The government has received a broadly positive response to its consultation on amendments to the NHS Pension Schemes Regulations in relation to the second part of the McCloud remedy, but will still make a number of changes to its proposals.

A large majority of those replying to the consultation (75 per cent of respondents), believed that the draft regulations, which are planned to come into effect on 1 October this year , deliver the policy objectives and requirements set by the Public Service Pensions and Judicial Offices Act 2022. 5 per cent disagreed and 20 per cent did not know if this was the case.

Another substantial majority (64 per cent) agreed that the draft regulations allow members to be put as far as possible in the pension position they would have been in had the discrimination not occurred.

Meanwhile, 16 per cent of respondents disagreed with this statement and 20 per cent did not know if it was accurate.

Responses to the consultation came from the Association of Independent Specialist Medical Accountants (AISMA), the British Dental Association (BDA), the British Medical Association (BMA), the Scheme Advisory Board (SAB) for the NHS Pension Scheme and the NHS Business Services Authority (NHSBSA).

Following consideration of some the suggestions and concerns aired by the five organisations, the government will implement a number of amendments.

Members will now have the option to reinstate only part of their opted-out service during the remedy period and "evidential thresholds" will be lower in order for members to prove that they opted out of the NHS Pension Scheme as a consequence of the discrimination.

The NHS will now follow the approach being taken by several other public service pension schemes, where the timing of the opt-out is to be taken as sufficient evidence that it was prompted by the discrimination.

Therefore, where the member conveyed their decision to the scheme manager to opt out within the six-month period before 1 April 2015, the opening of the 2015 scheme or at any time during the remedy period, the scheme manager should accept an election to reinstate the relevant opted-out service without further evidence being required.

Regulations covering early retirement reduction buyout (ERRBO) will also be altered. They have been extended to allow members in this group to elect for their ERRBO contributions to be used to purchase an amount of additional pension in the legacy scheme.

The amount purchased will be of an equivalent value to the amount of additional pension that the member would have purchased had the contributions been paid to the legacy scheme in the year they were paid to the 2015 scheme. This will apply in respect of both member and employer contributions.

On the NHS side, employer contribution costs for reinstated service will be aggregated and factored into subsequent NHS Pension Scheme valuations, allowing them to be reflected into a future employer contribution rate and the costs being spread across all employers.

This follows concerns in the consultation feedback that invoicing employers for reinstating service could create budgeting difficulties.

The government has also reconsidered its proposed position over how members’ reinstated service contributions should be paid.

Where members owe contributions for reinstated service and are active or deferred members, they will be able to pay those contributions via a lump sum or an instalment plan. In addition, they will not be able to defer payment to a deduction from future benefits.

In addition, members who apply to reinstate opted-out service will have to confirm whether they have received recycled employer pension contributions for the service they wish to reinstate.

If they have done so, and still decide to reinstate that service, the relevant NHS scheme can take action to avoid members receiving double benefit in such scenarios.

Commenting on the consultation outcome, Quilter NHS pensions expert, Graham Crossley, stated: "The McCloud remedy measures for the NHS Pension Scheme, as outlined in the consultation are positive and forward-looking. It's heartening to see the Department of Health and Social Care (DHSC) taking an active stance in genuinely listening to the feedback from the consultation.

"Recognising the extensive efforts of the unions and other stakeholders in highlighting the myriad of ways members could have been financially disadvantaged, it's commendable that the DHSC seems to have integrated the majority of their suggestions to address the discrimination.

"This is an incredibly complicated area of pension planning and taxation. Given the nuanced financial implications of these changes, there's a pivotal role for financial professionals in this landscape.

"Their expertise can provide invaluable guidance and support to members, ensuring that they make informed decisions that safeguard their financial well-being in the years to come."

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