McCloud Judgement
Proposed changes to the NHS pension scheme
In 2015, the government introduced a new pension which affected the majority of practicing NHS dentists. Those who were within 10 years of their pension age were afforded ‘transitional protection’ and allowed to stay in their old schemes.
Some public sector workers felt the change to the scheme was not fair and took the government to court. In December 2018, the Court of Appeal found that the 2015 changes were discriminatory to younger members of superannuation schemes - this ruling is called the McCloud Judgement.
As a response to the McCloud judgement, the government came up with a new set of proposals attempting to redress the age discrimination. These proposals were put out for consultation in early 2020 and closed in October.
Who will be affected by the new proposals?
These proposals will affect any dentists who joined the NHS pension scheme on or before the 31st of March 2012 and were still a member of the scheme on the 1st of April 2015. This could also affect you even if you are now a deferred member or have recently retired, as well as those who have received a spouse or dependant’s pension since 2015.
If your pension is affected, you will be contacted directly with the options available to you.
The Remedy Period
The government has identified a “Remedy Period” which runs from 1 April 2015 to 31 March 2022 - the date from when many members were automatically switched from the 1995 to the 2015 section pension.
What are the proposed changes?
The government’s proposed changes to redress this discrimination are simple but the decision for each member may be complicated. In short, depending on personal circumstances, some members may be better off in their original pension scheme, whilst others may prefer to remain in the 2015 scheme.
If you are affected by these proposals, you will be asked to make a choice on the following:
Immediate Choice Exercise – which would need to be made in the near future and would be a permanent and irrevocable decision. This would however provide the member with clarity over their future NHS pension and help them to plan accordingly. However, they would need to make assumptions on their future service which is not always possible to predict.
Deferred Choice Underpin – with this option a member can defer the decision until retirement. At that point they can opt for their service between 2015 and 2022 (the Remedy Period), to be in either the Legacy (1995 or 2008 scheme) or the Reformed Scheme. The benefit of this choice is that you can defer making the decision until retirement when you will be able to calculate the differences.
This decision is going to be difficult for many members as there are a number of extremely complex issues to consider, such as:
Annual Allowance - calculating the effect of any tax paid during the Remedy Period either directly or through Scheme Pays – where the NHS paid this annual allowance tax charge on your behalf
Lifetime Allowance – it will also be relevant to establish whether the decision will have an impact on the value of your pension for lifetime allowance purposes. This allowance is currently £1,073,100 and will start increasing inline with inflation in April 2026
Ill health and those members who have taken early retirement
Those that have retired since 2015 and already taken their benefits
NHS Pension Scheme members update
Once we have studied the government’s consultation and final proposals, we will have a better understanding of the potential impacts on members of the NHS Pension Scheme. We will then be able to offer further advice on which option may be suitable for each individual member.
NHS Pension advice
If you have any questions on the above or would like guidance regarding your membership of the NHS pension scheme, please contact our NHS pension specialist – Martin Brown on 0121 685 5060 or martin@wealthwide.co.uk