Understanding your NHS Pension Scheme and the impact of the McCloud Remedy
Understanding the NHS Pension Scheme - particularly in light of the McCloud judgment - is essential when planning for your retirement. This guide outlines the different sections of the scheme, how the McCloud remedy may affect you, and what steps you may need to take.
What is the McCloud Judgment?
In 2015, changes were made to many public sector pension schemes, including the NHS Pension Scheme. These changes moved some members from their existing (legacy) schemes into a new 2015 Scheme.
The McCloud judgment, introduced in 2018, ruled that these changes were discriminatory based on age. As a result, members who were moved into the 2015 Scheme between 1 April 2015 and 31 March 2022 - known as the remedy period - are entitled to a choice of which scheme benefits they would prefer for that period.
Key changes under the McCloud Remedy
From 1 April 2022, new rules were implemented to address the age discrimination:
- All affected members were retrospectively moved back into their legacy scheme (1995 or 2008 Section) for the remedy period (2015–2022).
- From 1 April 2022 onwards, all active members are now in the 2015 Scheme going forward.
- When you retire, you’ll choose whether to receive benefits from your legacy scheme or the 2015 Scheme for the 2015–2022 period. You’ll be contacted with your Remediable Pension Savings Statement when it's time to make a decision. After you receive this, it’s important you act quickly.
Which NHS Pension Scheme section are you in?
Date Joined NHS Pension Scheme | Scheme Section | McCloud Impact? |
|---|---|---|
Before 1 April 2008 | 1995 Section (possibly transferred to 2008) | Yes, if moved to 2015 between 2015–2022 |
1 April 2008 – 31 March 2012 | 2008 Section | Yes, if moved to 2015 between 2015–2022 |
1 April 2012 – 31 March 2015 | 2008 Section → auto-moved to 2015 | No (change was part of original rules) |
On or after 1 April 2015 | 2015 Scheme | No |
NHS Pension Scheme comparison
All sections of the NHS Pension Scheme are defined benefit schemes. However, there are important differences in how your pension is calculated:
1995 Section
- Normal Retirement Age (NRA): 60
- Pension Formula:
1/80 × final salary × years of service - Tax-Free Lump Sum:
Automatic lump sum = 3 × annual pension - Final Salary Basis:
Based on the best of the last 3 years’ pensionable pay
2008 Section
- NRA: 65
- Pension Formula:
1/60 × reckonable pay × years of service - Reckonable Pay:
Average of best 3 consecutive years’ pensionable pay in last 10 years - Optional Lump Sum:
Available by exchanging pension
2015 Scheme (CARE)
- NRA: Linked to your State Pension Age
- Pension Formula:
1/54 × pensionable earnings each year + annual revaluation - Revaluation Rate:
Treasury Orders + 1.5% per year - CARE (Career Average Revalued Earnings) Basis:
Less generous than final salary but adjusts annually
What if you’ve been in multiple sections?
It’s very common to have pension benefits across more than one section due to the changes over time. This means your final pension will likely be a blend of schemes, depending on your service dates and scheme membership.
Note for GPs and Dentists: Your pension may already be calculated using a CARE model, regardless of your scheme section. However, benefits accrued before qualifying as a GP or dentist may follow legacy scheme rules.
How NHS pension contributions work
- Membership: Automatic when you start NHS employment, but voluntary
- Contribution rates: Tiered, based on your salary
Can I opt out of the NHS Pension Scheme?
You can opt out at any time. If you’ve built up at least two years of pension benefits, you'll become a deferred member - your benefits will be preserved and revalued until retirement.
Before opting out, seek professional advice to understand the long-term consequences, as well as:
- Consider the generous benefits you're giving up, including employer contributions and guaranteed income for life.
- Understand that opting out means missing out on tax relief, death benefits, and other protections.
Need help understanding your pension?
Navigating the NHS Pension Scheme and the McCloud remedy can be complex, especially if you've worked across multiple scheme sections. Our Medical Sector Specialists, including colleagues from Azets Wealth Management, can help you:
- Understand your current scheme membership
- Evaluate your retirement options under McCloud
- Calculate your estimated pension benefits
- Decide which scheme benefits to choose for the remedy period