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NHS Pensions McCloud Remedy – Contingent decisions, opting out and additional benefits

What do you need to consider if you opted out of the NHS Pension in 2015 to 2022 period due to being moved into the 2015 Scheme or tax. Can you now opt back in from 2015?

The short answer is probably if the 2015 scheme was part of their reason for opting out.

If it was from a tax point of view or an annual allowance point of view (your annual allowance is the measure of the growth in your pension) as you were in two different schemes you would have received two growth figures, one which in the 2015 section could be higher than it would be typically in 1995 section. That obviously is a reason to say I would have made a different decision had I not been forced to move into the 2015 scheme.

Alternatively if the normal pension age which is later in the 2015 scheme prompted your decision then again this could be a reason for now making a different decision.

This is  called a contingent decision with the pension scheme. We don’t know what that process is yet and we will update this document when we do. But we do now know that the

evidence threshold will be set quite low for an individual to opt back in but they have to some degree be able to evidence that.

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Things to consider

To be a member of the NHS pension scheme  you have to pay a contribution. So if you want to opt back in and it’s backdated  you have to pay back the contributions for that period of time. This will include the employee contributions but also maybe the employer contributions as well if you had received additional pay to reflect the fact your employer contributions were not being paid at the time. There has been an indication that there could be an installment option for both active and retired members and we wait to see over what period that would apply.

One thing to consider is  that you can choose to opt back in for part of the time that you opted out and it doesn’t have to be for the whole seven years between 2015 and 2022. There could be tax reasons to consider this as contributing more now may result in additional Annual Allowance Tax charges but as we understand it the earlier years may be out of scope i.e. won’t be assessed as a tax charge by HMRC so there is the possibility of good pension growth but we no Annual Allowance charge for some years being levied.

Added Years, ERBBO and Additional Contrubutions

A further issue thrown up is that people have made decisions around purchasing additional benefits or stopping added years contracts they previously had.

Added years contracts were relevant to the 1995 section. If you decided to stop these as a result of being moved into the 2015 scheme then there will be the option to opt back in and wind back this decision. Again similar to the above there will be additional contributions and also Annual Allowance considerations.

ERBBO (Early Retirement Buy Back Out) is only available in the 2015 scheme. This allows you to buy out the early retirement reduction that would have applied if you took your pension before the Normal Pension Age. As we are now rolling back 7 years of pension to the legacy scheme then ERBBO as such would not be available. The plan is to convert this to additional pension in your legacy scheme. In turn that could have Annual Allowance impacts but there will be compensation for this specific aspect.

In Summary

The McCloud rollback now gives people the opportunity to review their past decisions and change them if they can show that the move to the 2015 scheme influenced the past choice.

By changing what you did retrospectively there is likely to be additional cost and also implications for the Annual Allowance. If you are in this category then taking advise from a Financial advisor may be what you need to do as it’s a highly complex area to compate the additional benefits which may be available compared with the additional cost you need to pay to change your past decision.

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