NHS Pensions and the Impact of age discrimination

The government is removing age discrimination from public service pension schemes. We examine the current position and the changes ahead for pension scheme members.

Back in 2015 the government introduced reforms to the NHS Pension Scheme, although those members who were near to retirement could remain in their legacy scheme with full or tapered protection.

However, in December 2018 the Court of Appeal found this to be discriminatory against younger members in a ruling that became known as the McCloud judgement, 

Below is a summary of the current position.

Those members affected by the ruling will have a choice of pension scheme benefits for a remedy period from 1 April 2015 to 31 March 2022. This is deemed to be the period when discrimination could have applied.

The choice of pension benefits in the remedy period will be between having them calculated all in the legacy 1995/2008 scheme or all in the 2015 scheme.

The final decision on benefits to be received for the remedy period can be taken at the point benefits are drawn.

Consideration was given to asking scheme members to make their choice earlier, but, given any number of events that could happen between now and retirement, making the choice at retirement appears to be the most equitable outcome.

NHS Business Service Authority will provide information to members to help them in the decision making process. This information is expected to be available by 1 October 2023.

In the meantime it has provided a short video summarising the work being carried out to remove age discrimination from public service pension schemes.

Until the choice is made, pension benefit calculations for the remedy period for those affected will be moved, where applicable, back into the 1995/2008 scheme.

Recalculation

Again, it is anticipated that the revised figures will be available by October 2023, but, will result in pension growth being recalculated, which for those who were switched straight into the 2015 scheme in April 2015 will have seven years worth of pension growth recalculated.

The impact could be significant, i.e.

• recalculation of pension annual allowance excess tax charges,
• revised scheme pays elections (where pension tax charges have been paid by the pension scheme),
• possible resubmission of GP certificates of pensionable income,
• and of course submission of amended tax returns for years with amended tax charges. 

Pension benefits in the legacy 1995/2008 scheme accrue at a lower rate than the 2015 scheme, which for most should result in lower pension growth and, where affected, lower annual allowance excess tax charges.

HM Treasury in its response to the consultation on the pension changes indicated that it will not apply time limits to claiming tax refunds, but where a tax liability arises it will not collect tax beyond the statutory time limit of four years.   

From 1 April 2022, NHS pension benefits will accrue in the 2015 scheme for all active scheme members.

We can help

Bishop Fleming’s specialist medical advisers are well placed to support you with the above changes.

NHS Pensions have a considerable amount of work to complete over the next couple of years to action the above changes and we will continue to monitor the situation.

If you have any questions regarding any of the above, please contact our medical and NHS Pensions specialist Steve Tucker.

The above is a broad overview of the current position and subject to new legislation being passed. Individual circumstances may require scrutiny to establish if they are affected by the remedy period.

Individuals should always seek specialist professional advice before taking any action.