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Government recognises NHS pension scheme discriminates on age grounds

The Government has accepted that changes it made to the NHS pension scheme in 2015 are unlawfully discriminatory on the basis of age and will need to be 'remedied'.

Last month, the Government was blocked from appealing a court ruling that found another of its public service pension schemes - for judges and firefighters - was discriminatory.

Treasury chief secretary Elizabeth Truss acknowledged in a writtent statement to parliament yesterday that because the 2015 pension reforms affect all of the main public sector schemes - including the NHS - , the Court of Appeal ruling would also apply to all of them.

The BMA has now called for an end to discrimination within the 2015 pension scheme - as well as compensating doctors who joined the scheme and are 'likely to suffer sizeable financial losses', according to the BMA. 

As part of the changes to the pension schemes, members close to retirement age were not required to switch to the new version.

But the BMA said this in effect meant younger doctors were forced to join a 'discriminating' pension scheme that will 'result in huge financial losses when they retire' - and supported members to take legal action.

In her statement, Ms Truss said the Government will look into addressing 'the difference in treatment' across all public sector pension schemes.  

She said: 'The court has found that those too far away from retirement age to qualify for "transitional protection" have been unfairly discriminated against.

'As "transitional protection" was offered to members of all the main public service pension schemes, the Government believes that the difference in treatment will need to be remedied across all those schemes.

'This includes schemes for the NHS, civil service, local government, teachers, police, armed forces, judiciary and fire and rescue workers.'

She added: 'Continuing to resist the full implications of the judgment in court would only add to the uncertainty experienced by members.'

Ms Truss also noted that tackling the issues will cost an estimated £4bn per annum - on top of scheme liabilities from 2015. 

A new NHS pension scheme was introduced in April 2015, alongside the existing 1995/2008 scheme, for all new joiners.

Under the 2015 scheme, pensions are based on an individual's average earnings across their career. This is in contrast to the 1995/2008 scheme, which calculates pension benefits based on the person's final salary.

Accountants predicted increasing numbers of GPs would plan to leave the NHS pension scheme as a result of the changes, meaning many might have to work until 67 or 68 years of age in order to receive their full pension entitlements or risk losing benefits.

Around the same time, in 2016 the Treasury announced lifetime allowance for tax free pensions contributions was to be lowered again to £1m, leading to more GPs paying tax on contributions.

A BMA spokesperson said: 'The Government must now commit to bringing an end to discrimination within the current pension scheme that is impacting thousands of public sector workers, including doctors. The doctors’ trade union also wants the Government to agree compensation for those doctors who joined the scheme and are likely to suffer sizeable financial losses when they retire.

'The Government must formally accept liability in the case of doctors, and agree how the situation can be remedied. Even if the 2015 pension scheme is amended to prevent future discrimination, there is a need to financially compensate those doctors who were forced to join the scheme and have suffered detriment.'

It comes after dozens of BMA members launched legal action against the Government over the 'discriminating' pension scheme

This week, Ms Truss argued the measures were brought in to guarantee pensions remain sustainable in the long-term. 

In her statement she said: 'The Government is committed to providing public service pensions that are fair for public sector workers and for taxpayers. This is why we brought forward reforms in 2015, based on the recommendations of the Hutton report, to ensure that these pensions are sustainable in the future.

'The reasons for the 2015 reforms remain: that public service pensions are a significant cost for the taxpayer, now and in the future. The judgment does not alter the Government’s commitment to ensuring that the cost of public service pensions are affordable for taxpayers and sustainable for the long term.'

Last month, health secretary Matt Hancock announced plans for a flexible pension system - which would allow GPs to cut their pension contributions by half, thereby avoiding tax charges. However, GP leaders and accountants have warned that this solution is not enough to solve the problems.

The BMA previously warned that GPs are retiring early or cutting their hours of work - some in their 30s - to avoid tax charges.

Readers' comments (10)

  • David Banner

    Presumably HMG will simply shove everyone left on the 1995/2008 schemes to the crappy 2015 version. Hey Presto, no discrimination, we’re all Donald Ducked.

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  • No. That would be illegal.

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  • Or will they recalculate contribution as if in the old scheme & then land everyone with a large tax bill?

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  • @matthew Davies. Actually the opposite is true. The pension accrual rate for the 2015 scheme is much higher (1/54) than either the 1995 scheme (1/80) and 2008 (1/60) main difference being the age at which you can take a full pension without actuarial reduction and how the lump sum is managed. So the taxation for both the annual allowance and the lifetime allowance comes quicker and is higher under the 2015 scheme. I think more likely, colleague who have paid large sums of tax related to breaches in annual allowance might be due a refund if annual allowance calculations are redone!

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  • Don't hold your breath. Smoke and mirrors again and if Capita is involved.....

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  • A whole new opportunity for Crapita to stuff up.

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  • For Gps wasn’t the 1995 scheme always average lifetime earnings?

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  • Is this retrospective. How do you then unpick it, including annual allowance tax charges etc.. An unholy mess.

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  • A Bit like the current government Lifeboat.

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  • I wonder if more men are affected by the LTA and annual allonce. Does the pension scheme sexually discriminate by taxing men more?

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