The government accepted in 2019 that discrimination in the NHS pension scheme would need to be rectified after a landmark Supreme Court ruling found changes to some public sector pension schemes had been unlawful.
Under changes introduced in 2015 to the NHS pension scheme, doctors who were aged under 50 on 1 April 2015 were denied benefits offered to doctors closer to retirement age. At least a dozen doctors took legal action to challenge the impact of the changes.
The government has now confirmed that to reverse the discrimination, NHS pension scheme members will be able to choose when they retire whether for the period 1 April 2015 to 31 March 2022 they would have benefited most from being in the pre-2015 ‘legacy’ scheme, or the reformed version. The government has chosen this ‘deferred choice’ approach over an alternative that would have required pension scheme members to choose immediately which option suited them best over the period.
NHS pension scheme
GPs who chose to opt out of the NHS pension scheme over this period because of the changes may be able to reverse that decision retrospectively, according to a government consultation response published on 4 February.
Thousands of GPs could also reclaim part of tax bills paid under the annual allowance mechanism since 2015 – potentially worth four or five-five figure sums per year. This is because a lower accrual rate under the legacy pension scheme means the calculation of their annual pension growth will be reduced over the period.
In a foreword to the government response to a consultation on public sector pensions, chief secretary to the Treasury Steve Barclay wrote: ‘The significant majority of responses backed the introduction of a “deferred choice underpin” (DCU) as the way to remedy the identified discrimination. This approach will enable eligible members, when they retire with a pension, to choose whether the legacy or reformed schemes would be better for them for the period between 1 April 2015 to 31 March 2022.
‘Respondents offered strong and convincing arguments to support this view, which are set out within this consultation response. It is clear to me that the DCU will provide greater certainty for members and is also the right approach for schemes and the government.’
Board member of the Association of Independent Specialist Medical Accountants (Aisma) Andy Pow, of Mazars LLP, told GPonline that any NHS pension scheme member under 50 at the time the change kicked in who has paid an annual allowance tax charge since then would see a ‘positive adjustment’.
He said GPs may be able to claim back amounts worth ‘four or five figures’. Mr Pow said that an example he had looked at saw a doctors who had been slightly over the annual allowance threshold and paid a four-figure tax charge for 2019/20 would not have paid anything if his pension had operated on the ‘legacy’ system.
The government consultation response confirms that doctors could be able to revisit decisions to opt out of the NHS pension scheme if they did so because of factors triggered by the 2015 overhaul. However, this will not be automatic – and the government has promised further guidance.
The consultation response says: ‘Members will need to show that they took an action, relating to their membership of a public service pension scheme, that would have been different had it not been for the discrimination identified by the courts. The government considers that any claim will therefore need to be raised by members.’
It adds: ‘The government will undertake further work with schemes to agree guidance on handling cases where members can show they have taken such contingent decisions about their scheme membership.’
GPonline reported last year on the potential for a ‘tax windfall’ – and also potential increased costs for practices due to government requirements that public sector pension schemes are self funding.