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, 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
On 4 February the government published a response to its July 2020 consultation on proposed changes to public service pension schemes to remedy the unlawful age discrimination identified by the Court of Appeal in McCloud. Read more
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.
HMRC is introducing a new digital service that 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.
NHS Pensions are recalculating the pension input amounts for members affected by rollback and annual allowance charges for each remedy period tax year, and 2022/23. Once this is complete, they will send members who are affected by rollback and annual allowance a ‘remediable pension savings statement’. They are aiming to do this by October 2024. You will need your remediable pension savings statement to be able to use the HMRC Digital Service.