McCloud and NHS Pension

Knowhere

Hi,
My better half has a NHS pension and qualifies for 'special class status' under the 1995 scheme, therefore hoping to be able to retire at 55.
She has asked me (though appreciates how little I know on the topic !) how the McCloud judgement might affect things.  I do know it won't put you in a worse position, but we're hoping she may benefit.

She was in the 1995 scheme from joining the NHS (in 1989 I believe) up until 31/07/2016 at which date I understand members were forced onto the 2015 scheme - note, she never chose to transfer to the 2008 scheme.

Am I right in thinking that at retirement, she'll be presented with two 'options', one based on the current understanding and also now a  'McCloud' option which would effectively mean calculations are based on her remaining in the 1995 scheme up until 31/03/2022, thereafter moving to the 2015 scheme ?

That being the case, by my rough calculations (and they are rough) I don't think it'll make much difference to her pension but she may get an appreciably larger lump sum?

Or am I missing something...?

Thanks 

TARDIS

Yes you are broadly correct. However high CPI will make the 2015 scheme better than the 1995 one for the remedy period (2015-2022) for many members.

if she’s not doing it already she needs to download her TRS statement each year and check for any errors eg ensure her special class status isn’t accidentally removed as apparently that’s not uncommon.

DoublePolaroid

TARDIS said:

Yes you are broadly correct. However high CPI will make the 2015 scheme better than the 1995 one for the remedy period (2015-2022) for many members.

if she’s not doing it already she needs to download her TRS statement each year and check for any errors eg ensure her special class status isn’t accidentally removed as apparently that’s not uncommon.

The September 2021 CPI figure was 3.1% and will be applied to the 22/23 pension year. This year’s much higher CPI figure will be applied to 23/24 so high CPI won’t have affected the remedy period. Unless I’m missing something? Which is possible. 

It’s also worth noting if not for the OP then for a small number of others who might read this, that for Practitioners (a very small proportion of NHS pension scheme members) 1995 is CARE not FS and the accrual rate in 2015 is better than 1995 as is revaluation (CPI + 1.5%) at the cost of no automatic lump sum and a later NRD. This means that the delta between 1995 and 2015 schemes is potentially skinnier than it is for non-Practitioner members. 

TARDIS

Sorry I was referring to non-practitioner members.

Previous years’ entitlements in the 2015 scheme are revalued each year by CPI+1.5%.

Previous years’ entitlements in the non- practitioner final salary 1995 scheme only increase if your pensionable salary increases.

with sub-inflationary pay rises and CPI so high an extra 7yrs in the 2015 scheme will result in a greater pension than the FS 1995 scheme for many.

This free calculator gives an estimation of the two schemes for non-practitioner members: https://grid.is/@tony.goldstone/nhs-mccloud-explainer-knBr0NLkTHqLsX9Q8h48mQ

saucer

Of course people would have to bear in mind that the 2015 is payable at a later date (based on NRA) and taking earlier would involve early retirement factors.   

TARDIS

saucer said:

Of course people would have to bear in mind that the 2015 is payable at a later date (based on NRA) and taking earlier would involve early retirement factors.   

Very true. However the creator of the calculator I linked to, Tony Goldstone, reckons even taking actuarial reductions into account for taking it early many people will be better off in the 2015 scheme now that CPI is so high (and pay awards relatively small).

Purplelady65

There is no lump sum in the 2015 CARE scheme. In the 1995 scheme the lump sum is 3x pensionable pay so something else to factor in along with the different ages that the pensions can be accessed without reductions. 

Bobinyorkshire

I also believe the legislation will not be ready until Oct ‘23, so any decisions before then will not include any legacy scheme, although these can apparently be applied retrospectively

kassy64

Bobinyorkshire said:

I also believe the legislation will not be ready until Oct ‘23, so any decisions before then will not include any legacy scheme, although these can apparently be applied retrospectively

Correct, I've recently retired from the civil service and have not been given any Mcloud options, as mentioned probably wont be until late 2023 before letters drop through post box offering already retired members retrospective options to make.
Also, I have tried to make some quick calculations and even with different NRA's and no auto lump sum in Alpha (new pension), my 2 x options will be very similar in £'s

Bobinyorkshire

That’s interesting, as I’ve too compared the NHS 1995 and 2015 pension systems taking into account the actuarial reduction for both schemes. In my own circumstances, if I take the pension at aged 58 there is little difference for the annual pension, but the greater lump sum by staying in the 1995 scheme until April 2022 has the edge. Be interesting to see how they compare when both estimates are sent.

Knowhere

Thanks for all the replies, thankfully a little while to go yet before any decision needs to be made, so hopefully a bit more clarity will start to emerge as the 'McCloud' clears a bit (dreadful pun intended) and of course eventually we'll have the figures presented to us.

Possibly need to factor in a couple of years of high CPI when I revisit the calculations but I still believe as Bobinyorkshire has also said, there looks to be a greater lump sum which would sway the balance.