Our parent company, Wesleyan, shares the implications of the Age discrimination within the NHS pension scheme and the proposals published by the Government to remove this discrimination for members of all public sector pension schemes including NHS dentists…
In April 2015, public sector pension schemes were reformed, with most members moved into new career average arrangements.
Following consultations with member representatives when the schemes were reformed, transitional protections were put in place to protect those close to retirement. These protections meant that members within ten years of retirement on 31 March 2012, would not move into the reformed schemes, usually referred to as the 2015 schemes. It also meant that those between ten and thirteen and a half years from retirement would move to the reformed schemes, but later.
In December 2018, the Court of Appeal found that these transitional protections unlawfully discriminated against younger members of the judicial and firefighters’ schemes. In July 2019, the Government accepted that the judgment applied to all the main public service pension schemes, including the NHS.
This consultation is the Government’s remedy to remove this discrimination from all public sector pension schemes.
- All public sector schemes including NHS, Teachers, Local Government, Armed Forces and Judicial.
- All members who were in service before 31 March 2012 and on or after 1 April 2015. This includes members who were in service on 31 March 2012 and then took a qualifying break of less than five years and members who left pensionable service, or who took their pension benefits, after 1 April 2015.
As some members will benefit from moving to the reformed scheme, rather than the legacy scheme, the Government is proposing to give members a choice.
The choice is which scheme they wish to receive benefits from for the period from 1 April 2015 to 31 March 2022, also known as the ‘remedy period’.
The Government are considering two possible approaches to this:
- An immediate choice, where members will be asked to make a choice over which scheme they wish to receive benefits from for the relevant period within 12 to 24 months after 31 March 2022
- ‘Deferred Choice Underpin’, where members will be asked to make their choice when they access benefits.
In both cases, those members who have already taken benefits will be asked to make their choice as soon as possible after 31 March 2022. Their choice will then be applied retrospectively.
The Government is also proposing that all active members are moved into the reformed schemes on 1 April 2022. This will mean that anyone still contributing to the scheme on 1 April 2022, will be moved into the 2015 schemes.
What do the proposals mean for dentists who were moved from the legacy scheme?
Dentists who were moved to the 2015 scheme will need to decide whether they want their benefits to be based on the legacy scheme or the reformed 2015 scheme, for the remedy period between the 1 April 2015 and 1 April 2022. Members will not need to make their decision until after the 1 April 2022.
Depending on the outcome of the consultation, the decision will either need to be made within 12 and 24 months of April 2022, or when the member retires after this date. Members who retire before April 2022, will need to make their decision shortly after April 2022 and any changes to benefits taken will be backdated.
Each dentist impacted by the consultation will need to make a choice between their legacy scheme and the 2015 scheme, based on their own circumstances and needs.
What’s the impact on dentists joining the pension scheme after April 2012?
Those who joined the NHS Pension Scheme after April 2012 would not have been eligible for protection, no matter how close to retirement they were and are therefore excluded from the consultation. Unless they transferred in from another public sector pension scheme.
How did the 2015 pension reforms affect dentists?
How the reforms affect dentists depends on if they were classed as officer members of the scheme, for example hospital dentists, or practitioners, such as general dental practitioners.
While the pension pot builds up slightly differently and the normal retirement ages are different, both the 1995 and 2008 sections of the legacy NHS Pension Scheme for practitioners, were based on career average earnings.
Both sections put each dentist’s entire salary into a pot of earnings that was then uprated each year by 1.5%, plus the Consumer Price Index (CPI). The member would receive either 1.4% of the pot at the normal scheme retirement age if in the 1995 section, or 1.87% if in the 2008 section.
In the 2015 scheme, 1/54th of each dentist’s earnings are added to the pot each year, which is uprated by 1.5%, plus CPI. The member will get the pot as a pension at the normal scheme pension age.
Those dentists classed as officers by the scheme will have seen big changes in how their pensions accrue. Although the normal retirement ages are different, both the 1995 and 2008 sections of the legacy NHS Pension Scheme, were based on service and the member’s salary close to or at retirement.
For all, members still received the similar types of benefits in both the legacy schemes and the 2015 scheme. For example, all offer ill health retirement, a lump sum if the member dies in pensionable employment and a spouse’s pension on death. Some benefits have changed between legacy and reformed schemes.
Dentists in the 2015 scheme would not, for example, receive an automatic lump sum on retirement, which members of the 1995 sections do. The 2015 scheme also offers the members
the option to buy out their early retirement reduction so they can retire after age 65 without penalty as well as other ways to allow the member flexibility in retirement.
Need further guidance?
With areas as complex as this, it is prudent to obtain advice. Your local Wesleyan Financial Services Consultant can advise on how the nuances of this issue affect you now and into the future.
A no-obligation appointment can be arranged at a time and date that fits best around your busy schedule.
You can contact our colleagues at Wesleyan here.
Advice is provided by Wesleyan Financial Services Ltd.
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