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McCloud Judgement – Your NHS Pension

In 2015 the government made changes to reform the majority of public service pension schemes.

Public Service Pension Schemes
In 2015 the government made changes to reform the majority of public service pension schemes. These reforms did not apply to members within 10 years of their normal pension age on the 31 March 2012, who remained in their legacy schemes with ‘transitional protection’.

The Court of Appeal later found this to be discriminatory against younger members in the judicial and firefighters’ schemes – the government accepted that this discrimination existed in all schemes where transitional protection was introduced. It is typically referred to as the ‘McCloud judgement’.

Many NHS Pension Scheme members will have transferred over to the 2015 NHS Pension Scheme on 1 April 2015 or later, under transitional arrangements. From 1 April 2022 Members will have their contributions made during the remedy period moved back to their legacy scheme with an option to return them to the 2015 scheme at retirement.

The period this discrimination will apply is between 1 April 2015 and 31 March 2022, and this is called the remedy period.

Deferred Choice Underpin (DCU) means members will have to make a choice when they retire and will receive two Annual Benefit Statements.

Retired members will make the choice retrospectively, with pension payments backdated to the date of retirement.
From 1 April 2022 all active members will become members of the reformed 2015 scheme.

For GPs previously in the 1995/2008 Scheme, any service earned up until 1 April 2022 will be retained and access to these benefits will remain the same.

The processes needed to support members to make choices when they retire are to be in place by 1 October 2023.

Tax Implications

Changes to benefits for the remedy period may mean a new or higher annual allowance charge. For any underpaid tax, scheme pays will be available. Where a member has over paid tax, a tax refund will be made or an adjustment to any scheme pays arrangement.

Any additional tax payable is subject to a 4-year statutory time limit, however there are no time limits on tax refunds or alterations to Scheme Pay Elections already made.

Adjustments to lifetime allowance changes may be required where benefits have been taken. Members may have a change in contributions in the remedy period which may affect their income tax position.

Retired members pension may change with tax due on an increase in pension income.

We deliver a specialist NHS Pension Management Service for our clients alongside accountancy and tax advice. The NHS Pension Management Service is unique to our firm. We are not authorised and regulated to provide pension advice. If you have further queries regarding your options with your pension, i.e. opting in/out of the scheme, using Scheme Pays facility, when to start taking your pension, those questions fall under ‘regulated advice’ and must be answered by a qualified, regulated Financial Adviser.

If you would like us to facilitate an introduction to a regulated financial adviser who understand the complexities of the NHS Pension Scheme, contact our Client Services team on 0191 500 6930. Our client services team can also provide further details regarding our NHS Pension Management Service if you have concerns regarding the accuracy of your pension data and annual allowance/lifetime allowance tax position.

For further information and official papers regarding the McCloud judgement, contact NHS Pensions direct;

Tina Milligan FCCA

Tina Milligan FCCA

NHS Pensions Manager

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