Removal of age discrimination – The knock-on effect to your NHS pension

Just when you thought your NHS pension scheme couldn’t get much more complicated there are now more pension decisions to make. The government has confirmed that changes made to the Firefighter’s pension in 2015 were age discriminatory, and they will impact all public sector pensions.

We are now at the point where the government has announced a consultation paper on how they plan to deal with this fiasco. This will have considerable implications for members of the NHS Pensions scheme.How the removal of age discrimination on public sector pensions will affect your pension?

The pension changes are largely impacting those who were in the NHS pension before 31st March 2012 and were transferred on 1st April 2015 or thereafter.

Two possible paths

The consultation is looking at two possible paths. Either an immediate choice or a deferred choice that can be made at retirement, with both ultimately seeing you and your benefits return to the 1995/2008 scheme until 31st March 2022. However, it’s complicated!

So what will your deciding factors be?

  1. As you will remember the 1995 & 2008 NHS pension schemes have different retirement ages (age 60 and 65 respectively) than the latest 2015 scheme (which is in line with state retirement). Meaning you could potentially draw your scheme penalty-free earlier if you are a member of the 1995 or 2008 version.
  2. We have spoken to many medics who are changing their retirement plans due to Covid-19, so this could work in their favour.
  3. The different pension schemes also have different accrual rates, meaning the rate at which you amass benefits differs between the schemes. So this is another factor that will need to be considered when making any decision.

The issue of tax and pension accrual will raise its head and has to be a consideration if you change the version of the NHS pension scheme you are a member of.  

The introduction of limits on how much you can accrue in your pension each year and in the course of your life, (annual and lifetime allowances) has caused many to have unexpected tax liabilities. If we change the basis on which your pension is calculated, then it will have an impact on your overall tax position.  

For some, it would potentially lead to having a liability if they change schemes, or possibly even a refund if it’s more favourable for others. The revenue will only be able to go back four years, with liabilities before not be collectible.

Other points to think about…

Have you left the NHS pension scheme? Those who elected to leave the pension scheme may be impacted by this new development and it is unclear as to their position at this point. In our experience, this will particularly impact GP’s. 

Have you already retired? If you have already retired and are affected, you will be asked to make a decision soon after changes have been implemented.

We are likely see more details after the consultation, and we will of course keep you up to date as the situation becomes clearer and guidance more certain.  

In the meantime, if you are concerned or have any questions regarding your NHS pension, please do not hesitate to contact your Legal and Medical adviser.

What are your thoughts? Are you going back to the previous pension scheme? Let us know by adding a comment below.

8 thoughts on “Removal of age discrimination – The knock-on effect to your NHS pension

  1. Theresa

    Do we know why the deadline is 2022?
    Not all those affected by the transitional protections will be 60 by 2022, How will this affec them ?

    Reply
    1. Owen Beswick

      Hi, Theresa

      The truth of the matter is, I don’t know. However, I would imagine that this time around the government has taken watertight advice that has led them to believe that they cannot be challenged if they introduce the scheme from 2022. Regards your assertion that not everyone in the 1995 scheme will have reached the age of 60 by 2022 – you are obviously correct.

      But I assume that new date of Mar/Apr 2022 for all members (current and deferred) of the 1995 scheme is somehow meaningful in law, in that is does not “discriminate” between those who are 25, 31, 45, 55, 57 etc. It is applicable to all members of the 1995 scheme regardless of age. I can’t imagine that the government will want to be challenged on this again, so I imagine they have done their homework!

      Best wishes, Owen

      Reply
  2. William King

    Thanks for the article – wow – complicated again!. What would happen to ERRBO contributions should years in the 2015 scheme revert to 1995 pension? Will they keep them or refund them? How would one reduce the tax liability on them? Put them straight back into a SIPP/LISA? Could one transfer them accross protected like transferring a SIPP from one provider to another? Or if one has protected ERRBO years in the new 2015 scheme that are increasing by inflation +1.5% is it better to leave them where they are and get a better rate at 60 even if one has had to pay some actuarial reduction? Assuming NPA stays where it is! Many thanks. (P.S Still have added years running for the 1995 section as well).

    Reply
    1. Owen Beswick

      Hi, Will

      The short answer is nothing has been said regards ERRBO. ERRBO gives you the right to retire at the age of 65 on “unreduced benefits”, assuming the necessary contributions are made and not forgetting that these contributions can be reviewed (which is another way of saying they can be increased – they are unlikely to go down in cost!).

      In the circumstances where you elect to remain on the 95 scheme for longer, ie: up until 2022, then you will be in the 2015 scheme, potentially, for a shorter time. However, ERRBO applies to 2015 only, and the premise is the same regardless of when you joined – it allows you to retire at 65 with unreduced benefits. My feeling is, that any perceived ERRBO contributions that you didn’t “need to make” because you “should have been” in the 1995 scheme will be returned in some way, shape or form. Potentially through a small reduction in any ongoing ERRBO contributions that you still intend/need to make. To start to make “refunds” etc with all the tax relief side of things would be problematic. This is just an opinion and therefore may be wide of the mark!

      I hope this helps but please feel free to contact me directly to discuss further if you wish.

      Best wishes, Owen

      Reply
  3. Andrew COONEY

    Very unclear! Does this mean that all those in mixed ’95 & 2015 pension schemes will be consolidated into the 2015 scheme after April 2022, no matter what, or can members elect have all of their pension reverted from the 2015 into the 95 scheme until retirement?
    I’m 54, I’m equally split between the 95 & 2015 schemes. I want to retire at 60, so the 2015 scheme will penalise me by 35% ( I think).

    Reply
    1. Owen Beswick

      Hi Andrew,

      No – consolidation will not be imposed.

      Those with 95 service could have that membership extended to April 2022. i.e. if service has been within the 2015 scheme then the individual can apply to have it “applied “ to the 95 scheme, not the 2015 scheme. As you say – a pension in the 2015 scheme can be reverted to the 95 scheme (for those in the NHS on or before April 2012) all the way up to the beginning of April 2022. However, from 2022, every member will be moved on to the 2015 scheme, regardless of what scheme they are on (1995 or 2008 or 2015).

      I’ve attached a link to help: Public Sector Pensions Leaflet

      I hope this helps!

      Best wishes, Owen

      Reply
  4. Alison

    Hi just to clarify; I am currently 53 yes 9 months l and want to claim my pension at 55 in March 2023. I was going to claim both my 1995 and my 2015 pension n March 2023 understanding that I “lose” 19% per month of the 1995 and a higher % of my 2015 pension but together these are enough to cover my monthly outgoings. Is it correct that I will be able to transfer all that is in my 2015 scheme into my 1995 scheme (up to March 22) then I will be able to claim much more at the reduced % penalty of 19%. Anything paid in after 2022 automatically then goes into the 2015 scheme which will have to be claimed at a higher % penalty.

    Reply
    1. Owen Beswick

      Hi, Alison

      Yes, it will be possible to elect to have any service in the 2015 pension scheme “transferred” over to the 1995 pension scheme up until April 2022. At this point, all members, regardless, will be moved on to the 2015 pension scheme.

      The penalty rate for retiring at the age of 55 is 19.95%. If you elect to take your 1995 scheme benefits at this stage, you will be precluded from continuing to be a contributing member of the 2015 Scheme. You can only continue to contribute to the 2015 pension scheme if you haven’t taken pension benefits.

      Best wishes, Owen

      Reply

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