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NHS Pension consultation to remove age discrimination from the Scheme

NHS Pension consultation to remove age discrimination from the Scheme

Tuesday, 01 September 2020

In 2015, reforms to all main public service pension schemes were brought in to make sure they were sustainable and affordable. These reforms, however, didn’t apply to those closest to retirement.

For the NHS, this meant that older members didn’t transition or had a delayed transition from their final salary scheme (either the 1995 Section or the 2008 Section) to the new career average 2015 scheme.

In 2018, the Court of Appeal found this discriminated against younger members across the public sector and the Government has now launched a consultation, running from 16 July to 11 October 2020, which aims to remedy this. Members who were affected by the transition to the new 2015 scheme, will be given a choice of which pension scheme they’d like to have for the remedy period (between 1 April 2015 to 31 March 2022). Members can either opt to remain in the 2015 scheme or to remain in their old scheme. From 1 April 2022, all members will then transition into the 2015 scheme.

The consultation is also seeking views on two options for when this decision will have to be made by members:

•   Immediate choice: the choice would be made in the year or two after the remedy is        implemented in 2022

•   Deferred choice underpin: the choice would be made at the point at which the member retires or when they take their pension benefits. However, members would remain in, or be returned to, the old schemes for service between 2015 and 2022

Both options address any annual allowance tax issues which may arise as a result of moving schemes. Any changes, that result in a tax charge owed to HM Revenue and Customs, will be bound by the four-year statutory time limit to amend tax returns. However, any changes which result in a refund of tax won’t be bound by this statutory limit and will be repaid in full.

Under the deferred choice underpin option, on retirement or a member taking their benefits, any increase in Annual Allowance liabilities, due to swapping to the reformed scheme benefits, will be compensated for in the year in which individuals take their pension benefits. Members will still be liable to report and pay Annual Allowance charges incurred for any other reason.

Members who are affected should consider, not just the difference this would have on the value of their pension on retirement but also, for example, the following:

•   Whether there is an automatic cash lump sum in addition to regular pension payments

•   The age at which members can choose to retire with an unreduced pension (normal pension age)

•   Member contribution rates

•   Qualification for ill health retirement

•   Entitlement to survivor benefits

•   Additional or reduced tax liabilities in the remedy period

You can read the full consultation here

If you’d like any further information, please speak with a member of our healthcare services team. You can find contact details on the Our People section of the MHA Larking Gowen website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk

Jamie Butcher

 

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