WHAT DOES IT MEAN FOR YOU?
With millions affected, public sector workers are clamouring to understand what the McCloud judgement means to them personally.
Here you will find useful information, tips and links that will help you understand the background to the McCloud judgement, the government’s solution to remedy unlawful age discrimination, action you may need to take if you receive a remediable pensions savings statement (RPSS) and what this could mean for you and your NHS Pension.
1 WHAT IS THE MCCLOUD JUDGEMENT?
The McCloud judgement refers to a ruling made by the Court of Appeal on 20 December 2018 which found that when public service pension schemes changed in 2014 and 2015, they had unlawfully discriminated on the grounds of age, by only providing transitional protection for older members.
2 HOW WE GOT HERE, THE MCCLOUD TIMELINE
The McCloud judgement followed a series of events stemming back over a decade to June 2010 when the coalition government established an Independent Public Service Pensions Commission to look at the long-term affordability of public sector pensions. Read more
3 WHERE THINGS STAND NOW
The final judgement was made in February 2021, and the first part was completed in 2022 with all active members now being members of the 2015 Scheme. This provides equal treatment for all active pension scheme members.
The second part is to put right, or ‘remedy,’ the discrimination that could have taken place between 1 April 2015 and 31 March 2022. This is known as the remedy period. If you were affected by the changes in 2015, you’ll be asked, when it’s time to pay you your pension benefits, if you want to receive legacy scheme or reform scheme benefits for your service during the remedy period.
If you were a member with either no protection or tapered protection, any service you have in the 2015 Scheme during the remedy period has been returned to the 1995/2008 Scheme on 1 October 2023. This is called rollback.
4 WHAT THIS MEANS IF YOU’RE AFFECTED BY THE ANNUAL ALLOWANCE
If you have pensionable service in the remedy period that is rolled back, it may affect your pension tax position for one or more of the tax years in the remedy period.
Many members affected by rollback will not see any change to their pension tax position, but some may, particularly if they had an annual allowance charge for one or more of the remedy period tax years.
The annual allowance is the maximum amount of tax-free growth your pension can have in a tax year. The standard annual allowance was £80,000 for 2015/16, £40,000 each tax year from 6 April 2016 until 5 April 2023 and £60,000 from 6 April 2023.
From October 2024 NHS Pensions are sending members who are affected by rollback and annual allowance a ‘remediable pension savings statement (RPSS) recalculating the pension input amounts for each remedy period tax year. The RPSS will also include the growth for the 2022/23 tax year and the 5 preceding years to 2015/16 which may be needed for carry forward purposes. You will need your remediable pension savings statement to be able to use the HMRC Digital Service.
HMRC’s digital service will enable members who have new annual allowance charges, or changes to annual allowance charges as a result of rollback, to:
- reassess any previous annual allowance charges during the remedy period tax years
- make an application for a refund of any previously overpaid annual allowance charges for tax years 2019/20, 2020/21 and 2021/22
- make an application to claim compensation for any previously overpaid annual allowance charges for tax years 2015/16 to 2018/19
- pay any underpaid annual allowance charges for tax years 2019/20, 2020/21 and 2021/22
- pay an annual allowance charge for 2022/23
The digital service will also apply to other tax charges such as lifetime allowance charges and unauthorised payments charges.
HMRC has confirmed that members affected by rollback and annual allowance will not need to resubmit a self-assessment tax return for any remedy period tax year or need to include an annual allowance charge on a tax return for tax year 2022/23.
5 MEMBERS WHO WILL NOT RECEIVE AN RPSS
You’ll not receive an RPSS if:
- you had full protection from transitioning to the 2015 Scheme
- you were not an active member on 1 April 2012
- you’ve applied to purchase missing membership or additional voluntary contributions (AVC) due to making a contingent decision
If you retired before 1 October 2023, you’ll not receive an RPSS until after you’ve been contacted to choose which benefits you want for the remedy period.
The government has designed the remedy, so you only get an RPSS if you need one, depending on the benefits you choose when we contact you to make your choice.
6 WHATS INLCUDED ON AN RPSS
The RPSS will show a total of 13 years to include:
- the relevant 2022/23 year
- the 7 remedy years from 1 April 2015 to 31 March 2022
- the previous 5 years for carry forward
The 2015/16 year will have 2 amounts because the input period has changed from the scheme year to the tax year.
If you were not an active member for the whole tax year you may have some missing years.
You may have some growth in the 2015 Scheme for the 2021/22 year. All members transitioned to the 2015 Scheme on 1 April 2022, but Annual Allowance is based on the tax year. This changed from 5 April 2022 so you may have up to 5 days in the 2015 Scheme for this tax year.
7 CHANGES TO YOUR ANNUAL ALLOWANCE GROWTH
Your statement is calculated on information provided by your Employing Authority (EA).
Your growth may change if NHS Pensions have received updated pay or service details from your EA from when your previous Annual Allowance statement was produced.
If you have Mental Health Officer (MHO) status, your growth may change when it’s rolled back due to doubled years increasing your reckonable service. This may result in an increase in your growth overall.
Some of your growth figures may be the same as previous Annual Allowance statements you received if you did not transition to the 2015 Scheme on 1 April 2015. Those benefits were already calculated to be in the 1995 or 2008 Sections of the Scheme.
If you had a Pensions Annual Allowance Charge Compensation Scheme (PAACCS) for 2019/20, any changes:
- will be paid to you if your charge increases
- must be repaid if your charge decreases
8 REPORTING CHANGES TO YOUR ANNUAL ALLOWANCE
If your growth has changed, use the public service pension adjustment calculator on the HM Revenue and Customs (HMRC) website. This will show if you have any Annual Allowance charge to pay and any changes due.
If you’re logged into your Government Gateway account when you use the calculator, this will report any changes to HMRC. This includes amending any Annual Allowance charges you’ve already paid.
HMRC will tell NHS Pensions of any changes to your existing Scheme Pays.
If you’re not logged into your Government Gateway account when you use the calculator, you must submit any changes separately.
9 SCHEME PAYS
The Scheme Pays amounts displayed on your RPSS are the current active and accepted charges for each year.
These have been taken from your record to reflect the current Scheme Pays in place following any elections we’ve received and processed.
HMRC only need your Scheme Pays elections from year 2014/2015. Any earlier Scheme Pays will not show on your RPSS.
Email schemepaysadmin@nhsbsa.nhs.uk if you think:
- your figures are incorrect
- a charge is missing
- there’s a figure showing for a year you did not elect Scheme Pays for
You must check your acceptance letter for the relevant year before emailing to make sure your election was not restricted.
10 COST CLAIM BACK SCHEME
This Cost Claim Back Scheme allows members directly affected by the remedy to apply to claim back some types of direct financial losses incurred as a result of the discrimination or the application of the remedy.
Members may have more complex situations so they may need to pay for professional services or advice, such as an accountant or independent adviser (IFA). If so, they can apply to recover certain costs or other direct financial or tax losses, using the NHS Cost Claim Back Scheme.
A claim for IFA services to help you make your decision about your choice of pension benefits for the remedy period is limited to £500 including VAT, per piece of advice.
The maximum payment under this Scheme for accountancy services, where the service relates to the use of the HMRC Digital Service for the completion of applications, is £1,000 including VAT per piece of advice.
The full details of the NHS Cost Claim Back Scheme are explained in the Scheme Rules.