The McCloud Judgement

Those nearing retirement however were permitted to remain in their legacy schemes, which, in the case of the NHS Pension Scheme, refers to the 1995 and 2008 Sections. These individuals benefitted from full protection and did not have to transition to the new 2015 Section. Those further from retirement were afforded tapered protection, where they could remain in their legacy schemes longer than unprotected individuals.

Following a review by The Court of Appeal, it was determined that these arrangements discriminated against younger, unprotected members. The Government has now committed to removing this age discrimination from public sector schemes, where a transitional protection arrangement like the one above was introduced.

This means that, at retirement, those affected by the NHS Pension Scheme changes in 2015 will be asked whether they wish to have the benefits treated as earned in the legacy schemes, known as rollback, or elect to retain them in the 2015 Section.

Only benefits accrued between 1 April 2015 and 31 March 2022 will be affected – this seven-year window is known as the remedy period and reflects the period from the 2015 changes taking effect through to the latest that the above discrimination could still take place.

Are you impacted?

Those impacted must meet all of the following conditions:

• Had a pension service during the remedy period (1 April 2015 to 31 March 2022)
• That pensionable service was in a legacy section of the Scheme, or in the 2015 Scheme (but would have been in the legacy section if not for the discrimination)
• Were in a pensionable service under a legacy section of the Scheme on or before 31 March 2012 (and have not since had a disqualifying gap before starting pensionable service during the remedy period)
• Where there is more than one period of pensionable service during the remedy period, there must not be a disqualifying gap between periods for the subsequent periods to count as remediable.

A disqualifying gap is defined as more than five years where it is between another public sector scheme and the NHS Pension Scheme, or five years or move between NHS Pension Schemes.

Please note, the current ruling is specific to NHS England, with further information from NHS Scotland still to be released.  

Recent updates

As alluded to by the length of the remedy period, the legacy sections of the NHS Pension Scheme are effectively closed as of 31 March 2022 (although they maintain a link for final salary purposes), with all accruals for active members credited to the reformed 2015 Section from 1 April 2022 onwards.

From 1 October 2023, affected members will begin to receive correspondence from the Scheme in respect of the ‘rolling back’ of their remediable benefits, with these benefits being placed into the legacy sections of the Scheme for unprotected members and those with tapered protection. It is estimated that there are 1.1 million affected members.

At retirement, members will then have the option to accept this ‘rolled back’ position or elect for the relevant benefits to be treated as accrued in the 2015 Section of the Scheme, although they are still technically payable from the legacy scheme in either case.

An immediate choice election will be provided to those with pension benefits already in payment or beneficiaries of those who have died within the remedy period so that an amendment can be made as needed. It is estimated that there are approximately 250,000 affected members in this bracket and the expectation is that the Scheme will prioritise these members.

Wider considerations

Amendments to the treatment of remediable service will adjust the treatment of those benefits for tax purposes, meaning that the reporting of relevant tax liabilities (and the associated tax charges) may need to be altered where possible.

The legislation allows such amendments for the previous four years and HMRC are introducing a digital portal from October 2023 to facilitate changes in respect of the Annual Allowance, Lifetime Allowance and Unauthorised Payments. Whilst amendments cannot be submitted for years prior to this, the portal will also enable members to apply for compensation with regards to the above for the years 2015/16 through 2018/19.

It is worth noting that some members will not receive Annual Allowance Pension Savings Statements for 2022/23, although this does not necessarily mean that there will not be an Annual Allowance excess for the year.

What you need to do now

Naturally, whether to accept the rollback or return to the 2015 Section will depend heavily on individual circumstances and retirement plans. As a result, we would encourage members to seek advice in respect of this decision, particularly given the potential for it to have an impact from an Annual Allowance perspective, the recent changes to the Lifetime Allowance legislation/retirement flexibilities for members and the need to consider the differences between legacy schemes and the 2015 Section (such as Normal Retirement Age).

Many GPs do not currently receive Annual Allowance Pension Savings Statements, which can indicate issues with their pension record. Naturally, there is a need to ensure that such gaps/errors are identified and corrected, particularly where these occur with respect to remediable service – similarly, there is a need to refine figures that were estimated previously. We are able to support our clients through this process, assisting them in identifying issues and amending their records.

Get in touch

If you would like to speak with one of our NHS pensions specialists about the McCloud ruling or any other pension queries, please get in touch.

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