Changes to employee contributions within the firefighter pension scheme: summary of responses

This document is for information only.

Large print, Braille and alternative language versions of this document are available on request.

For further information:

Fire Services Branch 
Welsh Government 
Rhydycar 
Merthyr Tydfil 
CF48 1UZ

Email: fire@gov.wales 

The Welsh Government’s “Consultation on proposed amendments to the employee contribution rate structure within the Firefighters’ Pension Scheme in Wales” was published on the 12 November 2024. 

HM Treasury requires all public sector pension schemes to achieve a set member contribution “yield”, meaning the overall proportion of annual pensionable pay which employees pay as contributions to the scheme. This is to contain the cost of pension benefits to the public purse. The target yield from employee contributions for all firefighters’ schemes in the UK is 13.2%.

Changes are required to the current employee contribution rate structure as the Government Actuary’s Department (“GAD”) identified at the last valuation exercise that the yield achieved by the scheme was slightly lower than required at just under 13.0%. Therefore, the contribution rate structure needs to change to achieve the 13.2% contribution yield at the next valuation exercise. Employee contribution rates are a protected element under the Public Service Pensions Act 2013, and the Welsh Ministers must consult the persons (or representatives of the persons) who appear to the responsible authority to be likely to be affected by the regulations if they were made with a view to reaching agreement with them. The consultation dealt with a range of possible changes to the current employee contribution rate structure to achieve the target contribution yield, whilst aiming to provide the best and fairest option for members as a whole.

The consultation set out that the new contribution rate structure should follow the underpinning principles outlined below:-

• contributions should be affordable, and the changes should not induce members to opt out of the scheme
• rates should be structured in favour of lower paid scheme members
• rates should not discourage career progression
• the contribution rate structure should be future-proofed
• the system should be straightforward to administer

Several options were outlined which could change the contribution structure to achieve the necessary yield:-

• Option 1 adjust current contribution rate bands: adjust the contribution rates for all bands as they currently are to achieve the target yield of 13.2 %.
• Option 2 contributions based on marginal rates: applying the contribution rate on a marginal basis would be similar in principle to how income tax is calculated. Under this system, all members would pay the band 1 rate of contributions on the proportion of their salary up to the top of band 1, the band 2 rate of contributions on the proportion of their salary between the top of band 1 and the top of band 2, and so on.
• Option 3 linking contributions to grade structure as set out in the Firefighters Terms and Conditions of Service (“the Grey Book”): this option would link contributions to the grade structure set out under Section 3 of the Firefighters Terms and Conditions of Service (“the Grey Book”) rather than by financial banding. The model would be split into 4 bands, Firefighter; Crew Manager / Watch Manager; Station Manager / Group Manager; and Area Manager and above. As now, employee contribution rates would increase in line with grade progression, such that Firefighters would pay the lowest rate and Area Managers and above would pay the highest. In addition, we proposed that retained duty firefighters (regardless of grade) should be placed in to band 1 with wholetime firefighters.
• Option 4 changing from wholetime equivalent to actual salary: currently, members of the Firefighters’ Pension Scheme pay contributions based on the band in which their pensionable pay or assumed pensionable pay falls into. This includes their basic salary and allowances which are pensionable for the purposes of the Scheme. (As a general rule, allowances that are paid permanently or indefinitely are pensionable; but temporary or fixed-term allowances like overtime or temporary promotion payments are not). This proposal considered whether we should change this approach and use actual annual rates of pensionable pay instead of wholetime equivalent salary. 

A 12 week consultation began on 12 November 2024 and was open for responses until 4 February 2025. The consultation contained 9 questions, with options to respond to those questions by completion of an online form or by e-mail. The consultation document was available on the Welsh Government website.

The Welsh Government received 18 responses to the consultation. Those 18 responses came from the following: 

• 3 from Fire and Rescue Authorities in Wales (FRAs)
• 1 from a trade union representing firefighters.
• 1 from the Firefighters’ Pension Scheme Advisory Board for Wales (SABW)
• 13 from individuals 

A full list of respondents is available at annex a.

The Welsh Government welcomes the responses to the consultation and would like to thank those who responded.   

The Welsh Government published its Integrated Impact Assessment alongside the consultation document. The overall policy position set out in the consultation document remains the same and will form the basis of the final regulations.Therefore, no changes have been made to the Integrated Impact Assessment as originally published. 

The Welsh Government has considered the responses to the consultation. This document provides a summary of the responses received to each of the specific questions and the Welsh Government’s response to them. 

Question 1 

How far do you agree that the new structure should be underpinned by the principles outlined above? Do you think some principles are more important than others?

12 out of 18 respondents agreed that the new structure should be underpinned by the principles outlined in paragraphs 9  to 14 of the consultation document.

2 respondents did not agree with the principles outlined. 4 respondents didn’t provide a definitive view. 

Welsh Government response

The Welsh Government acknowledges the general support for the principles. We will therefore proceed with implementing a revised structure which is underpinned by the principles set out in the consultation document.   

Question 2

How far do you agree that employee pension contributions should be calculated on a marginal basis, rather than a tiered basis?

6 out of the 18 respondents to this question felt that employee contributions should be calculated on a marginal basis. Respondents felt that this structure would be a more equitable approach as those on higher salaries would only pay additional contributions gradually in line with an increase in salary. 

Ten respondents felt that calculating contributions on a tiered basis was preferred as the structure is easier to understand, manage and administer. Two respondents noted that if a marginal approach was adopted, the proposed implementation date would be unachievable, as significant changes to the way current payroll systems are configured would need to be implemented and tested. 

Two respondents did not provide a view.

Welsh Government response

The Welsh Government notes concern from the majority of respondents that calculations based on a marginal basis would be complex and difficult for scheme members to understand and for the Fire and Rescue Services to administer. Calculating contribution rates on a marginal basis would also result in significant changes to payroll systems which could potentially cause more administrative burden to the Fire and Rescue Services. Based on the comments received, we will continue to base calculations on a tiered basis. 

Question 3

How far do you agree that employee pension contributions should be based on the Fire Service grade structure rather than by financial banding?

The majority of respondents, including all members of SABW which represents all employers and all recognised trade unions, welcomed the proposal to base contribution rates on grade structure as set out in the Grey Book. Respondents stated that they favoured this option as it would be easily understood by firefighters as they were already familiar with the terms set out in the Grey Book and it would be easier for the Fire and Resue Services to administer, as determining the appropriate rate of contributions would depend on the scheme member’s grade. In addition, this option would allow for future proofing as salary bands would uprate automatically each year in line with National Joint Council pay awards.  In the consultation document and in this response, we refer to this as a “grade-based structure” although a member’s duty system (wholetime or retained) is also relevant to it.  The regulations we propose to make will also use the term “role” rather than “grade”. 

Five of the respondents in favour of this option noted that they were in support of adopting a structure based on grade. However, they were concerned that the illustrative example showed large steps in the contribution rates, particularly for senior managers (Group Manager and Area Manager and above), thus creating circumstances which could potentially be unfair to higher paid scheme members and discourage individuals from seeking promotion. As such, individual respondents and members of SABW suggested that further consideration should be given to the rates applied to each band which could provide a more gradual increase in contribution rates, thus removing the steps / cliff edges between grades. Respondents also added that the increase in contributions needed to meet the scheme yield should be apportioned fairly across all scheme members and all bands.

Two respondents also raised concerns that this approach could inadvertently introduce a culture of extended temporary promotions, which would enable the scheme member to remain in their previous banding, as temporary promotion allowances are generally not pensionable under the 2015 Scheme.   

Five respondents did not agree with this approach and did not provide any further comment. Three respondents felt that basing contributions on financial banding was preferred as they believed the basing contributions on grade could be complicated to calculate where an individual is in receipt of temporary promotion or other allowances.  In addition, 2 respondents felt that Retained Duty Firefighters (“RDS”) should not be included in Band 1 and pay less contributions than their wholetime counterparts as RDS firefighters are likely to have access to other workplace pensions as part of their primary employment / contract.

One individual did not provide a view.

Welsh Government response

The majority of respondents agree that contribution rates should be based on grade rather than by financial banding. Respondents felt that basing calculations on grade would be more easily understood by firefighters and has the added benefit of being future proofed. However, we acknowledge concerns that the contribution rates set out in the illustrative example showed that there would be a significant increase in contribution rates between the bands, particularly for higher paid scheme members, which could potentially be seen as unfair. In turn, this could potentially create “cliff edges” which would discourage career progression. 

The Welsh Government has since met with members of SABW in order to discuss how to achieve contribution rates which are applied more equally across all bands, whilst also ensuring the target yield is achieved. The Welsh Government has subsequently commissioned the Government Actuary’s Department (“GAD”) to produce a series of revised calculations which applied a more gradual increase in contributions rates across the bands in order to smooth out any cliff edges. We also note concerns that the original example showed that Band 1 (firefighters and all RDS firefighters) would be receiving a decrease in contributions whilst senior managers contributions were set to increase significantly. This was not the intention of this consultation, however, the Welsh Government and SABW maintain the belief that in order to maintain consistency with the underpinning principles for change, the lowest paid members should be protected from paying disproportionately high contribution rates. We believe that this should also extend to RDS firefighters as it is arguably unfair to expect retained duty firefighters to pay the same rate of employee contributions as their wholetime counterparts as this could result in retained staff in Crew Manager or Watch Manager grades paying a higher level of contributions for a lower pension than wholetime staff in the Firefighter grade. 

GAD has since produced revised contribution rates (attached at annex b) which provide a more gradual increase in contributions at all grades. In order to remain consistent with the underpinning principles, the lowest paid scheme members will see a slight increase in contribution rates with rates increasing progressively for higher grades.

As noted above, should the Welsh Ministers wish to make or amend scheme regulations containing changes which impact on ”protected elements” section 22 of the Public Service Pensions Act 2013 places specific consultation requirements upon them. In order to satisfy the requirement set out under s22, the Welsh Government must engage fully with persons (or representatives of the persons) who appear to the responsible authority to be likely to be affected by the regulations with the aim of agreeing on the proposed amendments. In addition to undertaking a full public consultation, we have specifically engaged with SABW members for their views and for formal agreement on proposals. We have made clear throughout those discussions that the Welsh Government has no preference about exactly how contribution rates should change, provided that the result achieves the target yield.  Rather, we have been guided by what the employers and representative bodies believe to be equitable and easy to administer and have commissioned further work from GAD in light of that.

Following numerous discussions with members of the SABW, representatives from both employers and trade unions have agreed the contribution rates contained in annex b. Members are content that the grade based structure is the most appropriate for the firefighters’ pension scheme in Wales, whilst also ensuring that the underpinning principles are adhered to. The Welsh Government will therefore proceed to implement the proposal to base employee contribution rates on grade, subject to the revised calculations attached at annex b.   

Question 4

How far do you agree that contributions should continue to be calculated by reference to wholetime equivalent salary rather than actual pensionable pay?

10 out of 18 respondents agreed that calculations should continue to be calculated by reference to wholetime equivalent salary. 1 individual did not provide a view.

Several respondents noted that due to the large number of RDS firefighters in Wales, calculating pay using actual salary would result in a significant number of retained duty / part time firefighters moving down to the lowest contribution rate band. This would subsequently drive the yield further downwards and result in a significant rise in contribution rates for all firefighters, including those employed on retained duty terms. As such this would fail to achieve the underpinning principles as set out in the consultation. 

In addition, 4 respondents felt that scheme members could regard this approach as divisive as basing the calculation on actual pay would undoubtedly benefit retained duty firefighters but would have a detrimental impact on wholetime counterparts. One respondent also commented that a significant increase in contributions rates to all scheme members could potentially result in more individuals opting out of the firefighters’ pension scheme. 

One respondent highlighted that the pension calculation in the legacy schemes is based on the member’s final salary and therefore scheme members should pay fully and appropriately for the benefits they receive at the point of retirement.

Welsh Government response 

The majority of respondents believe that calculations should continue to be based on whole time equivalent pay. We note respondents’ concerns that basing the calculation on actual pay would result in many retained duty firefighters moving down to the lowest contribution rate band regardless of grade or wholetime equivalent salary. However, this question only applies to a system in which contributions are set according to salary bands. This question becomes irrelevant as we are moving to a grade-based approach which does not use any measure of (actual or wholetime equivalent) salary in any event. 

Question 5

How far do you agree with the detailed proposal set out in paragraphs 37to 40 above?

The Welsh Government acknowledges the mixture of responses to this proposal, which included both positive reception, as well as some disagreement with a number of its aspects. 

The majority of respondents confirmed that they were content with employee contribution rates being based on grade rather than by financial banding as outlined in question 3. However, respondents were concerned that the illustrative example showed large steps in the contribution rates, particularly for senior managers (Group Manager and Area Manager and above), thus creating cliff edges which could potentially discourage individuals from seeking promotion. In addition, members felt that it was unfair for Band 1 to receive a modest increase in net pay when senior managers would potentially be paying a significantly higher level of contributions. Some respondents also commented that placing all retained duty firefighters into Band 1 could be seen as unfair as they contribute less to the pension scheme in real terms and they also have access to other workplace pensions as part of their primary employment.  Respondents commented that in order to ensure fairness and to remove potential “cliff edges”, the increase in employee contribution rates should be applied equally across all bands and scheme members. 

One respondent highlighted that placing all RDS staff into Band 1 would require some administrative changes to the payroll software and as such an implementation date of 1 April 2025 would not be achievable.

Welsh Government response

As set out in our response to question 3, we note respondents concerns that the illustrative contribution rates that formed part of the consultation did not provide a fair increase in rates for all bands. As such, the Welsh Government have since met with members of the SABW in order to discuss how to achieve contribution rates which are applied more equally across all bands, whilst also ensuring the target yield is achieved. The Welsh Government subsequently commissioned GAD to produce a series of revised calculations which applied a more gradual increase in contributions rates across the bands in order to smooth out any cliff edges. Whilst we note some respondents’ concerns that it would be inequitable to place all RDS staff into Band 1, we firmly believe that as the lowest paid scheme members, they should be protected from paying disproportionately high contribution rates, as it is arguably unfair to expect retained duty firefighters, at any grades above Firefighter, to pay the same rate of employee contributions as their wholetime counterparts. This is because they will necessarily earn substantially less than them and accrue a lower pension. For instance, an RDS Watch Manager earning £20,000 per year has a significantly lower salary than a wholetime Firefighter and will accrue a significantly lower pension, so cannot reasonably be expected to pay a higher rate of contributions for it.  

The revised contribution rates (annex b) provide a more gradual increase in contributions at all grades, thus reducing the large steps between grades. In order to remain consistent with the underpinning principles, the lowest paid scheme members will see a slight increase in contribution rates with rates increasing progressively in line with career progression. In compliance with the increased consultation requirements under section 22 of the Public Service Pensions Act 2013, members of the SABW, which consists of representatives from both employers and trade unions have discussed in depth the revised contribution rates provided by GAD. The SABW have since agreed the contribution rates contained in annex b. 

The Welsh Government will therefore continue to implement the proposal set out in the consultation document (i.e contribution rates based on a grade based structure with all RDS firefighters placed in Band 1) on a revised basis, implementing the employee contribution rates as set out in annex b.  Amending regulations will thus be introduced from 1 September 2025 to allow scheme managers sufficient time to make administrative change and inform scheme members of the change to the employee contribution rate structure.

Question 6

If you do not agree with the proposal outlined above, do you have an alternative suggestion of how the contribution rate should be structured?

11 out of 18 respondents responded to this question. Their comments largely raised issues which related to other questions above, and which have been covered there.  One individual argued that contribution rates should not change at all; however, for the reasons set out in the consultation document, that could never be an option. 

Question 7

We would like to know your views on the effects that the above proposals would have on the Welsh language, specifically on opportunities for people to use Welsh and on treating the Welsh language no less favourably than English. What effects do you think there would be? How could positive effects be increased, or negative effects be mitigated?

No specific comments were made other than recognition that documents will be made available in both English and Welsh, in accordance with Welsh Language Standards. 

Six respondents did not provide a view. 

Welsh Government response

The Welsh Government notes that Fire and Rescue Authorities will continue to communicate with their members in both Welsh and English, in line with their Welsh language standards. Our final regulations will also be made available in both Welsh and English. 

Question 8

Please also explain how you believe the proposed policy could be formulated or changed so as to have positive effects or increased positive effects on opportunities for people to use the Welsh language and on treating the Welsh language no less favourably than the English language, and no adverse effects on opportunities for people to use the Welsh language and on treating the Welsh language no less favourably than the English language.

No specific comments were made in respect of the effect the policy may have on the Welsh Language, other than those already raised under Question 7.

Seven respondents did not provide a view. 

Welsh Government response

There are no issues to be addressed. We will therefore proceed to implement the proposals in the consultation document.   

Question 9

We have asked a number of specific questions. Do you have any other comments on our proposals or any related issues which we have not specifically addressed?

12 out of 18 respondents did not provide a comment.

Two respondents, including the SABW, raised concerns that an implementation date of 1 April 2025 may not provide Scheme Managers with sufficient time to make the necessary administrative changes including updates to software for payroll systems. Furthermore, introducing the changes retrospectively would create an administrative burden and create concern for employees.  In addition, respondents felt that scheme members should be informed of the change to contribution rates and the reason for the increase. Failure to communicate effectively with scheme members could result in an increase in opt outs from the scheme going forward. As such, it has been suggested that the Welsh Government should consider implementing the new structure from 1 September 2025 to allow for sufficient communication with scheme members regarding the proposed changes.

One respondent queried what the Welsh Government’s view would be if the National Joint Council pay award was linked to role and type of employment as opposed to an increase across the pay grades as this would negatively affect retained duty firefighters.

One respondent commented that only minor changes to the current structure was required in order to meet the target yield and they did not welcome any further revisions. 

One respondent queried whether the Welsh Government had given consideration to aligning the approach in Wales with the firefighters’ pension schemes in England and other devolved nations. The respondent felt that any divergence could potentially affect cross border transfers due to different contribution rates, leading to higher or lower pensions in Wales. In addition, the respondent added that significant changes to administration processes and current practices could increase costs for the Fire and Rescue Services across Wales.

One individual felt that they were content for the tax payer to bear the increase in costs to the firefighters’ pension scheme; whilst another individual queried how much employee contributions would need to increase by if a retained duty firefighter earned less than £15,000 on average per year. 

Welsh Government response

We note concerns that the proposed implementation date of 1 April 2025 may not allow scheme managers sufficient time to make necessary adaptations to administrative process and to inform scheme members of the proposed changes and reasons for introducing a new structure. We also note the comments about consistency with other firefighters’ schemes in the UK and agree that this is desirable. However, there are likely to be differences across the UK in the levels of increase in contributions that are needed to achieve the target yield. So, adopting the same changes would mean either that one or more schemes would not achieve the target yield, and/or that firefighters in some parts of the UK were paying higher contributions than necessary. We also need to reflect differences in the workforce, principally the higher proportion of retained duty firefighters in Wales (around 55% of the workforce, compared to 30% in England).  Overall, our primary aim has to be to provide a scheme which is fair, equitable and affordable for firefighters in Wales, not to facilitate cross-border transfers within the UK. 

As a result of respondents comments, the Welsh Government will implement the new employee contribution rate structure from 1 September 2025. It is anticipated that this will allow scheme managers to implement the necessary administrative changes and communicate the change in contribution rate to scheme members.

The Welsh Government would like to thank all those that responded to the consultation. The Welsh Government will now proceed with making and laying amending regulations which will come into force on 1 September 2025.  

• Firefighters’ Pension Scheme Advisory Board for Wales
• National Fire Chief’s Council
• Mid and West Wales Fire and Rescue Service
• North Wales Fire and Rescue Service
• South Wales Fire and Rescue Service
• 13 individual responses