The McCloud judgement affects you if you were a member of the NHS pension scheme on 31 March 2012 and transitioned into the 2015 scheme between 1 April 2015 and 31 March 2022.
In October 2023 all affected by McCloud were transferred back into their legacy scheme and Remedial Pension Savings Statements are to be issued by October 2024 detailing the revised pension growth. The roll back into the legacy scheme last year was not a choice; those affected by McCloud have returned to their legacy scheme. However, there will be a choice at retirement if you would like your contributions for the remedy period to be in the legacy scheme or reformed (2015) scheme.
Update since last year
- From April 2024, Remedial Pension Savings Statements are going to start being issued (for GP’s these are supposed to be received in October 2024)
- These Statements are going to show your pension growth for the remedy period, any carry forward years and the 2022/23 tax year
- HMRC are currently developing a tool which will enable all years (remedy period and 2022/23) to be dealt with at once.
Compensation
- Due to the complexities surrounding these statements and the amount of work involved, a compensation scheme has been agreed.
https://www.nhsbsa.nhs.uk/changes-public-service-pensions/nhs-cost-claim-back-scheme - The NHS Cost Claim Back Scheme is for members of the NHS Pension Scheme directly affected by the McCloud judgement (Public Service Pension Remedy). Members can apply to recover direct financial or tax losses, as well as professional advice, up to a fixed amount.
- Accountancy services used to complete an application via the HMRC Digital Service is limited to £1,000 including VAT (£833 net) per piece of advice. This will need to be paid by yourself and claimed back. We can assist with the completion of these claims.
- Costs of professional services, for example an Independent Financial Advisor, is limited to £500 including VAT (£416 net) per piece of advice.
At the moment, we are unsure what our fees will be for dealing with the applications via the HMRC Digital Service and associated calculations. We would like to work on a fixed fee basis but are aware that some clients may only be affected slightly whereas others will feel a greater impact. It is also difficult to ascertain how much work is involved in the completion of the HMRC Digital Service form as this is still being developed. We will be able to quote our fees nearer the time and let you know if your personal circumstances and associated complexities will incur charges in excess of £1,000.
Contingent decisions
If you would have acted differently if the introduction of the 2015 scheme had not occurred, you may have a case for a contingent decision. These may include opt outs, transfers in and out and purchasing additional pension.
There are lots of considerations to take into account when reviewing your contingent decisions. These can include an impact on your lump sum, cash flow modelling and inheritance tax planning.
Any decision made will require a reassessment of your Remedial Pension Savings Statement. At the moment, we believe that if you were to opt back in for a period, you would be required to pay the employee’s contributions. We are unsure if this would need to be paid as a lump sum or a payment plan would be allowed and how the tax relief you should be entitled to would be assessed.
Further guidance is due regarding these contingency decisions later in the year.
What can I do now?
- Forward any documents received concerning your NHS Pension onto us as soon as possible. Your Remedial Pension Savings Statement should be received by October 2024 but may be earlier (especially if you are not a GP awaiting the processing of your 2022/23 pension certificate). The compensation claim form needs to be submitted within 12 months of the Remedial Pension Savings Statement being issued.
- If you have not already done so, obtain your ‘Annual Allowance service and pay extract’ to check that your history is correct
- Tax computations will be required for the tax year 2015/16 onwards (prior to this date annual allowance was not tapered). If we were not acting as your accountant from this date and you do not have copies of these computations, we can request copies from HMRC if you would like us to do so.
- Set up your government gateway, if you do not currently have one. The HMRC Digital Service is still in development but it is unlikely that our current client authorisation will enable us to complete the form on your behalf. A separate authorisation will need to be requested and for you to approve this you will need a government gateway.
What are we doing now?
- We are checking the Annual Allowance Service and Pay extracts for all clients that provide them.
- For our GP’s based in England, we are checking PCSE to ensure pension records are up-to-date.
- We are collating the information we currently hold, including tax computations, scheme pays elections, annual allowance charges paid, to ensure we have the information when required.
