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.
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?
- 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.
- We have spoken to many medics who are changing their retirement plans due to Covid-19, so this could work in their favour.
- 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.