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Age discrimination in reformed public service pension schemes

The 'McCloud' judgement

When the 2015 public service pension schemes were introduced, transitional arrangements were put in place for when staff would move to the reformed schemes. These arrangements meant that those closest to retirement would stay in their original (legacy) scheme for longer.

Recently, the courts found that the way in which members of the Firefighters and the Judiciary Pension Schemes were moved to their new 2015 pensions schemes under these transitional arrangements was discriminatory on grounds of age. These cases are sometimes referred to as 'McCloud' after the name of one of the claimants.  (Please note: it was the transitional protection arrangements that were found to be discriminatory, not the reformed schemes themselves).

This discriminatory effect must be removed and the UK government has committed to applying the same principle and remedy to all public service pension schemes - including the NHS pension scheme. As part of this remedy, the legacy scheme (1995/1998) was closed in April 2022 and all active members were transferred to the reformed (2015) scheme.

Next steps will depend on how close you are to retirement.

If you are affected by the McCloud remedy and already retired 

Your pension administrator will contact you within 12 months of 1 October 2023 to ask you to choose whether to take your accrued benefits during the remedy period (2015 to 2022) from the 1995/2008 Section, or the 2015 Scheme. If your choice results in additional pension, backpay will be paid. 

If you are affected by the McCloud remedy and not yet retired

On 1 October 2023, your pensionable service for the remedy period will automatically be put back into the 1995/2008 Section until it’s time to make your choice. When you retire, your pension administrator will contact to ask you to choose whether to take your accrued benefits during the remedy period (2015-2022) from the 1995/2008 Section, or the 2015 Scheme.

In December 2021 the RCN took legal action against the UK Government to prevent members of the NHS and other public-sector pension schemes sharing the cost of resolving the age discrimination that resulted from reforms made to those schemes in 2015.

In 2018 in a ruling known as the McCloud judgment, the courts found this amounted to age discrimination towards the younger workers. Facing estimated costs of £17 billion to rectify this mistake, the UK Government has tried to use savings from the NHS pension schemes to pay for its discrimination, rather than pass those savings on to members. These savings resulted from a 6% rise in the value of the schemes, which made it cheaper to administer. Current rules require the savings to be passed on to members. 

The Judicial Review is ongoing, which means a judge will decide if the UK Government’s action is lawful or not. The RCN was unsuccessful during the first stage but has taken the case to the Court of Appeal. A decision is expected in the summer of 2024. 

If the judge rules in the RCN’s favour, ministers will be expected to pass on the savings to the schemes' members.

I was in the 1995 scheme with Special Class Status (SCS) before I was moved to the 2015 scheme under tapered protection. I’m not going to be 55 until after April 2022, what will happen to my SCS? 

There is no Special Class Status (SCS) in the reformed 2015 NHS pension scheme so this will not apply to the benefits you accrue from 1/4/22 onwards. At age 55, if you meet all the other eligibility criteria for SCS, you will be able to claim your legacy pension under what is currently known as “preserved rights”. You need not claim your 2015 benefits at the same time but if you do, they will be reduced to take account that you are claiming them before your normal pension age for that Scheme. 

I retired in 2020. Will my pension benefits change? 

Because you retired during the remedy period your case will be reviewed to see whether paying your benefits under 2015 or your legacy scheme is better for you. You will then be able to elect which set of benefits you prefer according to your circumstances. Cases such as yours will be reviewed at some point after October 2023 (or before if the scheme administrator is able to).

I lost the ability to retire at 60 when I was transitioned to the 2015 scheme 3 years ago but now I find I may be treated as if I was in my old scheme after all. Can I make a retrospective application now? 

You can apply now but your benefits will be calculated according to the scheme rules at the time of retirement. Your claim cannot be backdated, and your benefits will be reassessed but possibly not until after October 2023. If your pension would be reduced now because you are claiming it “early” under your current scheme rules, yet the legacy rules would have allowed for full benefits, this will be addressed when your situation is reassessed by the pension administrator. 

I chose to stop the pension because I didn’t want to have to move to the 2015 scheme but if I’d stayed in those years would be calculated under the old scheme arrangements and I now wish I hadn’t opted out. What can I do? 

Those who opted out of the pension scheme between 2015 and 2022 will be allowed to reinstate that service – subject to scheme eligibility criteria and paying the required contributions. So you will be able to “buy back” the time you weren’t in the legacy scheme.

Can I reverse a decision I made about my pension after 2015 now that this is happening? 

If you feel you have made a decision that you would not otherwise have done because of the UK government’s 2015 scheme reforms and which has caused you financial detriment, you will potentially be able to pursue this. Such situations are referred to as 'contingent decisions'. We are awaiting further government guidance on the potential scope of such cases, including timescales, so please watch this space if you think this is relevant for you.

What we do know is that there will be no automatic revisiting of cases so you will have to raise the issue and to provide evidence to substantiate it. It is not yet known when the scheme administrators will start handling such cases.

I have already retired and am drawing my pension. I want to come back to work. Can I still pay into a pension? 

Yes, you can pay into a separate 2015 scheme pension up to the age of 75; however, not if you are drawing from the 1995 scheme. In such circumstances most employers offer an alternative defined contribution scheme as an option.  

What do the changes mean for ill health retirement (IHR)? 

Members are now subject to a later retirement age under the 2015 scheme. This is likely to make IHR applications more difficult, however, the position is subject to judicial review.

I was in the 2008 and moved to the 2015 scheme under tapered protection. Will I have to work longer? 

As above, you can retire at 55 and your pension will be subject to an actuarial reduction. Alternatively, at 65, you can claim your unreduced legacy pension as a ‘preserved right’. You don’t have to claim your 2015 benefits at the same time but if you do, they will be reduced in line with scheme rules. The alternative would be to draw your 2008 benefits at 65 and wait until your normal retirement age for your 2015 benefits.

With all these changes, should I transfer to a private pension? 

Members should seek advice from an independent financial adviser; however, opting out of the occupational scheme means members would lose out on the 20.8% employer contribution, access to death in service benefits and potentially reduced IHR benefits. 

If you need a pension forecast or have any questions about your pension, please contact your pension provider in the first instance. 

If there is a dispute with your employer or pension provider, please contact us.

Independent financial advice

Pensions and planning for retirement are both areas that require specialist advice. If you are considering alternative pension arrangements or additional pensions, then you may benefit from talking to a professional financial adviser. As a member of the RCN you are entitled to a complimentary, no obligation financial review from Quilter Financial Advisers.

Quilter can provide advice to overseas RCN members provided they are paying UK income tax. Please have your UK National Insurance and RCN membership number ready. 

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Page last updated - 04/03/2024