On the 4 February 2021 the government announced its response to the consultation in respect of public pensions. This is important as it includes your NHS Pension and sets out how the government proposes to remedy the discrimination found by the courts by transferring certain scheme members to the ‘reformed’ 2015 NHS Pension Scheme from the ‘legacy’ scheme, the 1995/2008 NHS Pension Scheme.
The response and proposed remedy are extensive but below we provide a summary of the key points.
- Dependent on age many of you will have transferred over to the ‘reformed’, 2015 NHS Pension Scheme, on 1 April 2015 or later under transitional arrangements. You will now be transferred back to the ‘legacy’ scheme, if you were in the 1995 scheme you will revert to the 1995 pension scheme rules and members of the 2008 scheme will revert to the 2008 NHS scheme rules.
- In the run up to retirement and intended from 2023, two Annual Benefit Statements will be produced showing the above to assist you in deciding when to retire.
- You will remain in the ‘legacy’ scheme up until 31 March 2022 after which all future service will be transferred over to the ‘reformed’, 2015 NHS Pension Scheme. This will also apply to members who had not been transferred to the ‘reformed’, 2015 NHS Pension Scheme and but for this consultation would have remained in the ‘legacy’, 1995/2008 NHS Pension Scheme.
- At retirement you will be offered what is known as a Deferred Choice Underpin (DCU). What this means is that two calculations of your NHS Pension benefits will be provided. These will be as members of the ‘legacy’ scheme, 1995/2008 NHS Pensions for the period 1 April 2015 through to 31 March 2022. The second choice as members of the ‘reformed’, 2015 Scheme from 1 April 2015 through to 31 March 2022. These dates will vary if you were a transitional member.
- Annual Allowance charges paid either personally or by way of Scheme Pay Elections will have to be revisited to determine if additional tax or a refund is due. For any additional tax payable, limits on how far the Revenue can go back are provided which is not to exceed four years but there are no time limits on refunds or alterations to Scheme Pay Elections already made.
- Should at the date of retirement you decide to choose to return to the ‘reformed’ scheme, (2015 NHS Pension) for the period 1 April 2015 through to 31 March 2022, there will be very high pension growth in your final year which under normal circumstances would result in a substantial annual allowance charge. However, under the proposals it appears to be that no tax will be payable under these circumstances.
Action Points
- For many of you no action is required at the moment as the necessary legislative changes are needed to be put in place. However, since it will not be until 2023 possibly at the earliest that the NHS Pensions will be able to provide the two Annual Benefit Statements and as a consequence revised Annual Allowance Statements, many of you may wish some indication if a refund or additional tax could arise as a result of these changes and at least provide a method to check the accuracy of what will be produced by the NHS Pensions in the future.
As a firm we have the system in place to undertake these calculations to provide an indication of any refunds or additional tax due and for these to be used to check future statements produced by NHS Pensions. Many doctors may be eligible to reclaim thousands of pounds in Annual Allowance tax previously paid.
This service is available to consultants & GPs both in England & Wales administered by NHS Pensions and for consultants in Scotland administered by the Scottish Public Pensions Agency (SPPA).
- If you have recently retired and had been a member of the ‘reformed’ 2015 NHS pension in the run up to retirement you will be entitled to your benefits being recalculated should you decide as a member of the ‘legacy’ , 1995/2008 NHS Pension Scheme. This is important if you took early retirement on the grounds of ill health.
- Some of you made the choice to become deferred members of the NHS Pension Scheme, the majority being GPs in England & Wales and some consultants in Scotland by way of special arrangements in 2019/20 to mitigate Annual Allowance tax charges. There is scope to return to the scheme for the periods that you deferred but this will be dealt with on an individual basis.
The above is not an exhaustive list and more details relating to the remedy will follow as the government puts into place the practicalities of it.
We should point out that for Scotland the remedy may differ from England & Wales as the Scottish Government is the responsible authority for the NHS Scotland Pension Scheme even though the Treasury & Parliament has responsibility for the overall shape of reform and so is subject to further decisions of Scottish ministers.
For Northern Ireland separate legislation was originally enacted and as such a separate consultation was held that closed on 18 November 2020.
