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.

36 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
  5. Theresa

    Hi
    The government is proposing to remove transitional protections which were offered. Will the result of this be that the pension available to take at age 60 will be much lower because a greater proportion of pension will be imoved to the 2015 scheme and therefore subject to a greater reduction.

    Reply
    1. Owen Beswick

      Hi, Theresa,

      Potentially pension benefits accrued since 2015 (or when an individual transitioned on to that scheme) in the 2015 pension scheme, up until April 2022 can be moved into the 1995 pension scheme. Essentially then the transitional period has been increased in length. It is therefore actually the case, that a greater proportion, not less, of pension, will be available at 60 without actuarial reduction (ie benefits under the ’95 scheme) than is currently the case.

      The choice left with the member is to decide upon whether they want service up until 2022 being recorded in the 1995 or 2015 scheme. It is our understanding that calculations, that the NHS will undertake, will confirm whether a member is better off with either option.

      Best wishes, Owen

      Reply
  6. lisa

    hello,
    I am almost 51 years old and I want to retire at 56 . If I transfer all my years into the 1995 pension scheme up to 2022, would i be better off not paying into the 2015 pension scheme at all , for those remaining 4 years?

    Reply
    1. Owen Beswick

      Hi there,

      Paying into the 2015 scheme will, even for those few years, generate a pension that can be accessed from aged 57/58 onwards, if you accept an actuarial reduction. Or, you could just defer payment of the 2015 pension benefits until later life when the actuarial reduction is smaller/zero.

      Retiring at 56 and taking your pension (even if all in the 1995 scheme) will result in a smaller pension than that available at 60, as the benefits will be reduced to reflect receipt of benefits before the Normal Retirement Age (NRA) of the scheme which is 60, as you are aware.

      However, I would recommend that you speak to one of our advisers to discuss your options.

      Best wishes, Owen

      Reply
  7. Tracy Yeates

    Is there a calculater that I can use to see what the changes to my 1995 pension would be if I transfer the extra 7 years uptp 2022 back into it?

    Reply
    1. Owen Beswick

      Hi there,

      Sorry I am not aware of a calculator! At the moment, the idea is that you will get to your potential retirement date and ask the NHS to do the relevant calculation. This isn’t necessarily that great as one would want to be in a position before then, to know if you can/want to, retire! I imagine a calculator will be forthcoming – it’s just not available at the moment.

      Best wishes, Owen

      Reply
  8. Mark jagger

    I am looking at taking my frozen 1995 pension April this year(frozen at 29.5yrs I will be 55 then). what will happen to the 5yrs contributions paid into the 2015 scheme that I would probably want adding to my frozen pension? Will my 1995 scheme would be topped later or would an option be made available to me when I hand in my application?

    Reply
    1. Owen Beswick

      Hi there

      Our understanding is that members such as yourself will be offered two scenarios at the time of your benefit request:

      1 – transferring your 2015 benefits over to the 1995 scheme
      2 – leaving service within the 2015 scheme.

      However, to ensure that this is the case, I would put a covering letter in with your application. Incidentally, now is an incredibly busy time of the year, and as the pension service requests that an application for benefits is requested three months in advance anyway, I would put your application in sooner rather than later!

      Best wishes, Owen

      Reply
  9. Jacqueline Woolley

    I can retire September 2021 at age 60 with full protection on the 1995 scheme. Do I need to retire before April 2022 to keep the right to retire at 60 with a tax fee lump sum

    Reply
    1. Owen Beswick

      Hi there

      The short answer is “no” – you can retire at any time after the age of 60 and still retain all of the 1995 benefits, including tax-free lump sum, assuming this isn’t changed in the interim. Your consideration maybe “do I still carry on contributing to the NHS pension scheme after April 2022 – when contributions will then be in respect of 2015 pension scheme membership.” Obviously, the 2015 scheme normal retirement age is linked to State Retirement age and you may not consider it worthwhile to carry on contributing! You definitely need to speak to an adviser regarding your pension benefits.

      You may not be aware that the lump sum that is available to you via the NHS pension can be increased if you give up pension income (process called commutation) for instance? I encourage you to get in touch.

      Best wishes, Owen

      Best wishes, Owen

      Reply
  10. Meryl Matthews

    Hi
    I have paid into the NHS pension scheme since 1990 and as a nurse was always in the special classes of being able to retire at 55. Last year I was moved into the new scheme without a choice as we all were. If the rules change back and I can go back in the old scheme, 1995- will the terms and conditions still include being able to retire at 55, as currently it increased to 60 last year?

    Reply
    1. Owen Beswick

      Hi there,

      Yes – it’s perfectly possible that the service that you are accruing under the 2015 scheme can be transferred across back to the ‘95 scheme. Your service within the 95 scheme and your special classes position means that you will still be able to claim a pension, in respect of this service, at the age of 55 without actuarial reduction.

      It is only service in the 2015 scheme that will not give you this status. As this could be potentially a very small part of your NHS service overall then it shouldn’t have to big an impact.

      Best wishes, Owen

      Reply
  11. Aida

    Hi
    I’m turning 50 in May 2021, I have been an active member since 1998. I wanted to claim my 1995 pension as early retirement at 50, but I was moved to 2015, will I be able to get all my full contribution in the 1995 or do I need to wait until 2022 April to qualify for all my contributed years to be taken in the 1995 scheme

    Reply
    1. Owen Beswick

      Hi, Aida

      You can claim your pension in relation to the ’95 scheme early, at age 50. You will, however, then be precluded from continuing to contribute to the NHS pension scheme (2015 or otherwise.) Regards the service that you have already “built-up” in the 2015 scheme, which under the proposed McCloud arrangement can be treated as 1995 service, I would recommend that you contact NHS pensions to discuss how they will reconcile the situation for you, bearing in mind your wish to retire early.

      Best wishes, Owen

      Reply
  12. Dave Johnson

    Many thanks for this, it is very helpful. I pretty much understood what was happening but some interesting comments have been made. I’m 57 and on the basis of being transitioned into the 2015 scheme in Aug 2019 (tapered protection) I reduced my hours because I decided not to consider any 2015 scheme payments in my long term plans as it would be God knows when before I could get them (currently 67 but you never know with HMG!). It does mean I wont get to my full 40 years (NHS man and boy) until later now as I reduced my hours but you win some, you lose some. One thing I would say though that people should consider if thinking of opting out of the 2015 scheme after 2022, you would lose the death in service benefit which, whilst a somewhat morbid subject, is a considerable amount for surviving loved ones.

    Reply
  13. Catherine Neilson

    I’m 56and was planning to work till 60.
    I could take my pension at 55 as I’m special class and also been in 1995 scheme and will choose for that to be reinstated when given the choice
    The rub for me is what to do when they change my pension at age 57 .? Will my 1995 pension be frozen and if I pay only for another 3 years into 2015 scheme ( and still be protected death benefits) I’m assuming I can’t access even 2015 pension until I’m 67 as this will be my NPA . This has been the 4 th change since I commenced in NHS . I’m thinking of just retiring in 2022 and hopefully applying for another job part time . Potentially the could have a mass exodus !!

    Reply
    1. Owen Beswick

      Hi, Catherine

      Your ’95 pension will be frozen although you could access it from the age of 55, as you infer, without suffering an actuarial reduction. If you were to do this then you would be precluded from contributing to the 2015 scheme though (this is on the basis that you took pension ’95 scheme benefits but returned to work.) You can access you 2015 pension earlier than age 67 but will suffer an actuarial reduction if you do so.

      I would recommend that you contact an adviser to talk things through. You may want to consider commutation of pension income for a bigger lump sum bearing in mind you will probably be continuing to earn an income.

      Best wishes, Owen

      Reply
  14. simon

    Hi Ma, Owen, all concerned,
    is this not a no brainer?
    will not everyone revert to 1995 scheme who can, and gain an extra 7 years in that scheme?
    for me i had 22 years in the 1995 (roughly 50% of the 40 yrs max) so add those 7 magic years back (roughly 75% now)
    this can be taken at the age of 60….instead of 67 (when you may be dead if unlucky!)
    i agree with others….alot of people will retire in 2022!
    for those wishing to stay on – i think paying into new pension will be a difficult choice
    may be pay 1 mon thof the year for death in service protection
    but for me i’d take the pension contribution money, shout about getting recycled payments, and invest it – more control / similar benefits?

    Reply
    1. Owen Beswick

      Hi Simon

      You make a lot of valid points and there is definitely a lot to think about. What I would say is that I was of the same opinion – “the ‘95 scheme is bound to be better”! However, having worked through a couple of examples and even taking into account the later normal retirement age, sometimes a combination of the ‘95 scheme and early “actuarially reduced” 2015 scheme benefits looked to offer a better pension than solely ‘95! It’s very much about personal circumstances, current age, ideal retirement date etc. etc, and how these factors impact the potential pension and ultimately influence your decision.

      Ultimately whether it’s the ’95 or 2015 scheme – they are great schemes when you look at the prospective pension payments.

      Best wishes, Owen

      Reply
  15. Ram

    Hello Owen

    I’m 57 in September 2021 and have been in 1995 scheme since 1/9/1997 then moved with tapered protection in the 2015 scheme since 1/4/2017.

    From the 1/4/2021 I’m stepping down & changing my role , having worked in clinical management & advanced practitioner , so I will be working part -time hours & at a lower band.

    My concerns are :
    1 -do I use pay protection with nhs pensions & leave taking my pension until 2022/2023 ? Until McCloud is sorted ?
    But I will have a nearly 30-40% annual pay reduction?

    2- take my 1995 scheme 3 early early in September 2021? So I have part -time income & nhs pension income with an early reduction factor applied ?

    3 – or wait until April 2022 & hopefully nhs pensions have systems ready for providing McCloud calculations 1995 vs 2015
    However they mention it may be as late October 2023 for McCloud changes .

    Thank you Ram

    Reply
    1. Owen Beswick

      Hi Ram

      These are complex questions and I am not sure that this is the forum for dealing with them. Answers need to consider overall context, financial position, family situation etc. I, therefore, feel that you should get in touch and talk to one of the advisers at Legal and Medical.

      As a brief synopsis:

      1. Working P/T sees your income converted into whole-time equivalent with regards to pension benefits. Your pension is based on the best of the last three years based on WTE pay.
      2 This is very much down to personal circumstances and what your general finances look like. Potentially you may need to consider the effects of abatement.
      3 I expect there will be some re-calculation in the future to ensure that members are not out of pocket.

      To reiterate Ram, you need to talk this through at a meeting with an adviser. These are important decisions that should be considered from a fully informed position.

      Best wishes, Owen

      Reply
  16. Robert Birkinshaw

    I’m almost 54 and worked for the nhs since 1990. I have 25 years in 1995 and the rest in 2015 scheme. Due to annual allowance tapering situation I had a large tax bill for 2019 -20 and had to use scheme pays to pay this. This is then complicated by the fact I then had to complete a 2019-20 NHS compensation form as the chancellor agreed to pay this back when I retire. Will this be affected when I retire if I move back to the 1995 scheme until 2022.

    Reply
    1. Owen Beswick

      Hi, there

      In the event of “moving back” to the 95 scheme, the NHS will have to do a calculation for you. Firstly to establish if there would have been an “excess” input if service was accrued solely in the 95 scheme, and secondly in the event of “yes” to this question, then calculate what that input would be. The compensation letter will still be effective. If your input was more than that for which you had originally applied, my feeling would be that the whole cost would be met by the exchequer on the grounds of “I would have applied for the “correct” compensation if I had known what the correct pension input was!”

      I hope this help!

      Best wishes, Owen

      Reply
  17. Denise

    Hi Owen
    I paid into my NHS pension from 1993 until I left clinical medicine in Dec 2017 aged 48 at which point I froze/ deferred my pension. The vast majority of my pension is in 1995 scheme and a small amount is in the 2015 scheme. I intend to draw my pension when I am 60. Have I understood correctly that I am now able to ask for my 2015 pension to be transferred to my 1995 pension, enabling me to draw the whole lot unreduced at 60? Or am I not eligible because I froze my pension schemes in 2017?
    I now work for HEE and have the option of re entering the pension scheme but for other reasons I am not keen to do this, but would consider it, if it made me eligible for the 2015 to 1995 transfer. Hope that makes sense.
    Many thanks
    Denise

    Reply
    1. Owen Beswick

      Hi, Denise

      If you are eligible (you are(!)), all service accrued in the 2015 scheme up until April 2022 will be eligible to be converted into ‘95 membership.

      Best wishes, Owen

      Reply

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