What does the McCloud judgment mean for NHS Doctors?

The McCloud remedy will only apply for people who were in the pension scheme before 1 April 2022 and who transitioned to the 2015 scheme in the period 1 April 2015 to 31 March 2022 – this is the remedy period.

The rectification rolls back pension service into the legacy 1995 or 2008 scheme from 1 October 2023 and then on retirement people will be given a choice for it to remain there or for the remedy period service to revert to the 2015 scheme.

I am retiring soon. When will I get revised information?

The pensions agency have confirmed that they will be issuing people applying for retirement with information to compare their pension choice from 1 April 2024.

The pension statement service will be updated for all members from 1 April 2025 to show this comparable information in a Remedial Service Statement.

I have never had an annual allowance tax charge – how does this affect me?

The chances are that you won’t be impacted by the need to correct Annual Allowance Pension tax charges. However, there are cases where the Annual Allowance measurement of growth can increase when the remedy is applied. Additionally, if you have missed making a declaration previously maybe as a result of never receiving information then you may have still have a tax charge to disclose. If you receive an annual allowance Remedial Pension Savings Statement then you need to review it and take action where appropriate.

The tax is only one part of the process. You will find that your pension benefits for the remedy period are rolled back to the legacy scheme for this seven year period. You do not need to make a choice now and this will be deferred until retirement. When reviewing your pension plans you will therefore have to look at two scenarios – one where you opt for the benefits in the seven year period to remain in the legacy scheme and one where you opt for the benefits to transfer back to the 2015 scheme. In some cases the latter may still give you a bigger pension.

I have continued in the scheme throughout and have had an annual allowance tax charge

You need to act, but not yet. You will receive a Remedial Pension Savings Statement for the remedy period. You will then need to calculate if you have over or underdeclared your tax charge for that period as well as assess the position for 2022-23. You can do this by using the new HMRC digital system - any tax charges will need to be revised as well as any Scheme Pays Elections which you previously had used. You will have a short time to correct this once you receive the statement, which is likely to be sometime in 2024.

The good news is that the Scheme Pays deadline has been extended for both existing members and retired members to allow time to correct things.

I am a GP and my pension record is not up to date. What will happen to me?

The remedy period covers up to 31 March 2022. It is essential to have this properly assessed to ensure that pension records are accurate for this period. GP’s in this situation should take action where possible to get records up to date. It is also essential that your 2022-23 pension certificate is submitted promptly to ensure your pension records is updated. You can find more information about pension returns for GP’s here.

In 2019-20 I had an annual allowance tax charge and claimed compensation in England or Wales

If your annual allowance tax charge changes for this year, then a mechanism will be put in place to ensure that this is corrected.

As a result of change to the tax regime I pulled out entirely from the NHS pension scheme for some or all of the period

You need to act. Consultants & GP’s who pulled out of the scheme for some or all of the remedy period will have the option to change this decision. They will need to show that the decision to pull out was as a result of the move to the 2015 scheme, but many factors would have influenced this decision and we understand the evidence needed will follow a light touch approach.

This will be an opportunity to change your decision. If you decide to opt back in you will need to pay back contributions to restore the benefits and this may result in Annual Allowance Tax charges. Doctors will need to consider carefully the additional benefits which will arise compared with the cost that will be incurred.

As a result of the changes to the tax regime I pulled out of paying into my Added Years Contract

Added Years were only available in the 1995 scheme. Many doctors stopped paying into these because of high Annual Allowance charges. Similar to those who opted out entirely there will be an opportunity to review this decision if it can be shown that this was related to the move to the 2015 scheme. Doctors will need to consider carefully the additional benefits which will arise compared with the cost that will be incurred including additional Annual Allowance tax charges.

I have been buying the Early Retirement Reduction Buy Out (ERRBO). What will happen?

ERRBO only applied in the 2015 scheme and as a result of the rollback no benefits will remain in the 2015 scheme for the remedy period. Doctors will be given options of exchanging for additional benefits, having the amount repaid or deferring a decision to retirement. More details are awaited on this.

I am a high earner and my annual allowance tax charge has been impacted by the fact that I had a tapered annual allowance has this changed?

The methodology for calculating the tax charge has not changed and the taper will continue to apply. All that has changed is that benefits will be rolled back to the legacy schemes. There are however different growth calculations for each section of the Scheme so you will still need to reassess the tax charge for the remedy period.

Doctors with taxable income above £200,000 will continue to need to assess the impact of the tapered annual allowance going forward.

I have retired and did not transition to the 2015 scheme before retirement.

The McCloud remedy only impacts those who transitioned to the 2015 scheme in the remedy period. If you have retired and all your benefits were in one of the legacy schemes then there will be no change to your pension. Just carry on enjoying your retirement.

How can we help?

Our healthcare teams can assist in the submission of revised annual allowance calculations, provide help with getting GP pension records up to date, and provide financial advice. You can contact a member of the healthcare team below.

Contact us