In response to the government consultation on the proposed McCloud Remedy, new details have been released. This government announcement is hot off the press, so let’s cut straight to the chase and tell you what we know…
Ten proposed changes to the NHS pension scheme regulations
1. If you opted out in the six months before the 1st of April 2015, you will be able to buy back lost service up to the end of the’ remedy period’, 31st March 2022. You will not need to provide any reason for opting out previously or evidence to support your initial decision.
2. If you decide to contribute and reinstate service from the time you opted out, you can do so as a lump sum or via an instalment plan. The idea has been proposed, that the instalment term should match the length of time you are buying back. For example, if you are buying back in for five years, the instalments should also be spread over five years.
3. If you stopped voluntary contributions such as added years you will also be able to buy these back without further evidence.
4. If you ‘recycled’ employer’s contributions or a portion of them as taxable pay in lieu of pension contributions, you can reinstate that service. However, this could prove costly as you will need to pay these contributions back into the scheme. This may not be affordable, however, it will be possible.
5. If you bought ‘Early Retirement Reduction Buyout’ (ERRBO) in the 2015 scheme but decide you would like to move benefits back into the ‘95 or 2008 schemes, you will be granted equivalent benefits in the legacy schemes.
6. During the consultation, it was highlighted that salaried GPs and GP partners would find it incredibly hard to find the necessary cash to pay employees contributions if they wanted to reinstate service. Therefore, it has been requested that the employer contributions will be aggregated and factored into payments in subsequent years. This is yet to be confirmed as granted.
7. If you moved to the 2008 section in 2015 as part of choice 2, you will be allowed to change that decision and revert to the 1995 scheme. This would require detailed advice and should not be decided upon lightly.
8. The HMRC is launching a new digital service for the annual allowance (AA). It will allow tax years from 2020/21, 2021/22 and 2022/23 to be corrected in light of the McCloud Remedy. This digital service will facilitate compensation for any overpayments in the 2015/16 tax year through 2018/19.
Please note it will be necessary to go as far back as 2011 to accurately recalculate annual allowance figures.
9. If you have overpaid annual allowance charges, they will refund these with interest, or if you used the scheme pays system, they will amend this on your behalf.
10. There has also been some noise about the government offering a financial compensation scheme. There are no further details at this point. However, it is thought they may cover some costs you have incurred for professional services, such as financial advisors or accountants necessary to calculate the best options for you.
These announcements show no signs of slowing in pace. We continue to work through the implications and how they will affect our clients.
As always, it is important to take full consideration of your own circumstances. No two individuals have the same finances. We strongly advise you to take specialist advice to understand what these proposals mean for you. This article is not intended as specific advice.
This article was written in cohort by Max Spurgeon and Kirsty McGaun.