NHS McCloud Remedy: Contingent decisions

It’s confirmed! Over 1 million members, deferred members and pensioners of the NHS pension scheme are affected by the McCloud Remedy. This includes anyone who was in the NHS pension scheme on or before 31st March 2012, including anyone who would have been eligible to rejoin as they were within 5 years of leaving.

NHS McCloud Remedy contingent decisions...

What is a Contingent Decision?

You’ll hear the phrase ‘contingent decision’ a great deal in the coming months – if you haven’t already! A contingent decision is a decision you made or did not make because of actual or perceived implications of the 2015 pension scheme reforms. Essentially, it stems from the question: ‘ Would you have acted differently if you hadn’t moved into the 2015 section of the pension scheme until 2022?’

As discussed in previous articles, the McCloud remedy has triggered this retrospective change, a reality as all affected members can now revisit decisions made in that period.

These actions include opting out, stopping added years or early retirement reduction buy-out (ERRBO), and the often used ‘hokey-cokey’ of leaving and rejoining the pension scheme. These actions were often designed to reduce annual allowance issues and lifetime allowance charges. 

Changes to membership can now be implemented for the entire remedy period, spanning from April 1st, 2015, to March 31st, 2022, along with the preceding six months. This adjustment will carry annual allowance implications, which, for the majority, are expected to be a positive change.

What if you paid an annual allowance charge in relation to your NHSPS benefits between 1st April 2015 and 31st March 2022? 

Any annual allowance calculations which resulted in either scheme pays election or cash settlement of tax liabilities between these dates will be affected. The HMRC will give more than the standard four-year scope to go back and change tax returns to reflect this and allow alterations for the entire remedy period.

If there is a decrease in liability, the government will compensate you for the 2015 /16 tax year to the 2018/19 tax years and refund you for the 2019/20 to 2021/22 tax years.

In the event of an increase in tax liability impacting only a limited number of members, the HMRC has the authority to collect the additional tax from the previous four years. They have suggested that they may not go further beyond this timeframe. It’s important to note that in the 2019/20 tax year, the scheme pays annual allowance compensation scheme was in place. Under this scheme, individuals could apply to have their liability covered by scheme pays without affecting their pension benefits. Therefore, any alterations in the tax year for individuals who opted for the scheme pays will also have their records amended.

Do you have to decide to change every year in the remedy period?

You may have the option to reverse some decisions partially or fully. This means you could pick single tax years to alter, some or all of them, as suits your position. 

Indeed, you must work through each year in turn to see if any of them would benefit from a different decision. This will take a lot of work, or you can outsource this to an accountant or a specialist financial adviser, such as Legal & Medical Investments. It is complex – so tread lightly. 

You don’t have to amend every year’s decision, but any reinstatement where you have rejoined the pension would result in retrospective employee contributions for any membership you now benefit from. This does include added years. Payment plans will be available if you cannot pay a single lump sum to achieve this.

What other decisions are affected? 

Another decision open for reconsideration and reversal is ‘Choices 2′, allowing members to undo their decision to transfer from the 1995 scheme into the 2008 scheme. However, tread carefully as the 2008 scheme has the ability to calculate benefits based on the best of the last 10 years’ income, in contrast to the ’95 scheme, which considers the best of the last three years. It is advisable to carefully calculate the figures for both options before making a decision in this regard.

The NHS pension scheme is planning to contact those affected in February 2024. While this decision could have significant implications for some individuals, it is crucial to carefully consider your options before taking any action. If you are uncertain about the implications, seek specialist advice promptly.

All in all, this development is positive for the vast majority. Nevertheless, the complexity of the calculations and the need for a thorough understanding of the situation may seem overwhelming. Remember that you are not alone in dealing with this matter. There is an increasing amount of information on NHS websites, and we are here to support and provide guidance. Feel free to reach out – we’ll assist you through the process.

Hot off the press

It was confirmed on 14th February 2024, as part of the NHS Costs claim back scheme, you will be able to claim some of the costs of professional advice taken in the past, or that you may choose to take now. For example, you could claim costs incurred where you employed an Independent Financial Advisor or accountant for advice about the move to the 2015 Scheme, or if you need advice about the effect of rollback on your tax position once you’ve received your Remediable Pension Savings Statement (RPSS).

In next month’s article, more details on both the NHS Costs Claim Back Scheme and the Remediable Pension Savings Statement (RPSS). So make sure you check back in with us to remain fully up to date on the NHS pension scheme.  

This article is not specific advice. We would always suggest that you get specialist advice in this area.

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