3 big NHS pension scheme changes you need to know

Keeping up to date with NHS pension scheme changes can be challenging and tedious at the best of times, let alone when you have 3 big NHS pension scheme changes to get your head around! 

Don’t Panic –  NHS pensions are what we do! So let us guide you through the important changes that are in process right now.

The first is the big headline! The McCloud Remedy

In several past articles, we have discussed the firefighters McCloud/Sargeant pension case that went to the Court of Appeal. The Court of Appeal found the government’s changes to the 2015 firefighters pension scheme was age discriminatory. The court was also successful in forcing the government to consider ALL public sector pension schemes which were part of the 2015 reforms.  The government has now responded on how they are going to address this verdict.

Deferred Choice Underpin

The government is proposing the ‘deferred choice underpin’, which means members would remain in or be returned to their legacy scheme (pension sections 1995 or 2008) for the remedy (The McCloud Remedy). This remedy period ends on the 1st of April 2022 where all members will join the respective reformed scheme.

Is this a good thing for you?

Each pension member’s case will be unique. The obvious consideration is the impact on members pension at retirement, but more immediately on your annual allowance position. This could mean all annual allowance calculations will need to be recalculated back to 2015! This is likely to impact a substantial number of doctors.  

Some doctors have opted out of the pension scheme to avoid hefty tax bills that may be reduced or negated by this action, it is unlikely that they will be given the opportunity to rejoin retrospectively. Some doctors will have annual allowance breaches where they had none before.

Members who have already retired and are in receipt of the pension will be offered a choice, but there is likely to be some delay in resolving this.

Undoubtedly, this is going to mean a lot of work and members will need to liaise with their advisers, particularly where annual allowance charges have been made.  We will, of course, follow up this article as more information becomes available.

What else is new?

Flexibility of NHS pension for senior clinicians

The government has confirmed it will not increase the flexibility of the NHS pension for senior clinicians.

The aim of this was to look at the NHS pension to see if it could offer flexibility around the accrual of pensions leading to onerous tax charges from an annual and lifetime allowance perspective.

The Department for Health and Social Care believes that the raising of the income threshold from £110,000 to £200,000 from 6 April 2020 has removed 96% of GPS, and 98% of consultants from the tapering issues.  This does not mean that you will not suffer an annual allowance charge, merely that your allowance is likely to remain at £40,000.  

Their belief is that the changing of the income threshold has achieved what is required by the proposed flexibilities but without the complexity that would otherwise arise.  It is likely that many doctors may still be forced to manipulate their hours or retire early to avoid penalties.

Again, if you need any advice regarding your annual allowance or threshold income do get in touch.

Now, for the final bit of news…

Prevention of discrimination on survivor pensions due to sexual orientation

A 2020 tribunal (Goodwin v Secretary of State for Education) considered the rules on survivor benefits in the Teacher’s Pension Scheme. The tribunal concluded that a female member in an opposite-sex marriage was treated less favourably than a female member in a same-sex marriage or civil partnership, and that treatment amounted to direct discrimination on the grounds of sexual orientation. As a direct result of this discrimination, male survivors of female members were entitled to a lower rate of survivor benefit than a comparable same-sex survivor.

How does this affect you?

The 2008 and 2015 schemes have already been fully equalised so this ruling will have no effect on members of those NHS pension schemes. However, there are proposed changes to the 1995 scheme. Anyone with benefits still in that scheme, or those members that will be transferred BACK into the 1995 scheme following the McCloud remedy will benefit from the change.  

The alteration will be deemed to have come into effect on 1st April 2019. Arrears of survivor benefits may be payable to a surviving spouse or civil partner from the date on which the benefits became payable, provided that the member died after 5th December 2005.

Where a surviving spouse or civil partner would have been entitled to a back payment, but they died on or after 1st April 2019, this will be payable to their estate. In circumstances where the surviving male spouse died on or before 31 March 2019, there will be no adjustment of benefits payable to the estate because the entitlement arose before 1st April 2019.

Full details on sex discrimination due to sexual orientation changes are here: NHS Pension Scheme: proposed changes to Scheme Regulations

The changes taking place within the NHS Pension scheme at the moment are complex and overlap at times. We will continue to get the new information out to you and explain how it affects you as quickly as possible.

We do strongly advise contacting your adviser. This is even more important if you haven’t had a chat for a while, or if you haven’t taken specialist independent financial advice ever. It’s vital so you can fully understand how this all applies to you.

That’s all, for now, folks – but I think that’s more than enough for you to get your heads around!

Do you understand all 3 changes, and how they could affect your pension?  Let us know by adding a comment below.