The launch of the NHS Cost Claim Back Scheme

Introduction

You may have heard about the NHS Cost Claim Back Scheme, but what is it exactly and how will it affect your retirement planning?

As a member of the NHS Pension Scheme, you’re likely to be familiar with the ‘McCloud judgement’ – put simply, changes that were made to the scheme as a way to remove age discrimination.

The McCloud judgement will affect your membership if:

• You were a member on 31st March 2013 and on or after 1st April 2015
• You left the scheme after 31st March 2012 but returned within 5 years

This includes members who have received benefits since 2015.

What does the McCloud judgement mean for you?

On 1st April 2022, the first steps towards introducing these changes came into effect, meaning that:

• All affected members were returned to their legacy scheme (either the 1995 or 2008 section) for the remedy period (between 1st April 2015 and 31st March 2022)
• All affected members still contributing to the scheme were moved to the 2015 scheme

If you are a member who is affected by these changes, you will be sent a Choice Communication so that you can choose which pension scheme you wish to receive benefits from for the remedy period.

If you are an active or deferred member, you will be sent your Choice Communication when you retire – unless this is before 1st April 2024. If you have already retired by this date, your Choice Communication will be sent to you after 1st April 2024.

The NHS Cost Claim Back Scheme

The most recent update to the McCloud judgement is the NHS Cost Claim Back Scheme, recently launched by the NHS Business Services Authority (NHSBSA).

Currently available to those in England and Wales, the scheme is designed to rectify NHS pension records for both retired and active members. It also involves recalculating and resubmitting Pension Annual Allowance growth calculations to HMRC.

This not only applies to members who previously faced a tax charge, but also to those who may now incur one as a result of the remedy being put in place.

Which costs can be claimed back?

While many details surrounding the scheme remain unknown, the NHSBSA has outlined its proposals on how it will remedy costs incurred (or to be incurred) by members, including:

• An allowance of up to £1000 (including VAT) to cover costs incurred by submitting the revised Annual Allowance calculations to HMRC via the HMRC digital service. This is available for up to 12 months following receipt of the reviewed Remedial Pension Savings Statement.
• An allowance of £500 (including VAT) per piece of professional advice sought by members as a result of the McCloud remedy – namely making the choice of whether to leave pension benefits in the legacy scheme or to move them over to the 2015 scheme.

There are other costs that can be claimed, but as things currently stand, they aren’t as clear. The documentation states that members can apply for cover through the Cost Claim Back Scheme for:

• Professional advice sought about the move to the 2015 scheme, which is no longer valid due to rollback
• Additional advice needed as a result of the remedy changes
• Other direct financial loss that has been incurred

It’s also worth noting that the NHS Cost Claim Back Scheme currently applies to England and Wales. To date, nothing has been published for Scotland or Northern Ireland.

What happens next?

While there isn’t really much you can do until you receive your Choice Communication, there are some ways you can prepare for claiming back costs.

This includes:

• Comparing your pension savings statement against your career history to identify any missing service information.
• Checking your tax returns from the last nine years. As mentioned earlier, you may be able to claim money back if you’ve paid an Annual Allowance tax charge and your post-McCloud recalculated Annual Allowance is lower.
• Making sure your Government Gateway ID is set up.
• Giving some thought to Individual Protection 16 (IP16). If the value of all of your pensions was valued between £1m and £1.25m in 2016, you’ll be able to apply for an individual Lifetime Allowance, giving you access to a higher lump sum. Applications for IP16 close on 5th April 2025.

Further updates are expected in the coming months, but in the meantime,  speak to your Specialist Financial Adviser from Wesleyan Financial Services if you’re worried about these changes or how they might affect your pension.