA is delegated to the Chief Executive, who is the Accounting Officer. The Chief
Executive is supported by a Leadership Team as shown below. The operation of the NHS Pension
Scheme is managed within NHS Retirement Services. The financial reporting and accounting for
the Scheme is managed within Finance, Estates and Commercial Services.
Page 34
NHS Pension Scheme Annual Report & Accounts 2022-2023
NHSBSA Leadership Team
Page 35
NHS Pension Scheme Annual Report & Accounts 2022-2023
Key governance systems
The NHSBSA has identified the following areas which support the overarching governance
arrangements:
• Risk management,
• Assurance,
• Managing information.
The Audit and Risk Management Committee regularly reviews these areas to ensure that they
remain robust and effective. This enables the Committee to provide assurances to the Board that
appropriate risk identification and management processes are taking place across the
organisation.
Risk Management
Risk appetite - Risk appetite can be defined as the amount of risk that an organisation is willing to
seek or accept in the pursuit of its long-term objectives. The NHSBSA Board review and agree the
organisation’s Risk Appetite Statement at the start of each year, setting appetite levels for key
areas. The NHSBSA’s aim is to seek to terminate, treat, tolerate, or transfer risks as appropriate to
ensure that it meets its objectives.
Process – The NHSBSA Risk Management Framework comprises:
• Risk management policy,
• Risk management methodology,
• Risk and Issue register.
These are applied consistently across the NHSBSA, with risks and issues being escalated up the
hierarchy as dictated by our policy. These tiers consist of:
• Services / Corporate Teams – Risks and issues are managed on an ongoing basis as part
of business-as-usual, with registers owned and managed by the Head of Service,
• Project / Programme – Risks are reviewed and managed by Project Managers as part of
the project governance process. Significant risks and issues are escalated to the
Programme Manager and Portfolio Board,
• Corporate – Each quarter the Leadership Team review the top-level Corporate Risk
Register. This review is informed by collated versions of team and project risk registers, and
a paper produced by the NHSBSA Risk Management Group. The Leadership Team is also
free to identify further risks and issues at this meeting,
• Audit and Risk Management Committee – The Committee receives updates on the work
undertaken in the area of risk and issue management. The Committee also receives a copy
of the Corporate Risk Register, and ‘Areas of Focus’ presentations on specific risk/issue
areas. This process enables the Committee to provide assurances to the Board that the
appropriate risk management processes are in place and risk mitigation is taking place.
Significant risks and issues
In a dynamic and complex business environment significant risks can always be encountered.
The following summarises the ongoing significant risks and issues that are specific to the Scheme
at the end of 2022-23, focusing on the most highly rated and of significance for our stakeholders.
Page 36
NHS Pension Scheme Annual Report & Accounts 2022-2023
Significant risks and issues managed and closed in year
Contact centre recruitment
As a result of the way people work post-pandemic and increased national competition for jobs, it
has become increasingly difficult to attract, recruit and retain frontline agents within the contact
centre putting service delivery KPIs and service quality at risk.
Service management teams, alongside our central People Team, have worked on a range of
mitigation actions to address this risk, including working closely with our recruitment suppliers,
streamlining our internal recruitment processes, broadening the reach of our recruitment, and
ensuring that the business continues to be an attractive proposition for new and existing
colleagues.
Our Customer and Contact Services have also partnered with an outsourcing supplier to support
recruitment and deliver aspects of our current service portfolio. This has allowed flexibility to run
parallel recruitment campaigns and mitigate risks of unexpected attrition and growth in contact
volumes.
Delivery of change
As a result of increased demand for our services and capabilities from DHSC and other
stakeholders in the health and care system, coupled with resource constraints, there was a risk
that our change portfolio became overloaded, which may have resulted in issues in delivering new
services, delivering service improvements, impact on our people, and reputational damage.
In response to this risk the Leadership Team sponsored our Internal Auditors to undertake a review
of the business’s approach to portfolio management. Key recommendations from this audit were
implemented, including having a dedicated Chief Portfolio Officer.
Further actions to mitigate the risk have commenced and include a focus on proactive recruitment
based on the change pipeline, increased capacity within the Portfolio Team, and increased focus
on the development of relationships and joint working with our commissioners to ensure a shared
understanding of required lead times and any resource constraints. Whilst the completion of this
work will require more time in 2023-24, the Leadership Team also agreed that the addition of risks/
issues to their Risk Register linked to specific deliverables is of more value re risk/ issue monitoring
and agreement of mitigations.
Pensions awards increase key performance indicator failure
Due to a 35% increase in Pensions awards payable in April 2022 in comparison with the previous
year and an increase in manual calculations due to the McCloud changes, KPIs for Pensions
awards were below the target of 99.50% from May 2022. A remedial action plan was created and
delivered which recovered the KPI in October 2022. The corporate issue was closed once the KPI
had recovered.
COVID-19 / Pandemic
Following the closure of the COVID-19 Issue during 2021-22, the Leadership Team agreed to
continue to monitor the risks posed in the event of either a resurgence of COVID-19 or another
pandemic event during 2022-23. The business continuity measures introduced during the COVID-
10 pandemic have increased the business’s resilience and readiness for such future events and
have been embedded in the Business Continuity Plans maintained by each service area.
Page 37
NHS Pension Scheme Annual Report & Accounts 2022-2023
Therefore, the decision was made to close the risk on the Corporate Risk Register at the end of
March 2023.
National energy supply issues
Due to the ongoing energy supply issues across the country, a risk was identified that NHSBSA
activities could be impacted if power supplies were disrupted. To mitigate this risk, business
continuity plans were reviewed, and following a period of monitoring, the Leadership agreed that
the risk on the Corporate Risk Register would be closed at the end of March 2023.
Current risks / issues
Public Sector Pensions ruling
Within the three projects aligned to the McCloud Public Sector Pensions ruling we have
successfully delivered a number of Reforms in the last twelve months aligned to the transition of
members from the old legacy Schemes to the reformed Schemes, alongside delivering changes to
the member contributions tiers in October 2022 and Pensionable Re-Employment for 1995
Scheme members from 1 April 2023.
We have completed significant volumes of communications with members and employers including
direct mailing to all eligible members (2.1m direct mailings) advising them of the changes delivered
to date.
There has been some significant increase in the scope of the work commissioned by DHSC for the
Reform element of McCloud which has caused some deferment of work on the Remedy aspects of
the programme. We continue to amend proposed delivery timelines and liaise with DHSC to
ensure we have approval for the proposed delivery intent. We are on track to commence Remedy
work from October 2023 and will continue to assess the chronology of delivery for all aspects
McCloud delivery in partnership with our commissioners and senior stakeholders, whilst continuing
to monitor and manage the risk of administration work growing beyond planned capacity.
Colleague attraction and recruitment
As a result of changes to the way people can work post-pandemic and increased national
competition, there is a risk that the required volume and quality of colleagues cannot be achieved
across many areas of the organisation, which may impact on our ability to achieve current service
KPIs, issues in delivering new services, increased pressure on our people, and damage to our
reputation.
To mitigate this risk, the Talent Acquisition (TA) Team have continued to collaborate with the
business to work on a range of actions to address the risk, including developing our Employee
Value Proposition to support the attraction of talent to the business, TA partnering with the
business to support the sourcing of candidates, development of our external careers microsite and
streamlining our internal recruitment processes. We will continue to focus on monitoring,
managing, and reducing the potential probability and impact of this risk during 2023-24.
Information security
The volumes and sensitivity of data we hold means the Leadership Team and Board have
purposefully continued to closely monitor the organisation’s approach to information and cyber
security. Ongoing benchmarking against best practice standards and scrutiny by the ARC ensures
the risk is managed as threats continue to evolve on a day-by-day basis. Improvements are also
being made as part of the Information Security Management System (ISMS) programme which is
Page 38
NHS Pension Scheme Annual Report & Accounts 2022-2023
aligned to the requirements of ISO27001 – with the business continuing to maintain external
certification during 2022-23, and via the rolling cyber security improvement project.
Significant fraud
A new risk was added to the Corporate Risk Register following discussion at the April 2022 ARC
meeting recognising and logging the business-wide work delivered each year in relation to Fraud
detection and prevention. The NHSBSA have a three-year Loss and Fraud Prevention Strategy
which includes the delivery of an annual workplan, producing Fraud Risk Assessments for all
services within the NHSBSA and monitoring the risks identified, as well as utilising data and
technology to reduce or where possible eradicate risk.
The NHSBSA are participating in the design and delivery of the NHS Counter Fraud Workplan
2023-24 which is a system wide plan to tackle fraud across the health sector and continue their
participation in the Cabinet Office National Fraud Initiative (NFI).
Assurance arrangements
The NHSBSA uses an assurance map approach, using the best practice three lines of defence
model, to identify the sources of assurance in place over each of the key functions and services we
deliver. The three lines of defence represent:
• First line: management control and reporting,
• Second line: functional oversight and governance systems,
• Third line: independent review and regulatory oversight.
This model provides the basis upon which the NHSBSA Leadership Team can determine the focus
of assurance effort. The assurance map is fully integrated with the risk management process with
areas of concern being reflected in the relevant business area risk register and escalated to the
Corporate Risk Register, where required.
The Audit and Risk Management Committee review, at least annually, the process in place around
assurance mapping. The Leadership Team members are responsible for ensuring their maps are
up to date for their areas of responsibility.
The Audit and Risk Management Committee has continued a programme of ‘Areas of Focus’
exercises to assure itself on behalf of the Board regarding the robustness of controls. During 2022-
23 exercises were carried out in the following areas impacting the Scheme:
o ESR Transformation Programme,
o Technical/ Systems Debt, and
o Pensions Legal Rulings.
The Committee has gained an increased awareness over the assurances in place for the area
reviewed. The assurance provided by these reports constitute the key report highlights from the
committee during 2022-23.
Managing Information
During 2022-23 the NHSBSA has maintained its approach to handling information efficiently and
securely. Each year, the NHSBSA undertakes a detailed self-assessment using the NHS-wide
Data Security and Protection Toolkit (DSPT). The DSPT return is based on the National Data
Page 39
NHS Pension Scheme Annual Report & Accounts 2022-2023
Guardian’s ten data security standards. The return for 2022-23 was submitted before the 30 June
2023 deadline. Frequent compliance updates are provided to the NHSBSA Audit and Risk
Management Committee and NHSBSA Board.
There were 347 security incidents raised during 2022-23 relating to the Scheme, this compares
with 336 incidents in 2021-22. Upon investigation and risk assessment (based on set DSPT
criteria), no security incidents were reported to the Information Commissioners Office (ICO).
In the course of the NHSBSA’s business, information is held and used about members of the
public and NHS colleagues. Some of this information is of a personal and sensitive nature and as a
consequence stringent controls are in place to ensure the security of this information. Issues
relating to information security within the NHSBSA are coordinated by the Business Information
Security Group (BISG) which is chaired by the Executive Director of People and Corporate
Services who holds the position of Senior Information Risk Owner (SIRO). The remit of the SIRO is
to take ownership of the NHSBSA’s information security policy, act as advocate for information risk
to the Board and provide written advice to the Accounting Officer on the content of the Annual
Governance Statement with regard to information risk.
Data Protection and Freedom of Information
As a Special Health Authority, the NHSBSA is subject to the requirements of the General Data
Protection Regulation (GDPR) and the Data Protection Act (DPA) 2018. This means that all subject
access requests should be responded to within the provisions of the Act, typically within a calendar
month. Appropriate notifications have been filed with the ICO. The NHSBSA is also subject to the
requirements of the Freedom of Information Act (FOI) 2000. This means that all requests for
information should be responded to within the provisions of the Act, typically within 20 working
days.
During 2022-23 we have dealt with:
• 223 DPA requests relating to the Scheme, 8 less than the previous year. All bar 30
were responded to within the required timeframe,
• 63 FOI requests relating to the Scheme, 16 more than the previous year. All except five
were responded to within the required timeframe.
The root causes for these exceptions have been identified and corrective action taken to avoid a
recurrence. The reason for the targets not being met were due to a number of reasons:
• Scanning staff not correctly recognising these requests,
• Contact Centre agents receiving email and phone requests have not been promptly
forwarding the requests or have not correctly recognised them,
• In the summer of 2022, there were resourcing issues within the corporate IG team due
to the unplanned absence of experienced staff and recruitment for several specialist
roles.
This was addressed through a combination of:
• Additional training for scanning staff to improve their recognition of these requests,
• Updated guidance and feedback on processing errors for contact centre agents,
• The corporate IG team plan being at full complement by the end of June 2023.
The Information Commissioner’s office monitors organisations who consistently fail to respond by
the legal deadline for 15% of requests.
Page 40
NHS Pension Scheme Annual Report & Accounts 2022-2023
Freedom to Speak Up (Whistleblowing)
During 2022-23 the NHSBSA continued to embed and improve a ‘Freedom to Speak Up’ approach
across the organisation. This includes a FTSU Policy, a FTSU Strategy and Improvement Plan, a
FSTU Guardian role, training and awareness plans and formalised Executive (Mark Dibble) and
Non-executive (Karen Seth) lead roles. FTSU Champions were also introduced during 2021-22,
made up of colleagues from a diverse range of backgrounds, locations, and services, and this has
continued to encourage colleagues to speak up during 2022-23.
Oversight of the agenda was provided by a FTSU Network, and regular reports were provided to
the Board aligned to National Guardian’s Office guidance.
During 2022-23 eleven cases were raised and addressed via the FTSU Guardian. Feedback
received from colleagues raising issues was positive in relation to the action taken and support
received. Volumes and themes of cases will continue to be monitored as further communication
campaigns and other initiatives are rolled out during 2023-24.
Handling Complaints
We pride ourselves on the level of service that we provide to our customers and other service
users. We aim to resolve all complaints fairly and promptly in accordance with our defined policy.
We view complaints as an opportunity to learn about how we can improve our services.
During 2022-23 we have maintained our approach to handling complaints. The total number of
formal complaints received during 2022-23 (classified as Internal Dispute Resolution (IDR) stage 1
cases), relating to the Scheme was 1,255, of which 658 were upheld (52.4%). This compares with
1,177 of which 525 were upheld (44.6%) in 2021-22.
The level is reflective of the increase in pensions work generated since 2021-22. Although there
was no overall theme, we identified that the most common area for complaint in 2022-23 was in
respect of process, which could be that the correct process was not followed, the process itself
was incorrect or it resulted in an incorrect decision.
In addition to the ongoing business improvements, we put in place as a result of the increase in
complaints in the year 2021-22, our newly formed Business Process and Knowledge Management
Team have been tasked with reviewing all our administrative process guides to ensure they are up
to date, accurate and complete which will include the following business improvements.
• Work Manager tool to identify root cause,
• More robust feedback tool for feedback to Service Delivery,
• Improved Pensioner Newsletter,
• Stakeholder Engagement events focusing on revised awards,
• Pensions Training Consultant with remit to improve training throughout NHS Retirement
Services.
Page 41
NHS Pension Scheme Annual Report & Accounts 2022-2023
Sources of Assurance
Audit and Risk Management Committee
One of the key sources of assurance provision for the NHSBSA’s Board is from the Audit and Risk
Management Committee, whose key responsibilities are described in the Audit and Risk
Management Committee section. The Committee meets these responsibilities by receiving regular
reports on a range of audit and assurance topics.
The following is a list of the key reports:
• Risk Management updates - setting out and assessing the major risks and issues that we
face along with progress and impact of mitigation actions,
• Annual Risk Management report - outlining how our risk management arrangements have
continued to operate during the year and how they have been reviewed and strengthened,
• Assurance Map review – annual review of the assurance mapping arrangements in place
across the business,
• Areas of Focus presentations – looking at high-risk areas, or other topics highlighted, for
example, through internal audits, assurance maps, etc,
• Internal Audit progress report – regular progress reports on the work undertaken by Internal
Audit against the agreed plan,
• External Audit reports – regular progress reports on the work undertaken by External Audit,
• Internal/External Audit recommendations tracker – updates on progress made across the
NHSBSA in implementing audit recommendations,
• Loss and Fraud Prevention/Local Security Management annual reports - reports detailing
the work undertaken during the year mapped against the agreed work plans,
• Freedom to Speak Up (Whistleblowing) update report – updates on whistleblowing activity
across the business each year.
Other Sources of Assurance
Supporting the role of the Board and the Audit and Risk Management Committee, the NHSBSA’s
governance and control environment also includes the following elements:
• Risk Management Process – see Risk Management section,
• Performance Management Framework - reviewed by the Leadership Team on a monthly
basis and by the Board at each meeting. The framework provides a balanced scorecard
approach covering the key areas of performance,
• Wellbeing and Inclusion Committee - controls are in place to ensure that all our obligations
under equality, diversity and human rights legislation are adhered to. The Wellbeing and
Inclusion Committee, which is chaired by the Chief Executive, monitors performance
against our Diversity and Inclusion Strategy and achievement of our equality objectives. It
also oversees the delivery of our wellbeing and community investment goals,
• Statutory Function Register – a register which details the current Statutory Instruments,
Directions and other applicable agreements is maintained to ensure correct arrangements
are in place, and the NHSBSA is legally compliant in discharging its duties,
• NHS Pension Scheme – as an employer with staff entitled to membership of the Scheme,
control measures are in place to ensure all employer obligations contained within the
Scheme are in accordance with the Scheme rules, and that member records are accurately
Page 42
NHS Pension Scheme Annual Report & Accounts 2022-2023
updated in accordance with the timescales detailed in the Regulations. In addition, access
restrictions to staff pension records exist within pension administration systems with limited
authorised staff able to view or amend records directly,
• National Joint Safety, Health, and Environment (SHE) Committee – controls are in place to
ensure that we comply with relevant health and safety, and environmental law and good
practice. The National Joint SHE Committee, which is chaired by the Executive Director of
People and Corporate Services, monitors performance against our Health and Safety
Strategy and Action Plan, and Environment and Resource Efficiency Strategy and Action
Plan.
Enhanced governance, compliance, and assurance specific to the Scheme
In line with legal requirements effective from April 2015, the NHSBSA has robust governance
arrangements in place to oversee the compliance of the Scheme administration, in addition to the
overarching governance and assurance framework of the NHSBSA.
Pensions Board
The Public Service Pensions Act 2013 requires the NHS Pensions Board to assist the Scheme
Manager in securing compliance with all relevant pension law, regulations, and directions. This role
is one of assurance and governance of the scheme administration provided by the NHSBSA. The
Pensions Board has been in operation since April 2015 (in shadow form since April 2014) and
holds quarterly meetings at which the NHSBSA reports pension KPIs, the results of Compliance
reviews and other administrative performance such as outcomes of legal challenges, Pensions
Ombudsman cases, Breaches of Law and Stakeholder engagement and communications activity.
Pensions Compliance Team
The Pensions Compliance Team conducts reviews covering all major aspects of the pensions
administration service. During 2022-23 compliance activity has been limited as the team were
partially deployed onto COVID-19 services but the following reviews were completed:
• 1995 Re-Employed Pensioners,
• Cash Equivalent Transfer Values (CETV) for Pensions on Divorce or the Dissolution of a
Civil Partnership,
• Pension Credit Benefits after a Divorce or a Dissolution of a Civil Partnership Product
Review,
• Protection of Pay and Voluntary Protection of Pay,
• The Implementation and Discharge of a Pensions Sharing Order after a Divorce or a
Dissolution of a Civil Partnership.
There were no compliance reviews reported to The Pensions Regulator during 2022-23.
Referral to The Pensions Regulator (TPR)
In line with the TPR Code of Practice No 14, the NHSPB submits reports to TPR where material
breaches of law occur.
In December 2022 a breach of law report was submitted in respect of failure to provide Annual
Benefit Statements (ABS) to 100% of the NHS Pension Scheme membership.
Page 43
NHS Pension Scheme Annual Report & Accounts 2022-2023
The NHSBSA provides ABS to members (both active and deferred) via NHS Total Reward
Statements (TRS). Members who do not have access to an ABS via the on-line portals are
directed to request one from NHSBSA. In August 2022 91.38% of NHS Pension Scheme members
were provided an ABS, an increase in real terms of 37,446 statements from the previous year.
Whilst the NHSBSA remains committed to its long-standing aspiration of delivering ABS to all NHS
Pension Scheme members, there are obstacles in achieving this goal. The NHS Pension Scheme
is the largest centrally administered pension scheme in Europe with over 2.3 million active or
deferred members and some of the most complicated working patterns and calculations in the
pensions industry. The complex nature of the Scheme means that it is unlikely that 100% full
automation of ABS calculations will be possible.
TPR are aware of the constraints facing the largest centrally administered pension scheme and will
take no further action in respect of the above breach.
In July 2022 and December 2022, breach of law reports were submitted to the Pensions Regulator
in respect of two individual Pension Sharing Orders which were not implemented within the
required timeframe of 4 months. The first breach was in respect of a 7-day delay and the second
in respect of a delay of 11 days. Both instances were due to manual administrative error. The
Pensions Regulator confirmed no action to be taken in respect of both breaches.
Regular engagement with TPR takes place and updates are provided in respect of record keeping,
annual benefit statement production and compliance.
Government Internal Audit Agency (GIAA)
During the year the Government Internal Audit Agency (GIAA) conducted internal audits relating to
the Scheme as part of their audit plan for the NHSBSA. Some were specific audits of the Pensions
Service and others were business-wide audits including coverage of the Pensions area.
• NHS Pensions – Duplicate Payments,
• Due Diligence and Change Portfolio Management,
• Governance (Key Controls),
• Data Security Protection Toolkit,
• Core Financials including Asset Management,
• End-to-end Debt Management,
• Estates and Facilities Management and Performance,
• Technical Debt,
• IT Support Cost Modelling,
• Incident Management,
• Clinical Governance.
Financial Management
The Schemes’ financial management arrangements conform to the requirements of HMT as laid
out in “Managing Public Money”. The Pensions Finance Reporting, Assurance and Reconcilation
Team report to the Head of Financial Strategy and Reporting who in turn reports to the NHSBSA
Executive Director of Finance and Commercial Services who is the Senior Financial Officer for the
Scheme and is a key member of the NHSBSA Leadership Team and Board.
This management arrangement covers such reports as the Scheme Main Estimate and
Supplementary Estimates, as well as key financial forecasts required by HMT and the Office for
Budgetary Responsibility (OBR). The Pensions Finance Reporting Team, with input from the
Government Actuary’s Department and DHSC prepare the twice yearly 6 year cash flow forecasts
Page 44
NHS Pension Scheme Annual Report & Accounts 2022-2023
for the Scheme. The forecasts are subject to a robust challenge process from HMT and the OBR,
and are refined where appropriate.
The Scheme’s Main and Supplementary Estimates are submitted to the NHSBSA Audit and Risk
Committee, the Supplementary Estimate for formal approval prior to submission to HMT.
Loss and Fraud Prevention
During 2022-23 the NHSBSA Loss and Fraud Prevention (LFP) Team worked with colleagues
across NHS Pensions to continue monitoring the Fraud Risk Assessment (FRA) that was initially
produced in 2020-21.
During 2022-23 NHS Pensions continued to participate in the National Fraud Initiative (NFI)
Mortality Data Matching Exercise which is used to tackle the risk around deceased NHS Pension
members who remain in payment due to their death not being reported to the Scheme. NHSBSA
LFP commenced Post Event Assurance (PEA) work to calculate and recover monies paid to
deceased members identified through the NFI where there has been no contact from next of kin.
The PEA work involves obtaining death certificates and working with the NHS Finance Team who
engage with the bank where the payments have been made. The benefit of this work will not be
realised until quarter 3 of 2023-24.
During 2023-24 we will review the NHS Pensions FRA following restructure of the service and the
teams. We will be monitoring any emerging risks from the implementation of McCloud and the roll
out of My NHS Pensions App.
Key contractual arrangements supporting Pensions Administration
The administration of the Scheme is currently delivered by NHSBSA employees and is supported
by a number of contracted services. The key contracts are detailed below:
• Pensioner and member payroll and administration application development, support and
maintenance delivered by Claybrook Computing Ltd,
• IT Hosting services delivered by Crown Hosting Ltd,
• IT Managed Infrastructure services delivered by Agilisys Ltd,
• IT Network Services delivered by Virgin Media Business Ltd,
• IT Telephony services delivered by Nasstar,
• Medical services delivered by Medigold Health Consultancy Ltd,
• Work manager application development and support and maintenance delivered by Verint
Systems UK Ltd.
A range of contract management and governance mechanisms are in place to ensure the service
delivery of these contracts, including monthly service review meetings, monthly reporting of
performance, recommendations for innovation and change, escalation, and dispute resolution
procedures. Requirements under the Data Protection Act 2018 and the NHSBSA Information
Governance policies and procedures are included within the contractual obligations and followed
by all these suppliers.
Accounting Officer’s review of effectiveness
As Accounting Officer, I have responsibility for reviewing the effectiveness of the system of internal
control. My review is informed in a number of ways. The Head of Internal Audit provides me with
an annual opinion on the overall adequacy and effectiveness of the organisation’s risk
management, control, and governance processes.
Page 45
NHS Pension Scheme Annual Report & Accounts 2022-2023
The Head of Internal Audit’s opinion was that, based on the work completed to date, there is
moderate assurance given to the Accounting Officer that the NHSBSA has had adequate and
effective systems of control, governance, and risk management in place for the reporting year
2022-23.
The Assurance Framework itself provides me with evidence that the effectiveness of controls that
manage the risks to the NHSBSA achieving its principal objectives have been reviewed. My review
is informed by:
• The work of the Audit and Risk Management Committee which informs the Board about the
outcome of its activities through submission of an Alert, Advise and Assure Report (AAA
report), together with its minutes and annual report to the Board,
• The findings of both the NAO and the internal audit reviews. The Audit and Risk
Management Committee oversees progress towards the implementation of all such
recommendations,
• The work of the Fraud Specialists is to prevent, deter, investigate, and report fraud activity.
The Audit and Risk Management Committee receives the annual work plan and annual
report of the Fraud Specialists and provides updates to the Board as appropriate.
Significant Governance Issues
There were no significant issues raised during 2022-23.
Conclusion
My review confirms that the NHSBSA has a system of governance that supports the achievement
of its policies, aims and objectives, and that of the NHS Pension Scheme, and that continuous
improvement is ongoing.
Michael Brodie
Chief Executive
NHS Business Services Authority 5 September 2023
Page 46
NHS Pension Scheme Annual Report & Accounts 2022-2023
Parliamentary Accountability and Audit Report
Statement of Outturn against Parliamentary Supply
In addition to the primary statements prepared under International Financial Reporting Standards
(IFRS), the Government Financial Reporting Manual (FReM) requires the NHS Pension Scheme
(incorporating the NHS Compensation for Premature Retirement Scheme) to prepare a Statement
of Outturn against Parliamentary Supply (SoPS) and supporting notes.
The SoPS and related notes are subject to audit, as detailed in the Certificate and Report of the
Comptroller and Auditor General to the House of Commons.
The SoPS is a key accountability statement that shows, in detail, how an entity has spent against
their Supply Estimate. Supply is the monetary provision (for resource and capital purposes) and
cash (drawn primarily from the Consolidated fund), that Parliament gives statutory authority for
entities to utilise. The Estimate details supply and is voted on by Parliament at the start of the
financial year.
Should an entity exceed the limits set by their Supply Estimate, called control limits, their accounts
will receive a qualified opinion.
The format of the SoPS mirrors the Supply Estimates, published on GOV.UK, to enable
comparability between what Parliament approves and the final outturn.
The SoPS contain a summary table, detailing performance against the control limits that
Parliament have voted on, cash spent (budgets are compiled on an accruals basis and so outturn
won’t exactly tie to cash spent) and administration.
The supporting notes detail the following: Outturn by estimate line, providing a more detailed
breakdown (SoPS 1); a reconciliation of outturn to net cash requirement (SoPS 3); and an analysis
of income payable to the Consolidated Fund (SoPS 4).
Page 47
NHS Pension Scheme Annual Report & Accounts 2022-2023
Statement of Outturn against Parliamentary Supply for the year ended 31 March 2023
Summary of Resource Outturn 2022-23
This section has been subject to audit.
£000
2022-23
Restated
2021-22
Outturn
Estimate
Outturn
vs
Estimate
saving /
(excess)
Note
Voted
Non-
Voted
Total
Voted
Non-
Voted
Total
Prior Year
Outturn
Total
Annually
managed
expenditure
SoPS1
- Resource
46,699,703
-
44,699,703
47,154,711
-
47,154,711
2,455,008
32,675,677
Total Budget
46,699,703
-
44,699,703
47,154,711
-
47,154,711
2,455,008
32,675,677
Non-Budget
- Resource
-
-
-
-
-
-
-
-
Total
46,699,703
-
44,699,703
47,154,711
-
47,154,711
2,455,008
32,675,677
Figures in the areas outlined in thick line cover the voted control limits voted by Parliament. Refer
to the Supply Estimates guidance manual, available on GOV.UK, for detail on the control limits
voted by Parliament.
Net cash requirement 2022-23
2022-23
2022-23
2021-22
Prior Year
Outturn vs Estimate
Outturn
Outturn
Estimate
saving/(excess)
Total
£000
£000
£000
£000
(4,325,191)
(3,458,212)
866,979
(4,350,585)
Administration costs 2022-23
2022-23
2022-23
2021-22
Prior Year
Outturn vs Estimate
Outturn
Outturn
Estimate
saving/(excess)
Total
£000
£000
£000
£000
-
-
-
-
Page 48
NHS Pension Scheme Annual Report & Accounts 2022-2023
Notes to the Statement of Outturn against Parliamentary Supply
SoPS1. Analysis of Resource outturn by Estimate line
£000
2022-23
Restated
2021-22
Resource Outturn
Estimate
Outturn vs
Estimate
saving /
(excess)
Prior
Year
Outturn
Total
Administration
Programme
Total
Total
Total
Total
Gross
Income
Net
Gross
Income
Net
Departmental Expenditure Limit (DEL)
Voted:
-
-
-
-
-
-
-
-
-
-
Non Voted:
-
-
-
-
-
-
-
-
-
-
Annually Managed Expenditure (AME)
Voted:
A: NHS Pension Scheme
-
-
-
63,592,895
(18,893,192)
44,699,703
44,699,703
47,154,711
2,455,008
32,675,677
Non-Voted
expenditure:
-
-
-
-
-
-
-
-
-
-
Total
-
-
-
63,592,895
(18,893,192)
44,699,703
44,699,703
47,154,711
2,455,008
32,675,677
Explanation of the variance between Resource Estimate and outturn:
The outturn is less than the Estimate primarily due to:
• The combined Current Service Cost and Pensions Finance Cost being lower than forecast
by £2,300 million due mainly to the prior period adjustment to the opening Scheme liability,
• Total contribution income being higher than forecast by £155 million.
SoPS2. Reconciliation of outturn to net operating expenditure
The total resource outturn of £44.70 billion shown above in the SoPS summary table on page 47 is
the same as the combined net expenditure shown in the Statement of Comprehensive Net
Expenditure (SoCNE) on page 59. Therefore no reconcilation table is required.
Page 49
NHS Pension Scheme Annual Report & Accounts 2022-2023
SoPS3. Reconciliation of net resource outturn to net cash requirement
2022-23
Item
Reference
Outturn
Total
Estimate
Outturn vs
Estimate
savings/
(excess)
£000
£000
£000
Resource Outturn
SoPS1
44,699,703
47,154,711
2,455,008
Capital Outturn
-
-
-
Adjustments to remove non-cash items:
New provisions and adjustments to
previous provisions
(63,549,633)
(65,854,012)
(2,304,379)
Adjustments to reflect movements in
working balances:
Increase in receivables
89,631
413,713
324,082
Decrease in payables
63,952
37,267
(26,685)
Increase in prepaid pension benefits
3,841
-
(3,841)
Use of provision
14,367,315
14,790,109
422,794
Net cash requirement
(4,325,191)
(3,458,212)
866,979
As noted in the introduction to the SoPS above, outturn and Estimates are compiled against the
budgeting framework, not on a cash basis. Therefore, this reconciliation bridges the resource and
capital outturn to the net cash requirement.
Explanation of the variance between Net Cash Requirement (NCR) Estimate and
outturn:
The NCR for the NHS Pension Scheme currently refers to the amount of surplus cash the scheme
generates each year as income exceeds pension benefits paid.
The outturn surplus was more than the Estimate primarily due to:
• Lump Sum payments being lower than forecast by £427 million,
• Total contribution income being higher than forecast by £155 million,
• The movement in debtors and creditors being lower than forecast by £297 million.
Page 50
NHS Pension Scheme Annual Report & Accounts 2022-2023
SoPS4. Amounts of income payable to the Consolidated Fund
In addition to the income retained by the Scheme to offset pension payments, the following income
is payable to the Consolidated Fund (cash receipts being shown in italics).
Item
Outturn total 2022-23
Accruals Cash basis
£000 £000
Outturn total 2021-22
Accruals Cash basis
£000 £000
Income outside the ambit of the
Estimate
-
-
-
-
Excess cash surrenderable to the
Consolidated Fund – current year
-
4,325,191
-
4,350,585
Excess cash surrenderable to the
Consolidated Fund – prior year
-
-
-
-
Total income payable to the
Consolidated Fund
-
4,325,191
-
4,350,585
Page 51
NHS Pension Scheme Annual Report & Accounts 2022-2023
Losses and Special Payments Disclosures
This section has been subject to audit.
Losses statement
2022-23
2021-22
Total number of losses
9,086
16,129
Total value of losses £000
1,233
6,701
Losses relate to overpaid pension benefits that were deemed irrecoverable. The increase in 2021-
22 primarily relates to the inclusion of the write-off’s relating to GMP rectification.
Special payments
2022-23
2021-22
Total number of special payments
102
57
Total value of special payments £000
798
129
Special payments relate to compensatory payments made to members where a complaint was
made against the scheme administrator, and to HMRC where the scheme is required to pay a tax
charge relating to a member benefit.
There were no individual losses greater than £300,000 or special payments during 2022-23.
Page 52
NHS Pension Scheme Annual Report & Accounts 2022-2023
The Certificate and Report of the Comptroller and Auditor General to the
House of Commons
Opinion on financial statements
I certify that I have audited the financial statements of the NHS Pension Scheme (incorporating the
NHS Compensation for Premature Retirement Scheme) (together “the Scheme”) for the year
ended 31 March 2023 under the Government Resources and Accounts Act 2000.
The Scheme’s financial statements comprise: the combined
• Statement of Financial Position as at 31 March 2023;
• Statement of Comprehensive Net Expenditure, Statement of Cash Flows and Statement of
Changes in Taxpayers’ Equity for the year then ended; and
• the related notes including the significant accounting policies.
The financial reporting framework that has been applied in the preparation of the combined
financial statements is applicable law and UK adopted international accounting standards.
In my opinion, the financial statements:
• give a true and fair view of the state of the Scheme’s affairs as at 31 March 2023 and its
combined net expenditure for the year then ended; and
• have been properly prepared in accordance with the Government Resources and Accounts
Act 2000 and HM Treasury directions issued thereunder.
Opinion on regularity
In my opinion, in all material respects:
• the Statement of Outturn against Parliamentary Supply properly presents the outturn
against voted Parliamentary control totals for the year ended 31 March 2023 and shows
that those totals have not been exceeded; and
• the income and expenditure recorded in the financial statements have been applied to the
purposes intended by Parliament and the financial transactions recorded in the financial
statements conform to the authorities which govern them.
Basis for opinions
I conducted my audit in accordance with International Standards on Auditing (UK) (ISAs UK),
applicable law, Practice Note 15 (revised) The Audit of Occupational Pension Schemes in the
United Kingdom and Practice Note 10 Audit of Financial Statements and Regularity of Public
Sector Bodies in the United Kingdom (2022). My responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the financial statements section of my
certificate.
Those standards require me and my staff to comply with the Financial Reporting Council’s Revised
Ethical Standard 2019. I am independent of the Scheme in accordance with the ethical
Page 53
NHS Pension Scheme Annual Report & Accounts 2022-2023
requirements that are relevant to my audit of the financial statements in the UK. My staff and I have
fulfilled our other ethical responsibilities in accordance with these requirements.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for
my opinion.
Conclusions relating to going concern
In auditing the financial statements, I have concluded that the Scheme’s use of the going concern
basis of accounting in the preparation of the financial statements is appropriate.
Based on the work I have performed, I have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the Scheme’s
ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
My responsibilities and the responsibilities of the Accounting Officer with respect to going concern
are described in the relevant sections of this certificate.
The going concern basis of accounting for the Scheme is adopted in consideration of the
requirements set out in HM Treasury’s Government Financial Reporting Manual, which requires
entities to adopt the going concern basis of accounting in the preparation of the financial
statements where it is anticipated that the services which they provide will continue into the future.
Other Information
The other information comprises information included in the Annual Report, but does not include
the financial statements and my auditor’s certificate and report thereon. The Accounting Officer is
responsible for the other information.
My opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in my certificate, I do not express any form of assurance
conclusion thereon.
My responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or my knowledge obtained in the
audit, or otherwise appears to be materially misstated.
If I identify such material inconsistencies or apparent material misstatements, I am required to
determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work I have performed, I conclude that there is a material
misstatement of this other information, I am required to report that fact.
I have nothing to report in this regard.
Opinion on other matters
In my opinion, based on the work undertaken in the course of the audit:
• the parts of the Accountability Report subject to audit
have been properly prepared in
accordance with HM Treasury directions made under the Government Resources and
Accounts Act 2000; and
• the information given in the Accountability Report for the financial year for which the
financial statements are prepared is consistent with the financial statements and is in
accordance with the applicable legal requirements.
Page 54
NHS Pension Scheme Annual Report & Accounts 2022-2023
Matters on which I report by exception
In the light of the knowledge and understanding of the Scheme and its environment obtained in the
course of the audit, I have not identified material misstatements in the Accountability Report.
I have nothing to report in respect of the following matters which I report to you if, in my opinion:
• Adequate accounting records have not been kept by the Scheme or returns adequate for
my audit have not been received from branches not visited by my staff; or
• I have not received all of the information and explanations I require for my audit; or
• The financial statements and the parts of the Accountability Report subject to audit are not
in agreement with the accounting records and returns; or
• The Governance Statement does not reflect compliance with HM Treasury’s guidance.
Responsibilities of the Accounting Officer for the financial statements
As explained more fully in the Statement of Accounting Officer’s responsibilities, the Accounting
Officer is responsible for:
• Maintaining proper accounting records;
• Providing the C&AG with access to all information of which management is aware that is
relevant to the preparation of the financial statements such as records, documentation and
other matters;
• Providing the C&AG with additional information and explanations needed for his audit;
• Providing the C&AG with unrestricted access to persons within the Department from whom
the auditor determines it necessary to obtain audit evidence;
• Ensuring such internal controls are in place as deemed necessary to enable the
preparation of financial statements to be free from material misstatement, whether due to
fraud or error;
• Ensuring that the financial statements give a true and fair view and are prepared in
accordance with HM Treasury directions made under the Government Resources and
Accounts Act 2000;
• Ensuring that the annual report is prepared in accordance with HM Treasury directions
made under the Government Resources and Accounts Act 2000; and
• Assessing the Scheme’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless
the Accounting Officer anticipates that the services provided by the Scheme will not
continue to be provided in the future.
Auditor’s responsibilities for the audit of the financial statements
My responsibility is to audit, certify and report on the financial statements in accordance with the
Government Resources and Accounts Act 2000.
My objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue a certificate
that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee
Page 55
NHS Pension Scheme Annual Report & Accounts 2022-2023
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Extent to which the audit was considered capable of detecting non-compliance with laws
and regulations, including fraud
I design procedures in line with my responsibilities, outlined above, to detect material
misstatements in respect of non-compliance with laws and regulations, including fraud. The extent
to which my procedures are capable of detecting non-compliance with laws and regulations,
including fraud is detailed below.
Identifying and assessing potential risks related to non-compliance with laws and
regulations, including fraud
In identifying and assessing risks of material misstatement in respect of non-compliance with laws
and regulations, including fraud, I:
• Considered the nature of the sector, control environment and operational performance
including the design of the Scheme‘s accounting policies.
• Inquired of management, the Scheme’s head of internal audit and those charged with
governance, including obtaining and reviewing supporting documentation relating to the
Scheme’s policies and procedures on:
o identifying, evaluating, and complying with laws and regulations;
o detecting and responding to the risks of fraud; and
o the internal controls established to mitigate risks related to fraud or non-
compliance with laws and regulations including the Scheme’s controls relating to
the Scheme’s compliance with the Government Resources and Accounts Act
2000, Supply and Appropriation (Main Estimates) Act 2022, Managing Public
Money, the regulations set by The Pensions Regulator, NHS Pensions Scheme
Regulations 1995, 2008 and 2015, as amended, the NHS (Compensation for
Premature Retirement) Regulations 2002, as amended, and the Public Service
Pensions Act 2013.
• Inquired of management, the Scheme’s head of internal audit and those charged with
governance whether:
o they were aware of any instances of non-compliance with laws and regulations;
o they had knowledge of any actual, suspected, or alleged fraud,
• Discussed with the engagement team and the relevant internal and external specialists,
including actuarial specialists, regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud.
As a result of these procedures, I considered the opportunities and incentives that may exist within
the Scheme for fraud and identified the greatest potential for fraud in the following areas: posting of
unusual journals, complex transactions, bias in management estimates and the selection of
inappropriate assumptions or methodology underpinning the pensions liability and related
estimates and the payment of benefits to ineligible members. In common with all audits under ISAs
(UK), I am required to perform specific procedures to respond to the risk of management override.
I obtained an understanding of the Scheme’s framework of authority and other legal and regulatory
frameworks in which the Scheme operates. I focused on those laws and regulations that had a
Page 56
NHS Pension Scheme Annual Report & Accounts 2022-2023
direct effect on material amounts and disclosures in the financial statements or that had a
fundamental effect on the operations of the Scheme. The key laws and regulations I considered in
this context included Government Resources and Accounts Act 2000, Managing Public Money,
Supply and Appropriation (Main Estimates) Act 2022, regulations set by The Pensions Regulator,
NHS Pensions Scheme Regulations 1995, 2008 and 2015, as amended, the NHS (Compensation
for Premature Retirement) Regulations 2002, as amended, and the Public Service Pensions Act
2013.
I considered the control environment in place at the Scheme, the administrator and the scheme
actuary, in respect of membership data, the pension liability, contributions due and benefits
payable.
Audit response to identified risk
To respond to identified risks resulting from the above procedures:
• I reviewed the financial statement disclosures and testing to supporting documentation to
assess compliance with provisions of relevant laws and regulations described above as
having direct effect on the financial statements;
• I enquired of management, the Audit and Risk Management Committee and in-house legal
counsel concerning actual and potential litigation and claims;
• I reviewed minutes of meetings of those charged with governance and the Board; and
internal audit reports;
• in addressing the risk of fraud through management override of controls, I tested the
appropriateness of journal entries and other adjustments; assessed whether the
judgements on estimates are indicative of a potential bias; and evaluated the business
rationale of any significant transactions that are unusual or outside the normal course of
business;
• I performed substantive testing of contributions received and benefits paid in the year to
ensure compliance with laws and regulations and regularity;
• I engaged an auditor’s expert to review the actuarial methods and assumptions used by the
Scheme actuary, reviewing the expert’s report and undertaking any further procedures as
necessary; and
• I review significant correspondence with the Pensions Regulator.
I also communicated relevant identified laws and regulations and potential risks of fraud to all
engagement team members including internal and external specialists and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout the audit.
A further description of my responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of my certificate.
Other auditor’s responsibilities
I am required to obtain appropriate evidence sufficient to give reasonable assurance that the
Statement of Outturn against Parliamentary Supply properly presents the outturn against voted
Parliamentary control totals and that those totals have not been exceeded. The voted
Parliamentary control totals are Departmental Expenditure Limits (Resource and Capital), Annually
Page 57
NHS Pension Scheme Annual Report & Accounts 2022-2023
Managed Expenditure (Resource and Capital), Non-Budget (Resource) and Net Cash
Requirement.
I am required to obtain evidence sufficient to give reasonable assurance that the expenditure and
income recorded in the financial statements have been applied to the purposes intended by
Parliament and the financial transactions recorded in the financial statements conform to the
authorities which govern them.
I communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control I identify during my audit.
Report
I have no observations to make on these financial statements.
Gareth Davies
Comptroller and Auditor General 11 September 2023
National Audit Office
157-197 Buckingham Palace Road
Victoria
London, SW1W 9SP
Page 58
NHS Pension Scheme Annual Report & Accounts 2022-2023
Financial
Statements
Page 59
NHS Pension Scheme Annual Report & Accounts 2022-2023
Combined Statement of Comprehensive Net Expenditure for the year
ended 31 March 2023
2022-23
Restated
2021-22
Note
£000
£000
Income
Contributions receivable
3
(18,755,774)
(17,437,693)
Transfers in
4
(70,305)
(78,405)
Other income
5
(67,113)
(113,073)
(18,893,192)
(17,629,171)
Expenditure
Service cost
6
50,100,000
40,800,000
Enhancements
7
79,327
86,291
Transfers in – additional liability
8
70,306
78,405
Pension financing cost
9
13,300,000
9,300,000
Administration cost
10
43,262
40,152
63,592,895
50,304,848
Combined net expenditure
SoPS1
44,699,703
32,675,677
Other comprehensive net expenditure
Pension re-measurements:
Revaluation loss of estimated discounted future cash flows
In respect of early retirement charges
16
127,682
31,411
Actuarial loss (gain) / loss
17.7
(429,482,318)
71,490,524
Total Comprehensive Net Expenditure
(384,654,933)
104,197,612
The Combined Statement of Comprehensive Net Expenditure, and the relevant supporting notes, as at
31 March 2022 have been restated to include a prior period adjustment in respect of a correction to the
scheme liability. Additional detail is provided at note 18 to the financial statements.
The notes on pages 63 to 80 form part of these financial statements.
Page 60
NHS Pension Scheme Annual Report & Accounts 2022-2023
Combined Statement of Financial Position as at 31 March 2023
2023
Restated
31 March
2022
Restated
1 April 2021
Note
£000
£000
£000
£000
Current assets:
Receivables
12
1,310,168
1,220,537
1,170,050
Cash and cash equivalents
13
4,325,191
4,350,585
3,642,299
Prepayments – prepaid pension benefits
15
3,841
-
-
Total current assets
5,639,200
5,571,122
4,812,349
Current liabilities
Payables (within one year)
14
(4,915,156)
(5,004,502)
(4,228,943)
Net current liabilities, excluding pension
liability
724,044
566,620
583,406
Estimated discounted future cashflows in respect
of premature retirement recharges
16
233,027
360,709
392,120
Pension liability
17.4
(460,600,000)
(840,900,000)
(732,400,000)
Net liabilities, including pension liabilities
(459,642,929)
(839,972,671)
(731,424,474)
Taxpayers’ equity
General Fund
(459,642,929)
(839,972,671)
(731,424,474)
(459,642,929)
(839,972,671)
(731,424,474)
The Statement of Financial Position, and the relevant supporting notes, as at 1 April 2021 and 31
March 2022 have been restated to include a prior period adjustment in respect of a correction to the
scheme liability. Additional detail is provided at note 18 to the financial statements.
M Brodie
Accounting Officer
5 September 2023
The notes on pages 63 to 80 form part of these financial statements.
Page 61
NHS Pension Scheme Annual Report & Accounts 2022-2023
Combined Statement of Changes in Taxpayers’ Equity for year ended
31 March 2023
2022-23
Restated
2021-22
Note
£000
£000
Balance at 1 April
(839,972,671)
(731,424,474)
Revaluation (loss) of estimated discounted future cash flows in
respect of early retirement recharges
16
(127,682)
(31,411)
Surplus cash payable to the Consolidated Fund – current year
supply
SoPS4
(4,325,191)
(4,350,585)
Comprehensive Net Expenditure for the Year
SoCNE
(44,699,703)
(32,675,677)
Actuarial gain / (loss) – NHS Pension Scheme
17.7
429,482,318
(71,490,524)
Net Change in Taxpayer’s Equity
380,329,742
(108,548,197)
Balance at 31 March 2023
(459,642,929)
(839,972,671)
The Combined Statement of Changes in Taxpayers’ Equity, and the relevant supporting notes, as at 31
March 2022 have been restated to include a prior period adjustment in respect of a correction to the
scheme liability. Additional detail is provided at note 18 to the financial statements.
The notes on pages 63 to 80 form part of these financial statements.
Page 62
NHS Pension Scheme Annual Report & Accounts 2022-2023
Combined Statement of Cash Flows for the year ended 31 March 2023
2022-23
(Restated)
2021-22
Note
£000
£000
Cash flows from operating activities
Net expenditure for the year
SoCNE
(44,699,703)
(32,675,677)
Adjustments for non-cash transactions:
Increase in receivables
(89,631)
(50,487)
(Decrease) / increase in payables
(63,952)
67,273
Increase in pension provision
17.4
63,400,000
50,100,000
Increase in pension provision – enhancements and
transfers in
17.4
149,633
164,696
Increase in prepaid pension benefits
15
(3,841)
-
Use of provisions – pension benefits
17.5
(14,129,568)
(13,057,579)
Use of provisions – leavers
17.6
(237,747)
(197,641)
Net cash inflow from operating activities
4,325,191
4,350,585
Cash flows from financing activities
From the Consolidated Fund (Supply) – current year
-
-
From the Contingencies Fund – current year
1,230,000
1,180,000
Repayment to the Contingencies Fund
(1,230,000)
(1,180,000)
Net Financing
-
-
Net increase in cash and cash equivalents in the year
before adjustment for receipts and payments to the
Consolidated Fund
4,325,191
4,350,585
Payments of amounts due to the Consolidated Fund
(4,350,585)
(3,642,299)
Net (decrease) / increase in cash and cash
equivalents in the year after adjustment for receipts
and payments to the Consolidated Fund
(25,394)
708,286
Cash and cash equivalents at the beginning of the year
4,350,585
3,642,299
Cash and cash equivalents at the end of the year
4,325,191
4,350,585
The Combined Statement of Cash Flows, and the relevant supporting notes, as at 31 March 2022 have
been restated to include a prior period adjustment in respect of a correction to the scheme liability.
Additional detail is provided at note 18 to the financial statements.
The notes on pages 63 to 80 form part of these financial statements.
Page 63
NHS Pension Scheme Annual Report & Accounts 2022-2023
Notes to the Financial Statements
1.1 Basis of Preparation of the Scheme Financial Statements
The financial statements of the combined NHS Pension Scheme and NHS Pension for Premature
Retirement Scheme have been prepared in accordance with the relevant provisions of the 2022-23
Government Financial Reporting Manual (FReM) issued by HMT. The accounting policies
contained in the FReM apply International Financial Reporting Standards (IFRSs) as adapted or
interpreted for the public sector. IAS 19 Employee Benefits and IAS 26 Accounting and Reporting
by Retirement Benefit Plans are of particular relevance to these statements.
In addition to the primary statements prepared under IFRSs, the FReM also requires the Scheme
to prepare an additional statement – a Statement of Outturn against Parliamentary Supply. This
statement, and its supporting notes, show outturn against Estimate in terms of the net resource
requirement and the net cash requirement.
1.2 Going Concern
The Statement of Financial Position as at 31 March 2023 shows a combined pension and
compensation liability of £460.6 billion (2021-22: £840.9 billion). Other movements in the liability
reflect the inclusion of liabilities falling due in the long-term, which are to be financed mainly by
drawings from the Consolidated Fund. Such drawings will be grants of Supply approved annually
by Parliament to meet the Scheme’s pension benefits, which come into payment each year.
Under the Government Resources and Accounts Act 2000, no money may be drawn from the Fund
other than as required for the service of the specified year or retained in excess of that need.
In common with other public service pension schemes, the future financing of the Scheme’s
liabilities is to be met by future grants of supply to be approved annually by Parliament. Such
approval for amounts required for 2023-24 has already been given. It has accordingly been
considered appropriate to adopt a going concern basis for the preparation of these financial
statements.
1.3 NHS Pension Scheme
The NHS Pension Scheme is an unfunded, defined benefit pay-as-you-go occupational pension
scheme operated by the NHSBSA on behalf of the Secretary of State for Health and Social Care
on behalf of members of the National Health Service who satisfy the membership criteria.
Contributions to the Scheme by employers and employees were set at rates determined by the
Scheme’s Actuary and approved by the Secretary of State for Health and Social Care. The income
received currently exceeds payments made by the Scheme, the balance of surplus cash is
returned to HMT. If payments exceed income, the balance of the funding would need to be
provided by Parliament through the annual Supply Estimates process.
The financial statements of the Scheme show the combined financial position of the NHS Pension
Scheme and NHS Compensation for Premature Retirement Schemes at the year end and the
income and expenditure during the year. The Combined Statement of Financial Position shows the
unfunded net liabilities of the Scheme; the Combined Statement of Comprehensive Net
Expenditure shows, amongst other things, factors contributing to the change in the net liability
analysed between the pension cost, enhancements, and transfers in, and the interest on the
Scheme liability. Further information about the actuarial position of the Scheme is dealt with in the
Report of the Actuary, and the Scheme financial statements should be read in conjunction with that
Report.
Page 64
NHS Pension Scheme Annual Report & Accounts 2022-2023
1.4 NHS Pension for Premature Retirement Scheme
The NHS Pension Scheme acts as a principal for employers in the payment of compensation
benefits arising under the NHS Compensation for Premature Retirement Scheme. Employers now
only have the option of discharging their liability by way of payment of a capital sum, previously
employers could pay for the compensation benefits, which are paid out in the course of the month,
on a quarterly basis. This arrangement ceased for employers from 1 October 2011 but the costs for
historic cases are still being met by employers. The financial statements recognise the liabilities
arising from cases charged to employers on an ongoing basis (and in addition a corresponding
estimated Discounted Future Cash flow within Combined Statement of Financial Position).
2. Accounting Policies
The accounting policies contained in the FReM follow International Financial Reporting Standards
to the extent that they are meaningful and appropriate to the public sector. Where the FReM
permits a choice of accounting policy, the accounting policy which has been judged to be the most
appropriate to the particular circumstances of the Scheme for the purpose of giving a true and fair
view has been selected. The accounting policies adopted have been applied consistently in dealing
with items considered material in relation to the Scheme financial statements.
2.1 Accounting Convention
These accounts have been prepared under the historical cost convention.
2.2 Critical Accounting Judgements and key sources of estimation uncertainty
The preparation of these accounts requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities,
income, and expenditure. These assessments are based on historic and other factors that are
believed to be reasonable, the results of which form the basis for making judgements. The
estimates and underlying assumptions are reviewed on an on-going basis. The key estimates and
judgements relate to the valuation of the pension liability set out in Note 17 below.
Further estimation uncertainty arises in relation to legal cases where either the outcome or impact
of the cases on the Scheme remain uncertain at the reporting date. Management has therefore
applied judgement in estimating the most likely impact on the Scheme based on the best available
information at the reporting date.
2.3 Contributions receivable
• Employers’ normal pension contributions are accounted for on an accruals basis in the
month to which the associated salaries and wages relate,
• Employees’ normal pension contributions are accounted for on an accruals basis in the
month to which the associated salaries and wages relate,
• Employees’ contributions paid in respect of the purchase added years are accounted for on
an accruals basis, and additional pension contributions are accounted for on a cash basis.
The associated increase in the scheme liability is recognised as expenditure,
• Where Scheme members make Additional Voluntary Contributions (AVCs) to secure
additional pension benefits through the Scheme’s approved suppliers these were directly
invested through individual contracts with those suppliers. These additional contributions
are not included in the financial statements but are shown separately in Note 11 to the
Page 65
NHS Pension Scheme Annual Report & Accounts 2022-2023
financial statements. Please refer to Note 11 for further information on Scheme AVC
providers,
• Contributions receivable are outside the scope of IFRS 15 – Revenue and Contract with
Customers.
2.3.1 Contributions receivable relating to the Compensation for Premature
Retirement Scheme
Employers’ contributions are accounted for in accordance with the agreement under which the
employer chose to discharge their liability, or in absence of such an agreement, on an accruals
basis.
2.4 Transfers in and out
Transfers in are accounted for as income and by representing the associated increase in the
Scheme liability. Transfers out reduce the Scheme liability. Both are accounted for on a cash basis.
2.5 Administration levy and costs
The costs of administering the Scheme are met by employers via a levy of 0.08% of pensionable
salary. The levy is shown as income in the Statement of Comprehensive Net Expenditure and
accounted for on an accruals basis in the period to which the associated salaries and wages relate.
The costs are initially borne by the NHSBSA and then recharged to the Scheme. These charges
are shown under expenditure in the Statement of Comprehensive Net Expenditure and are
accounted for on an accruals basis. Administration costs include all staff costs, overheads and
general administration costs attributed to the Scheme.
2.6 Current service costs
The current service cost is the increase in the present value of the Scheme liabilities arising from
current members’ service in the current period and is recognised in the Combined Statement of
Comprehensive Net Expenditure. The cost is based on a real discount rate of (1.30%) (2021-22 :
(0.95%)) and 1.55% including inflation (2021-22 : 1.25%). These assumptions are used to
calculate the in-year increase in the Scheme liability and differ to the assumptions used to assess
the year end Scheme liability.
2.7 Past service costs
Past service costs are increases in the present value of the Scheme liabilities related to employee
service in prior periods arising in the current period as a result of the introduction of, or
improvement to, retirement benefits. Past service costs are recognised in the SoCNE on a straight-
line basis over the period in which increases in benefit vests.
2.8 Interest on Scheme liabilities
The interest cost is the increase during the period in the present value of the Scheme liabilities
because the benefits are one period closer to settlement and is recognised in the Statement of
Comprehensive Net Expenditure. The interest cost is based on a gross discount rate of 1.55%
(2021-22 : 1.25%).
Page 66
NHS Pension Scheme Annual Report & Accounts 2022-2023
2.9 Scheme Liability
Provision is made for liabilities to pay pensions and other benefits in the future. The Scheme
liability is measured on an actuarial basis using the projected unit method and as at 31 March 2022
was discounted at a real discount rate of (1.30%) (i.e., 1.55% including inflation). The discount rate
changed on 31 March 2023 to 1.70% and the Scheme liability was discounted at that rate.
Further details of the financial assumptions used are set out at Note 17.1 to these accounts and in
the Statement by the Actuary on pages 22 to 27. For the purposes of IAS26 accounting, full
actuarial valuations by a professional qualified actuary are obtained at intervals not exceeding four
years. The actuary reviews the most recent actuarial valuation at the balance sheet date and
updates it to reflect current conditions. A full member data extract as at 31 March 2022 was
provided to GAD to facilitate a full actuarial valuation that has been used in the preparation of the
financial statements for 2022-23.
2.10 Pension benefits payable
Pension benefits payable due to age, ill health retirements, and voluntary early retirement are
accounted for as a decrease in the Scheme liability on an accrual basis. Where benefits fall on a
weekend or bank holiday benefits will be paid on the last working day before the benefits are due.
2.11 Actuarial gains / losses
Actuarial gains and losses arising from any new valuation and from updating the latest actuarial
valuation to reflect conditions at the Combined Statement of Financial Position date are recognised
in the Combined Statement of Comprehensive Net Expenditure for the year.
2.12 Accounting policies for the NHS Compensation for Premature Retirement
Scheme
Compensation payments for the costs of service enhancements for staff leaving before their
normal retirement age are met by employers. For administrative purposes, benefits are paid to the
member and the employer is subsequently re-charged for the costs. Except where stated
otherwise below, the accounting policies outlined at Note 2 above, apply.
Employers are invoiced on a quarterly basis in arrears for the costs incurred over the previous
three-month period. This arrangement ceased for employers from 1 October 2011 for new cases,
but the costs for historic cases continue to be met by employers. An employer may also choose to
settle their future liability by way of a capital sum. Both types of income are accounted for as Other
Pension Income (see Note 5).
In recognition of the fact that significant future cash flows will arise from these arrangements, the
estimated future cash flows which may accrue to the Scheme after the Statement of Financial
Position date, discounted to current values, are disclosed on the Statement of Financial Position.
This asset is revalued on an annual basis and any net increases or decreases will be accounted
for through the General Fund and disclosed within the Combined Statement of Changes in
Taxpayer’s Equity.
2.13 Changes in Accounting Standards
In order to comply with the requirements of IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors, the Scheme must disclose where it has not applied a new IFRS that has
been issued but is not yet effective. The Scheme has carried out a review of the IFRSs in issue but
not yet effective, to assess their impact on its accounting policies and treatment and found that
Page 67
NHS Pension Scheme Annual Report & Accounts 2022-2023
none of the updates have any impact on the accounts as the Scheme has no leases or insurance
policies.
There following standard came into effective during 2022-23:
• IFRS 17 Insurance Contracts – effective for annual periods beginning on or after 1 January
2023. It has not yet been decided when FReM will adopt the standard for government
financial reporting.
3. Contributions receivable
2022-23
2021-22
£000
£000
Employers
(12,585,571)
(11,703,455)
Employees:
Normal
(6,094,297)
(5,650,037)
Purchase of added years
(54,751)
(63,807)
Purchase of additional pensions
(19,176)
(18,595)
Purchase of early retirement redundancy buy out
(1,979)
(1,799)
(18,755,774)
(17,437,693)
£19.49 billion contributions are expected to be payable to the Scheme in 2023-24. During the year ended 31
March 2023, employee contributions represented an average of 9.98% of pensionable pay.
4. Transfers in (also see note 8)
2022-23
2021-22
Note
£000
£000
Individual transfers in from other schemes
(68,316)
(76,871)
Group transfers in from other schemes
(1,989)
(1,534)
(70,305)
(78,405)
5. Other pension income (also see note 7)
2022-23
2021-22
£000
£000
Prefunded premature retirement contributions
(3,421)
(2,090)
Capitalised rechargeable premature retirement contributions
-
(18,981)
Rechargeable premature retirement contributions
(29,061)
(30,667)
Final pay control
6,149
(23,380)
Interest charged on contribution payments
(22)
(79)
Administration levy
(40,758)
(37,876)
(67,113)
(113,073)
Page 68
NHS Pension Scheme Annual Report & Accounts 2022-2023
6. Service cost (also see note 17.4 & 18.2)
2022-23
Restated
2021-22
Note
£000
£000
Current service cost
50,100,000
40,800,000
50,100,000
40,800,000
7. Enhancements (also see notes 5 & 17.4)
2022-23
2021-22
Note
£000
£000
Employees: Purchase of added years
54,751
63,807
Employees: Purchase of additional pension
19,176
18,595
Employees: Early retirement reduction buy out
1,979
1,799
Employers: Pre-funded premature retirement contributions
3,421
2,090
79,327
86,291
8. Transfers in - additional liability (also see notes 4 & 17.4)
2022-23
2021-22
Note
£000
£000
Individual transfers in from other schemes
68,317
76,871
Group transfers in from other schemes
1,989
1,534
70,306
78,405
Amounts receivable in respect of inward transfers increase the pension liability to the same extent. This
increase is reflected in the SoCNE as expenditure as part of the movements in the provision during the year.
9. Pension financing cost (also see notes 17.4 & 18.2)
2022-23
Restated
2021-22
Note
£000
£000
Net interest on defined benefit liability
13,300,000
9,300,000
13,300,000
9,300,000
10. Scheme administration cost
2022-23
2021-22
Note
£000
£000
Scheme administration cost
43,262
40,152
43,262
40,152
Page 69
NHS Pension Scheme Annual Report & Accounts 2022-2023
11. Additional Voluntary Contributions
The NHS Pension Scheme provides for employees to make Additional Voluntary Contributions
(AVCs) to increase their pension entitlement or to increase life assurance cover. Employees may
arrange to have agreed sums deducted from their salaries, for onward payment direct to the
approved provider, or may choose to make their own arrangements by making periodic payments
to an insurance company or scheme institution which offers Free Standing Additional Voluntary
Contributions Schemes. The NHS employers are responsible for payments made to the Scheme’s
approved provider. Members participating in this arrangement receive an annual statement from
the approved provider made up to 5 April each year confirming the amounts held in their account
and the movements in the year. AVC contributions are not part of the Scheme account cash flows
or financial statements. Members have a choice of funds in which their AVCs can be invested and
the aggregate amounts of AVC investments were as follows:
Utmost Life and Pensions
(formally The Equitable Life Assurance Society)
2022-23
2021-22
£000
£000
Movements in the year were as follows:
Balance at 1 April
90,596
93,775
Opening balance adjustment
-
(73)
Re-stated balance at 1 April
90,596
93,702
New investments
299
233
Sale of investments to provide pension benefits
(6,684)
(10,074)
Changes in market value of investments
(2,378)
6,735
Balance at 31 March
81,833
90,596
Contributions received to provide life cover
2
3
Benefits paid on death
488
383
Standard Life Assurance Society
2022-23
2021-22
£000
£000
Movements in the year were as follows:
Balance at 1 April
116,927
118,361
New investments
1,842
2,017
Sale of investments to provide pension benefits
(6,851)
(8,524)
Changes in market value of investments
(5,951)
5,073
Balance at 31 March
105,967
116,927
Contributions received to provide life cover
-
-
Benefits paid on death
299
245
Page 70
NHS Pension Scheme Annual Report & Accounts 2022-2023
Prudential PLC
Restated
2022-23**
2021-22*
£000
£000
Movements in the year were as follows:
Balance at 1 April
73,219
70,534
New investments
5,564
5,816
Sale of investments to provide pension benefits
(5,908)
(6,288)
Changes in market value of investments
(2,012)
3,157
Balance at 31 March
70,863
73,219
Contributions received to provide life cover
-
-
Benefits paid on death
-
-
* Figures for 2021-22 were provided as unaudited and have been restated.
** Figures for 2022-23 are provided as unaudited and will be restated if required in the 2023-24 accounts.
Statement of Financial Position
12. Receivables
Employers are responsible for the payment to the Scheme of both Employer and Employee
contributions. Contributions relating to one month should be paid over by the employer by the 19th
of the following month. Employers are also responsible for paying contributions relating to
premature retirements where the employer is responsible for any enhancement to the member
pension. Where a member has been overpaid their pension benefits, the outstanding debtor is
disclosed within receivables. The total amount of debt written off during the year is shown within
the Parliamentary Accountability and Audit Report. All receivables are straightforward and
therefore are recognised/measured at amortised cost and expected credit losses are nil.
2023
2022
£000
£000
Amounts falling due within one year:
Pension contributions due from employers
750,883
699,679
Employees’ normal contributions
497,985
456,251
Employees’ purchase of added years
4,362
5,782
Employees’ purchase of additional pensions
1,725
1,979
Employees’ purchase of early retirement reduction buy out
157
160
Invoiced pre-funded retirement contributions
1,170
6,999
Invoiced re-chargeable premature retirement contributions
10,451
8,468
Invoiced final pay control income
11,501
19,698
Total due from employers
1,278,234
1,199,016
Overpaid pension benefits
31,151
21,521
HMRC - VAT
783
-
Total due within one year
1,310,168
1,220,537
Amounts falling due after more than one year:
-
-
Total receivables
1,310,168
1,220,537
Page 71
NHS Pension Scheme Annual Report & Accounts 2022-2023
13. Cash and cash equivalents
2023
2022
£000
£000
Balance at 1 April
4,350,585
3,642,299
Net change in cash balances
(25,394)
708,286
Balance at 31 March
4,325,191
4,350,585
The following balances at 31 March were held at:
Government Banking Service
4,325,191
4,350,585
Balance at 31 March
4,325,191
4,350,585
14. Payables
2023
2022
£000
£000
Amounts falling due within one year:
Pensions
(369,374)
(485,002)
HM Revenue & Customs
(196,301)
(145,890)
Voluntary deductions
(295)
(261)
Scheme administration costs payable to NHSBSA
(16,104)
(13,147)
HMRC - VAT
-
(35)
Amounts due to employers:
Employee and employer contributions
(7,139)
(7,232)
Final pay control
(750)
(2,350)
Prefunded premature retirements
(2)
-
(589,965)
(653,917)
Amounts due to be paid to the Consolidated Fund
(4,325,191)
(4,350,585)
Amounts falling due after more than one year
-
-
Total payables
(4,915,156)
(5,004,502)
))
All payables are straightforward and therefore are recognised/measured at amortised cost.
15. Prepaid pension payments
To ensure scheme members receive their benefits on their due date, and where their due date falls
on a weekend or bank holiday, the payment is made on the nearest preceeding working day. The
prepaid benefits relate to pension payments paid at the end of March where the 1
st
and 2
nd
of April
fell on the weekend, and the prepayment relates to the element of benefits paid that relate to 2022-
23, as monthly member benefits are paid in arrears.
2022-23
2021-22
£000
£000
Prepaid pension benefits
3,841
-
Total prepaid pension benefits
3,841
-
Page 72
NHS Pension Scheme Annual Report & Accounts 2022-2023
16. Estimated discounted future cash flows in respect of early retirement
recharges
Where the employer chooses to pay the costs for premature retirements on a quarterly recharge
basis, income is recognised as the invoices are raised. Amounts receivable in respect of the
compensatory element of a premature retirement, where the employer pays for the case on an
ongoing basis, is classified as “Other Pension Income” to the pension scheme. In recognition of the
value of the future cashflows arising from these arrangements, the estimated future cashflows
which accrue to the Scheme, discounted to current values, are disclosed in the Combined
Statement of Financial Position.
2022-23
2021-22
£000
£000
Balance at 1 April
360,709
392,120
Revaluation of estimated discounted future cash flows in respect of
rechargeable premature retirements
(127,682)
(31,411)
Balance at 31 March
233,027
360,709
17. Pension Liabilities
17.1 Assumptions underpinning the pension liability
The NHS Pension Scheme is an unfunded defined benefit scheme. The Government Actuary’s
Department carried out an assessment of the Scheme liabilities as at 31 March 2023. The
Statement by the Actuary starting on page 22 sets out the scope, methodology and results of the
work the Actuary has carried out.
The Scheme managers together with the Actuary and the Auditor have signed a Memorandum of
Understanding that identifies, as far as practicable, the range of information that the Scheme
managers should make available to the Actuary in order to meet the expected requirements of the
Scheme Auditor. This information includes, but is not limited to, details of:
• Scheme membership, including age and gender profiles, active membership, deferred
pensioners, and pensioners,
• benefit structure, including details of any discretionary benefits and any proposals to
amend the Scheme,
• income and expenditure, including details of expected bulk transfers into or out of the
Scheme; and,
• following consultation with the Actuary, the key assumptions that should be used to
value the Scheme liabilities, ensuring that the assumptions are mutually compatible and
reflect a best estimate of future experience.
Page 73
NHS Pension Scheme Annual Report & Accounts 2022-2023
The key assumptions used by the actuary were:
At 31 March
2023
At 31
March 2022
At 31 March
2021
Financial assumptions
Nominal discount rate
4.15%
1.55%
1.25%
Rate of pension increases
2.40%
2.90%
2.22%
Rate of general pay increases
3.65%
4.15%
3.72%
Rate of short-term general pay increase
n/a
Real discount rate in excess of
Pension increases
1.70%
(1.30)%
(0.95)%
Long-term pay increases
0.50%
(2.50)%
(2.38)%
Life expectancies
- Life expectancy at 60 – current pensioners
Men
28.0
28.3
28.7
Women
29.2
29.4
30.1
- Life expectancy at 60 – current age 40
Men
29.7
30.0
30.4
Women
30.8
30.9
31.8
- Life expectancy at 65 – current pensioners
Men
23.1
23.4
23.8
Women
24.3
24.4
25.2
- Life expectancy at 65 – current age 45
Men
24.7
25.0
25.4
Women
25.8
25.8
26.8
▪
Stated life expectancy assumptions are for members retiring on grounds other than ill-health.
Assumed life expectancy of ill-health pensioners is lower.
These key assumptions are inherently uncertain, since it is impossible to predict with any accuracy
future changes in the rate of salary increases, inflation, longevity, or the return on corporate bonds.
The Actuary uses professional expertise in arriving at a view of the most appropriate rates to use in
the annual valuation of the Scheme liabilities. However, the Scheme managers acknowledge that
the valuation reported in these financial statements is not certain, since a change in any one of
these assumptions will either increase or reduce the liability. For example, on its own, even a small
rise in the assumed rate of inflation will result in an increase in the pension liability.
The assumption that has the biggest impact on the amount of the reported liability is the discount
rate net of price inflation. As set out in the FReM, and as required by IAS 19, the discount rate net
of price inflation is based on yields on high quality corporate bonds. The rates are set out in the
above table. Any decrease in the discount rate net of price inflation leads to a significant increase
in the reported liability.
In accordance with IAS 19 the Scheme Managers are required to undertake a sensitivity analysis
for each significant actuarial assumption as of the end of the reporting period, showing how the
defined benefit obligation would have been affected by changes in the relevant actuarial
assumption that were reasonably possible at that date. This analysis, including details of the
methods and assumptions used in preparing the sensitivity analyses, the limitations of these
methods, and the reasons for any changes in methods and assumptions used in preparing the
sensitivity analyses, are included in the analysis of the pension liability below.
Page 74
NHS Pension Scheme Annual Report & Accounts 2022-2023
17.2 Analysis of the provision for pension liability
At 31 March
2022
Restated
At 31 March
2022
Restated
At 31 March
2021
At 31 March
2020
At 31 March
2019
£bn
£bn
£bn
£bn
£bn
Active members (past
service)
235.7
521.1
445.6
386.4
305.8
Deferred pensions
50.7
98.9
90.3
82.2
65.7
Pensions in payment
174.2
220.9
196.5
184.6
161.8
Total
460.6
840.9
732.4
653.2
533.3
Pension Scheme liabilities accrue over employees’ periods of service and are discharged over the
period of retirement and, where applicable, the period for which a spouse or eligible partner
survives the pensioner. In valuing the Scheme liability, the Actuary must estimate the impact of
several inherently uncertain variables into the future. The variables include not only the key
financial assumptions noted in the table above, but also assumptions about the changes that will
occur in the future in the mortality rate, the age of retirement and the age from which a pension
becomes payable.
The value of the liability on the CSoFP may be significantly affected by even small changes in
assumptions. For example, if at a subsequent valuation, it is considered appropriate to increase or
decrease the assumed rate of inflation, or increases in salaries, the value of the pension liability
will increase or decrease. The Managers of the Scheme accept that, as a consequence, the
valuation provided by the Actuary is inherently uncertain. The increase or decrease in future
liability charged or credited for the year resulting from changes in assumptions is disclosed in note
17.7. The notes also disclose ‘experience’ gains or losses for the year, showing the amounts
charged or credited for the year because events have not coincided with assumptions made for the
last valuation. Please refer to note 18 regarding the restatement of the scheme liability at 1 April
2021 and 31 March 2022.
17.3 Sensitivity Analysis
A sensitivity analysis for each significant actuarial assumption as at the end of the reporting period
is detailed below. The most significant assumptions are the discount rate, general earnings
increases and pension increases (currently based on CPI). A key demographic assumption is
pensioner mortality.
The table below shows the indicative effects on the total liability as at 31 March 2023 of changes to
these assumptions (rounded to the nearest 0.5%).
Change in Assumption
Approximate effect on total liability
Financial Assumptions
Discount rate*
+ 0.5% a year
-9.0%
-£41.5 billion
Earnings increases*
+ 0.5% a year
+1.0%
+£4.6 billion
Pension increases*
+ 0.5% a year
+9.0%
+£41.5 billion
Demographic Assumptions
Additional one year increase in life expectancy at retirement
+3.0%
+£13.8 billion
*Opposite changes in the assumptions will produce approximately equal and opposite changes in the liability.
Page 75
NHS Pension Scheme Annual Report & Accounts 2022-2023
17.4 Analysis of movements in the scheme liability
Note
2022-23
Restated
2021-22
£000
£000
Scheme liability at 1 April
(840,900,000)
(732,400,000)
Current service cost
6
(50,100,000)
(40,800,000)
Pension financing cost
9
(13,300,000)
(9,300,000)
Enhancements
7
(79,327)
(86,291)
Pension transfers in
8
(70,306)
(78,405)
(63,549,633)
(50,264,696)
Benefits payable
17.5
14,129,568
13,057,579
Pension payments to and on account of leavers
17.6
237,747
197,641
14,367,315
13,255,220
Actuarial gain / (loss)
17.7
429,482,318
(71,490,524)
Scheme liability at 31 March
(460,600,000)
(840,900,000)
17.5 Analysis of benefits paid
2022-23
2021-22
£000
£000
Pensions to retired employees and dependants (net of
recoveries or overpayments)
11,162,540
10,413,287
Commutations and lump sum benefits on retirement
2,967,028
2,644,292
Total benefits paid
14,129,568
13,057,579
17.6 Analysis of payments to and on account of leavers
2022-23
2021-22
£000
£000
Death in service
88,142
89,066
Individual transfers to other schemes
58,236
54,363
Group transfers to other schemes
135
121
Refunds to members leaving service
91,234
54,091
Total payments to and on account of leavers
237,747
197,641
Page 76
NHS Pension Scheme Annual Report & Accounts 2022-2023
17.7 Analysis of actuarial losses
2022-23
Restated
2021-22
£000
£000
Experience (loss) arising on the Scheme liabilities
(32,517,682)
(1,990,524)
Changes in financial assumptions underlying the present
value of Scheme liabilities
446,800,000
(69,500,000)
Changes in demographic assumptions underlying the
present value of Scheme liabilities
15,200,000
-
Total actuarial gain / (loss)
429,482,318
(71,490,524)
17.7.1 Experience loss
The following table sets out an analysis of the impact in changes to experience on the scheme
liability 31 March.
2022-23
Restated
2021-22
£000
£000
April 2022 pension increase lower than expected
(23,517,682)
(2,600,000)
Pensionable pay and CARE revaluation increase higher
than expected
(21,400,000)
(1,990,524)
Membership and other experience
12,400,000
2,600,000
Total experience loss
(32,517,682)
(1,990,524)
17.7.2 Change in assumptions
The following table sets out an analysis of the impact in changes to experience on the scheme
liability 31 March.
2022-23
Restated
2021-22
£000
£000
Change in projected improvements in mortality
5,400,000
-
Change in baseline morality assumptions
-
-
Change in demographic assumptions (other than
mortality)
9,800,000
-
Change in financial assumptions
446,800,000
(69,500,000)
Total actuarial gain / (loss)
462,000,000
(69,500,000)
Page 77
NHS Pension Scheme Annual Report & Accounts 2022-2023
17.8 History of experience (gains) / losses
2022-23
Restated
2021-22
2020-21
2019-20
2018-19
Experience gains / (losses) on
scheme liabilities: (£000)
32,517,682
(1,990,524)
(547,847)
7,307,275
1,000,000
Percentage of the present value
of the scheme liabilities
7.06%
0.24%
0.07%
1.12%
0.19%
Total amount recognised in
Combined Statement of
Comprehensive Net
Expenditure: (£000)
429,482,318
(71,490,524)
(71,247,847)
(93,792,725)
26,509,363
Percentage of the present value
of the scheme liabilities
93.24%
8.50%
9.41%
14.36%
4.97%
18. Prior Period Adjustment
GAD’s data analysis carried out as part of the 2020 funding valuation identified an inconsistency
with the baseline ‘mortality after retirement assumption’ compared to previous years’ analysis. The
inconsistency related to death of pensioner data provided by NHSBSA to GAD for the final year of
the 2016 funding valuation, which was subsequently provided again to GAD as part of the 2020
funding valuation data.
The 2020 funding valuation was prepared from the combined pensions administration system
(Compendia) introduced in 2018, that migrated and integrated member pensioner payroll data with
active and deferred member data previously maintained on separate systems.
Prior to the introduction of the single combined system holding all member pensions data, a
standalone pensioner payroll system existed, and the data required for the valuation was extracted
from this system. There was no direct reconciliation between the two systems, and death of
pensioner data between the two systems had to be reconciled manually. Differences between
these two systems were the primary cause of the data inconsistencies. As the valuation process is
now run from a single system, the risks of similar issues reoccurring are mitigated.
The assumptions recommended for the accounts at 31 March 2023 have been updated for these
inconsistencies, which reduces the assumed life expectancies.
The effect of the revised baseline mortality assumption was to reduce the scheme liability and
current service cost by around 3% of their original value in 2021-22, and the actuarial loss on the
change in financial assumption also reduces by around 3%.
The closing scheme liability and financial position at 31 March 2022 and 1 April 2021 have been
restated to bring them into line with the updated assumptions. 2021-22 expenditure has also been
restated to reflect the impact of the updated assumptions on service cost, pension financing cost
and actuarial loss.
The following tables present the effect of the changes on the financial statements.
Page 78
NHS Pension Scheme Annual Report & Accounts 2022-2023
18.1 Restated 2021-22 opening position
Effect on Combined Statement of Financial
Position
Published
1 April 2021
Adjustment
1 April 2021
Restated
1 April 2021
£000
£000
£000
Pension liability
(757,100,000)
24,700,000
(732,400,000)
Net liabilities, including pension liabilities
(756,124,474)
24,700,000
(731,424,474)
General Fund
(756,124,474)
24,700,000
(731,424,474)
Total taxpayers’ equity
(756,124,474)
24,700,000
(731,424,474)
18.2 Restated 2021-22
Effect on Combined Statement of
Comprehensive Net Expenditure
Published
2021-22
Adjustment
2021-22
Restated
2021-22
£000
£000
£000
Expenditure
Service cost
42,300,000
(1,500,000)
40,800,000
Pension financing cost
9,600,000
(300,000)
9,300,000
Total expenditure
52,104,848
(1,800,000)
50,304,848
Combined net expenditure
34,475,677
(1,800,000)
32,675,677
Pension re-measurements
Actuarial loss / (gain)
73,990,524
(2,500,000)
71,490,524
Total Comprehensive Net Expenditure
(108,497,612)
(4,300,000)
(104,197,612)
Effect on Combined Statement of Financial
Position
Published
31 March
2022
Adjustment
31 March
2022
Restated
31 March 2022
£000
£000
£000
Pension liability
(869,900,000)
29,000,000
(840,900,000)
Net liabilities, including pension liabilities
(868,972,671)
29,000,000
(839,972,671)
General Fund
(868,972,671)
29,000,000
(839,972,671)
Total Taxpayers’ Equity
(868,972,671)
29,000,000
(839,972,671)
Page 79
NHS Pension Scheme Annual Report & Accounts 2022-2023
Effect on Combined Statement of Taxpayers’
Equity
Published
31 March
2022
Adjustment
31 March 2022
Restated
2021-22
£000
£000
£000
Balance at 31 March 2022
(756,124,474)
24,700,000
(731,424,474)
Comprehensive Net Expenditure for the year
(34,475,677)
1,800,000
(32,675,677)
Actuarial loss
(73,990,524)
2,500,000
(71,490,524)
Net Change in Taxpayer’s Equity
(112,848,197)
4,300,000
(108,548,197)
Balance at 31 March 2022
(868,972,671)
29,000,000
(839,972,671)
Effect on Combined Statement of Cash Flows
Published
31 March
2022
Adjustment
31 March 2022
Restated
31 March
2022
£000
£000
£000
Net expenditure for the year
(34,475,677)
1,800,000
(32,675,677)
Increase in pension provision
51,900,000
(1,800,000)
50,100,000
18.3 Restated 2021-22 baseline mortality assumptions
The following table sets out the change to the baseline mortality assumptions. No other changes
have been made to the assumptions adopted for the 2021-22 accounts.
Baseline mortality
Original
Revised
Standard
table
Adjustment
Standard
table
Adjustment
Males
Retirements in normal health
S2NMA
83%
S3NMA
91%
Current ill-health pensioners
S2IMA
83%
S3IMA
134%
Future ill-health pensioners
S2IMA
100%
S3IMA
134%
Dependants
S2NMA
100%
S3DMA
82%
Females
Retirements in normal health
S2NFA
85%
S3NFA
103%
Current ill-health pensioners
S2IFA
85%
S3IFA
134%
Future ill-health pensioners
S2IFA
100%
S3IFA
134%
Dependants
S2DFA
100%
S3DFA
89%
19. Financial Instruments
As the cash requirements of the Scheme are met through the Estimates process, financial
instruments play a more limited role in creating and managing risk than would apply to a non-public
sector Scheme of a similar size. There are no material financial instruments in relation to the
Scheme.
Page 80
NHS Pension Scheme Annual Report & Accounts 2022-2023
20. Contingent Liabilities disclosed under IAS 37
The Scheme has no contingent liabilities to disclose.
21. Related-party transactions
The National Health Service Pension Scheme and National Health Service Compensation for
Premature Retirement Scheme fall within the ambit of the NHS Business Services Authority, which
is regarded as a related party. During the year, the Schemes have had material transactions with
NHS employers (including the NHSBSA which administers the Schemes on behalf of the DHSC),
and other government departments, whose employees are members of the Schemes. None of the
managers of the Schemes, key managerial staff or other related parties have undertaken any
material transactions with the Schemes during the year.
22. Events after the Reporting Period
Judicial Review – McCloud Remedy Costs
In December 2021 several unions filed for a joint judicial review against the Government on the
inclusion of the McCloud remedy costs within the cost control mechanism at the 2016 valuations
(refer to Report of the Managers note 2.5). The judicial review was heard in early 2023 and the
claims made in the judicial review were dismissed by the High Court, in a judgment handed down
on Friday 10 March 2023. Permission to appeal this judgement was granted by the Court of Appeal
on 26 May 2023, the outcome of this appeal will become known in due course.
23. Date of authorisation for issue
The financial statements have been authorised for issue by the Accounting Officer on the same
date as the C&AG’s certificate.
E02922689
978-1-5286-4436-5
