Navigating the Impacts of the McCloud Ruling on NHS Pensions
A landmark court case known as the McCloud ruling is causing major changes for members of the NHS Pension Scheme. The case stems from reforms made in 2015 which transitioned many members to a new section of the pension scheme. Older members nearing retirement were allowed to remain in their legacy scheme, while younger members had to switch, with the transition occurring between April 2015 and March 2022.
However, in the McCloud case, courts found these protections for older members were discriminatory against younger members. As a result, the government has committed to removing this age discrimination.
What does this mean? Essentially, members impacted by the 2015 changes will be automatically reverted back in their legacy scheme and on retirement have the option to stay in that scheme or switch their benefits to the 2015 scheme. This only applies to benefits earned from 2015 through 2022, called the “remedy period.”
Who is affected? You are impacted if you:
- Had NHS pensionable service during the remedy period.
- Were moved from a legacy scheme to the 2015 scheme due to the reforms.
- Were in a legacy pension scheme on or before March 31, 2012 (without a gap in service before the remedy period)
Starting in October 2023, impacted members will receive details on rolling back benefits to legacy schemes. At retirement, you can retain this rollback or move the benefits into the 2015 scheme – this will be a personal choice depending on your circumstances.
There are also important tax implications. Moving benefits between schemes can alter how tax charges are calculated and reported. HMRC is introducing a digital portal to handle changes to tax liability reporting going back for all of the remedy years.
With complex pension rule changes, it is critical to seek expert advice on how the McCloud ruling will impact your specific situation. Factors to consider include tax, lifetime allowances, retirement age differences between schemes, and ensuring your pension records are up to date. We can help analyse your position to ensure that the maximum retirement benefits are available to you at your chosen retirement date.
The McCloud case demonstrates the complexity of public sector pensions. By working together, we can ensure you understand how it affects you and assist in making the most informed choices about your NHS pension.
For more information, please contact Peter Herniman on peter.herniman@ballardsllp.com
Disclaimer. This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.
