Public Sector Pensions – what the McCloud judgement means for you.
All Public Sector Pensions administrators were obliged to introduce new versions of their pension schemes from 1 April 2015 that were sustainable and fair. Some older members received full protection from the changes and could stay in their previous scheme. Those a little younger were moved across to the new scheme on a sliding scale dependent upon age and younger members went straight into the new scheme from 1 April 2015. This affects members of schemes such as the NHS, Civil Service, Teachers, Judicial, Police, Armed Forces etc
The above treatment was found to be discriminatory against younger members on age grounds and restitution was required to treat all members the same.
The majority of pension scheme members will be given the option as to which scheme they wish to be part of in the period from 1 April 2015 to 31 March 2022. This has become known as the ‘Remedy Period’. From 1 April 2022, all members will accrue benefits in the new 2015 schemes. Members can elect for all benefits in the Remedy Period to be in their original legacy scheme or they can all be in the new 2015 schemes, but not some combination of both.
In April 2022 as well as beginning to accrue benefits in the 2015 scheme, there will be a default position where everybody will have their benefits in the Remedy Period converted to their old scheme if they had moved into the 2015 scheme. This may have several knock-on effects.
Changes to schemes in the Remedy Period may affect the level of contributions due, the tax relief available, the pension tax charge due to the Annual Allowance and adjustments to tax returns and/or Scheme Pays elections may be necessary, for up to seven years. The level of pension entitlement will also, of course, change.
The decision will need to be made at the point the benefits are about to be drawn. For many, that decision will be several years in the future. By this time, scheme administrators will be required to have systems in place that provide annual comparative figures so an informed choice can be made.
Retiring in the next few years?
Administrators are required to have these information systems and comparative figures in place by October 2023. If you are retiring before then, what decision will you reach if there are no figures available? How can you be sure that all the years in the Remedy Period and the final pension benefits are correct and the best for you?
At MHA Moore and Smalley, we have many years specialist experience in examining the tax and pension affairs of public sector workers. We have expertise in the calculation of benefits, pension tax charges, tapered annual allowance, scheme pays election completion and tax return declarations. We work in parallel with scheme administrators and our own Independent Financial Advisers (IFA) to ensure our clients are fully aware of the detail and can make a reasoned choice. If you are retiring in the near future, you may wish to talk to us.
Please feel free to share this information with colleagues and representative organisations.
If you would like further information, then please contact David Walker, Senior Tax Manager – Healthcare Services on 01253 404404 or email email@example.com