Get advice to navigate the pension labyrinth

By Edie Bourne

Independent practitioners currently aged 59 or older who are still working and are part of the NHS Pension Scheme will face the biggest impact when all members are moved to the 2015 Pension in April 2022. 

When members were first moved to the 2015 scheme following a review by Lord Hutton, those within ten years of retirement age on 1 April 2012 were ‘protected’ and allowed to remain in their current 1995 scheme. 

But, in 2020, in what has become known as the McCloud judgment, a court ruling said this action was discriminatory 

The remedy to this judgment is that everyone who was forced to move to the new scheme can now choose to take advantage of the benefits from their former scheme for a set time from 2015 to 2022. 

These benefits are likely to be much more valuable. In addition, to reset everyone’s position, all remaining public sector workers will now be moved to the 2015 scheme in April.

Doctors unaware 

Patrick Convey, technical director at specialist financial planners Cavendish Medical, warned that while this arrangement has been known for some time, many doctors were still unaware that they will effectively lose the protection they were given back in 2015 in just a few months’ time. 

‘If you were born before April 1962, you will stop accruing your previous pension which is based on final salary and length of service in April 2022. 

‘You will not be able to draw the newly accrued benefits from age 60. Instead, your new NHS pension will be based on an average salary, with benefits available to you at state pension age, so most likely, at age 67. 

‘You will still retain a final salary link in your old scheme. This means that if your salary goes up a band, this will increase your benefits in that part of your pension. 

‘For many people, though, moving to the new scheme could be detrimental and may have an impact on lifetime and annual allowance positions, as you will have two inputs per year instead of one.

‘The NHS pension is now so complex and particularly challenging for busy doctors to manage. This January will be the first time those subject to the harshest tapered annual allowance of just £4,000 will be navigating their 2020-21 tax returns. 

Seek assistance

‘At the same time, there is an ongoing consultation to reduce contributions, but the official regulations of the McCloud remedy have not yet been released. Many scheme members could be unpicking the last seven years of tax returns in line with the new benefits they will receive.’ 

He added: ‘I cannot say it strongly enough, but if you do not have expert help to guide you through this maze, you should seek assistance as soon as possible. Not checking your own position thoroughly at this time could be a very costly mistake.’

Last October, the Government declared that individuals receiving extra benefits as part of the McCloud remedy would not be subjected to additional tax charges.

The McCloud remedy legislation is not due until October 2023 and the Government consultation into pension contributions is due to end in January, with new input tiers expected to be in place by April 2022.