Earlier this year, following a Court of Appeal ruling, the governments in England, Wales and Scotland conceded that the protection offered to older members when introducing new public sector pension schemes, resulted in unlawful discrimination to younger members. This transitional protection arrangement was also offered to members of the HSC pension scheme.
This outcome came about after several legal cases were brought against it, including one from the BMA on behalf of our members. Our action was support by evidence of discrimination from members across the UK.
The Norther Ireland Department of Finance have stated that they will allow affected members the choice of being a member of either the legacy (1995/2008) pension scheme or the reformed (2015) pension scheme during the period in which the discrimination occurred/is occurring (1 April 2015 to 31 March 2022). This is known as the 'remedy period'.
They have released a consultation outlining two proposals as to when members would make this choice, as well as describing how to deal with a number of other issues from this age discrimination.
Add your voice to the consultation
We're asking all affected doctors to use our online tool to submit a response to the consultation.
We strongly encourage you to amend the response to explain how these issues have affected you personally - ensuring that your voice is heard and counted.
The deadline is 18 November.
Note: these resources were produced for the consultation in Great Britain but the information is still relevant.
The four key areas
Timing of choice
The consultation outlines two possibilities regarding when members will make their choice about which scheme they would like to be a member of during the remedy period:
- immediate choice - which means making the choice at the end of the remedy period (likely in 2022)
- DCU (deferred choice underpin) - which is making the choice at the point of the retirement.
We are clear that DCU is the only sensible option.
With immediate choice, you are making an irrevocable decision based on assumed rather than final pension values. This means that members will be required to make their decision based on assumptions of their career pathway, future retirement date, salary progression etc which could result in people making the wrong choice and receiving a lower pension as a result.
There are further problems including how to deal with those that don’t respond during the choice window. All of these problems are avoided with DCU.
We are aware that many people may have made decisions because of their transition to the 2015 scheme, which we know to have been discriminatory due to the age of the affected members.
This may include:
- opting out of the scheme
- taking early retirement
- cancelling added years contracts
- going part time.
The consultation suggests that these decisions will be assessed on a ‘case by case’ basis.
This is impractical. We believe that for certain circumstances, such as the ones outlined above, members should automatically be entitled to reverse these decisions and be eligible to purchase any lost pension entitlement.
Complexity of calculation
The BMA is clear the annual allowance is completely unsuited to defined benefit schemes such as the NHS.
The interaction with the HSC pension scheme and pension taxation is extremely complicated and this will be exacerbated by there being four different tax rules in place during the 7-year remedy period.
Members will need to be supported through individual financial advice. These costs should be borne by the government and not by the member.
Problems with all doctors moving to the 2015 scheme
There are a number of anomalies in the 2015 scheme that need to be addressed.
Firstly, there is no justification for tiered contribution rates in a CARE (career averaged revalued earnings) scheme.
Secondly, those working less than full time pay higher pension contributions per pound of accrued pension than their full-time colleagues in a CARE scheme.
Thirdly, due to the interaction between the two schemes and current tax rules, members in both the legacy and reformed schemes pay more in annual allowance tax, often despite accruing less pension.
Finally, it is unfair that members cannot draw their 1995 scheme benefits whilst continuing to contribute to the 2015 pension scheme. This significantly devalues the benefit of the 1995 pension.
The anomalies within the 2015 scheme need to be resolved before all members move to this scheme at the end of the remedy period.