Medics face tough pension decisions due to McCloud remedy

Introduction

As many as 14,000 dentists, GPs and hospital doctors could face a difficult decision and significant costs around rejoining the NHS Pension Scheme (NHSPS) for the period when they opted-out, as part of the McCloud age discrimination pension remediation process, government data reveals.  

A Freedom of Information (FOI) request by Wesleyan, the specialist financial services mutual, has found 14,412 members left the NHSPS between 1 April 2015, when it changed from a final salary scheme to a career average scheme, and 31 March 2022.

What is the McCloud Judgement?

A 2018 Court of Appeal judgment found that the process for moving members to the new pension scheme discriminated against some on the basis of age. 

As part of the process to remedy this, those who opted out of the scheme between 1 April 2015 and 31 March 2022 will have the option to retrospectively opt back in for all or part of that period, if the reason they left was because of the age discrimination legislation. 

The impacts of McCloud

While opting back in could benefit some members, it could also come with potentially significant cost. Those returning could face paying up to seven years of backdated pension contributions or have to reimburse any employer contributions that were redirected to their salary after they left the scheme.

Alec Collie, Head of Medical at Wesleyan, said: “This data shows just how many people could be affected by this part of the remedy process.

“Thousands of medical professionals could now face a tough decision as to whether or not to apply to opt back into the NHSPS for this seven-year period.

“It’s a challenge because the benefit of doing that may be outweighed by any additional contributions or claw backs that are demanded, which might have to be paid now or taken out of their pension benefits.

“Each person will need to determine what the best option is for them. This will likely be a complex decision, that will only be made more difficult with the current uncertainty over the future of the Lifetime Allowance and the risk of further pension tax issues.  

“Seeking professional advice and support before they make a decision could be invaluable.”

'Choice 2' decisions

Wesleyan’s FOI also found that there are more than 1,618 dentists, GPs and hospital doctors who are likely to have received letters about their opportunity to reverse the ‘Choice 2’ decision they made about their pension in 2015. 

‘Choice 2’ gave certain members of the 1995 section of the NHSPS the option to move their service to the 2008 section, before being moved to the new 2015 pension scheme. 

As part of the McCloud remedy, they can revoke that choice and put any service they moved to the 2008 section back to the 1995 section.  

This could have implications for matters such as their pension income, retirement age, and the option to take part of their pension as a lump sum.

Alec Collie added: “These letters are causing confusion and concern because recipients have relatively little time to make what could be a big decision about their pension. 

“Crucially, the letters don’t include sufficient detail on what the various options mean for scheme members, which they need to make an informed decision.

“Again, we’d urge anyone who has received one of these letters to  seek professional help to calculate the precise implications for them so that they can make an informed decision.”

This data is based on an FOI filed by Wesleyan to the NHS Business Services Authority, received on the 6th February 2024.