For older scheme members who were protected in the legacy schemes, nothing much will change in the first instance, although they will be transitioned to the ‘new’ scheme as at 01/04/2022, and will be given the same choice of keeping the remedy period membership in the ‘old’ scheme or transferring it to the ‘new’ scheme upon retirement.
For younger members, or members with ‘tapered’ entry into the reform scheme, it will mean a more immediate change.
The way that the 2015 scheme pension is calculated is different to the 1995/2008 scheme. And will further differ between ‘officers’ and ‘practitioners’.
The ‘remedy’ will therefore alter the amount of annual pension, and lump-sum (where applicable) that you are due to receive in retirement, in the first instance, as well as the age at which those retirement benefits are due to be paid (the ‘normal pension age’) .
Whether these changes will increase or decrease the ultimate pension entitlement, and what’s right for the individual on balance, will be different for each and every member.
How do I actually make the choice about my pension accrual when the time comes?
The NHS should provide comparative statements to illustrate the changes to your pension should you keep the ‘remedy period’ membership in the legacy scheme v commuting the remedy period membership to the reform scheme.
I use the word should because, quite frankly, it’s a mammoth task which will take some time to implement. If you’ve already retired, or plan to retire in the not too distant future there could be some delay in obtaining such statements.
Otherwise, a specialist medical accountant may be able to calculate estimated comparatives for you, and a financial adviser may be able to drill down the best retirement plan for your needs, but it’s not just the pension that will change…
In the meantime, what else will change?
The immediate changes to pension scheme membership accrual will create a knock-on effect in many other areas…
Aside from pension income and lump-sum (where relevant), elements such as survivor pension benefits, death in service/life cover, ill-health benefits must be considered.
The wider financial implications are also quite vast. Alterations to pension scheme growth will mean that annual pension charges will be recalculated, retrospectively. Annual allowance charges and the tapered allowance will change, meaning that there may be tax charges (or increased charges) where there were none before, or decreases to charges which existed before the changes. This will all have to be updated with HMRC and the tax corrected.
For GPs in the 2015 scheme, pension tier rates were calculated by means of ‘annualisation’, in such cases it may be possible that pension contributions could have been overpaid in which case a refund would be due. But every action has an equal and opposite reaction, if contributions are refunded, tax relief will be lost and additional tax due…
This is before we start to consider things like pension protection and decisions taken not to enter into the 2015 on the basis of such protections etc.
Although you will not have to make a choice about the pension itself until retirement, a lot of other things will change in the meantime and it’s likely to cause a fair amount of chaos.
If you require help with your NHS pension please contact doctors@honeybarrett.co.uk or call the Honey Barrett Medical Team on 01424 730345 who will be pleased to assist.
