The McCloud remedy for the NHS Pension Scheme has been pushed back to October 2023 on the back of Treasury delays in producing required documents.
The remedy project had been expected to deliver on cases during 2021-22 on behalf of members most affected by the discrimination identified by the McCloud ruling, but the release of the provision definition documents did not materialise.
“This has meant a replan of the McCloud remedy project with the current target go-live date now being October 2023, which is based on receipt of all outstanding documents from the Treasury by the June 2022 deadline,” the newly released NHS Pensions Scheme’s annual report for 2021-22 stated.
The expectation that the PDDs would be published in July led to regulatory changes being scheduled, but these are now expected to be laid in parliament in August 2023 on the back of a public consultation.
‘Little engagement work’ on remedy programme
Typically, schemes would produce PDDs individually, but the Treasury opted to provide oversight to their production owing to the risk that some provisions may be misinterpreted and to reduce the amount of duplicative work done by schemes.
The report stated there has been “little engagement work” on the remedy programme as a result of the delays.
Over the coming year, the remedy project will transition away from the preparatory phase to begin delivery preparations during 2022-23.
This will include the production of high-level business requirements, but these are set to be based on the suite of delayed PDDs, the report said. The purpose of these preparations is to ready system suppliers such as IT and support staff.
The “large amounts of outstanding clarification from HM Treasury” in relation to the “extensive need for system changes” regarding McCloud has meant that the NHS Pension Scheme has put on hold any major project looking at alternative employer services, postponing them until 2024 at the earliest.
In its place, support will be continued for the Pensions Online service to ensure that provision “continues to be fit for purpose in the short to medium term”.
This will include work on priority rejected ill-health cases alongside the development, testing and distribution of retrospective remedy systems.
“This could impact a wide range of members including deceased members [and] GPs retiring with enhanced protection, as well as those who have applied for ill-health retirement,” said MediFintech technical director Jack Needham, adding particularly those who have been declined ill-health retirement under 2015 scheme rules, but would be accepted under 1995 scheme rules.
“It seems unfair that some members might have to wait for their ill-health retirement to be paid due to government delays.”
The administrative burden of implementing McCloud solutions was laid bare last month by the Teachers’ Pension Scheme and Local Government Pension Scheme-administering authorities, with 18,000 teachers facing a choice on whether to lean towards legacy or post-reform pension benefits.
The Local Government Pensions Committee warned that the exercise would be “administratively challenging for both the TPS and LGPS-administering authorities”.
Cash on tap
As of March 31 2022, the pension liabilities of the scheme were valued at £869.9bn – an increase of £112.8bn from the previous year.
The scheme also recorded a net cash requirement of minus £4.35bn against the estimate of minus £3.8bn, resulting in the scheme having surplus cash due to income exceeding pension benefit payments.
As the NHS Pension Scheme is an unfunded scheme, the liabilities are underwritten by the exchequer, but the excess £4.35bn cash will be returned to the Treasury during 2022-23.
The annual accounts also show the NHS Business Services Authority has fallen short in delivering annual benefit statements to all members, both active and deferred.
In August 2012, 91.77 per cent of scheme members were provided with an annual benefit statement, and while the scheme is “committed to its long-standing aspiration” of delivering a statement to all members, the latest finding marks only a 0.2 per cent increase on the previous year.
The report states: “The NHS Pension Scheme is the largest centrally administered Pension Scheme in Europe with over 2.3mn active or deferred members and some of the most complicated working patterns and calculations in the pensions industry.
“The complex nature of the Scheme means that it is unlikely that 100 per cent full automation of ABS calculations will be possible.”
Early retirement rise
Elsewhere, the NHS Pensions Scheme’s report revealed the number of active members within the scheme to be 1,0749,681 – a figure that was roughly in line with the prior year. Yet the number of leavers with deferred pension rights has risen sharply to 184,861, up from 139,987 in the 2020-21 report.
The finding follows a tumultuous period for members leaving the NHS Pension Scheme on the back of tax relief reforms leading to some doctors opting to reduce hours or retire early should the government push through with its plans to freeze the pensions lifetime allowance beyond 2026.
Under present plans, the allowance will cap the amount that can be saved into a pension, with contributions over £1,073,100 being eligible for a 55 per cent tax rate for lump sum withdrawals.
Difficulty around pension rules and pay erosion has resulted in almost half of consultants considering leaving or taking a break from the NHS, the British Medical Association said.
BMA consultants committee chair Dr Vishal Sharma said earlier in November that the current proposals “will not only leave our most senior doctors with little option but to retire early, it will also leave many senior nurses and other NHS workers facing the same situation”.
“We know the proportion of GPs retiring early has increased more than threefold since 2008, closely following the real-terms reduction in the lifetime allowance,” he added.
The findings from the latest NHS Pensions Scheme accounts corroborate the trend of members opting to retire early.
It is an issue the Department of Health and Social Care addressed in September when then-health secretary Thérèse Coffey unveiled the department’s report on how best to retain NHS staff.
“We know that people are leaving the workforce for a variety of reasons. For instance, currently, pension rules can be a disincentive for clinicians who want to stay in the profession or return from retirement and help our national endeavour,” Coffey told the House of Commons on September 22.
“We will correct those pension rules relating to inflation. We will expect NHS trusts to offer pensions recycling, and we will extend – until 2024 – measures that will allow people to stay or to return to the NHS,” she added.
Tom Higgins is a freelance reporter for Pensions Expert, FTAdviser's sister publication
