Prospective remedy regulations come into force and legacy schemes close to future accrual

Regulations delivering the first phase of the 2015 remedy came into force on 1 April 2022, following consultation between November 2021 and February 2022¹. Under the Public Service Pensions and Judicial Offices Act 2022 (PSPJOA 2022), which gained Royal Assent on 10 March 2022, all scheme members who continued in service from 1 April 2022 did so as members of the reformed scheme, regardless of transitional protections¹. The legacy schemes closed to all members for future service from 31 March 2022¹.

The change follows the Court of Appeal's December 2018 finding in the McCloud/Sargeant case that the transitional protections unlawfully discriminated against younger members, because protection was offered only to older members¹. Transitional protection had allowed members aged within 10 years of their normal pension age on 31 March 2012 to remain in their legacy schemes, with tapered protection for those aged between 10 and 13 years 5 months of that age in the NHS Scotland scheme, or between 10 and 14 years in the Scottish Teachers' scheme¹.

The remedy period runs from 1 April 2015 to 31 March 2022¹. Eligible members will be able to choose legacy or reformed scheme benefits for that period, but not a mixture of the two¹. Active and deferred members will make that choice under the deferred choice underpin, while pensioner members and representatives of deceased members will make an immediate choice¹.

The Scottish Public Pensions Agency has since consulted on the second, retrospective phase of regulations, which would implement the choice provisions, return remediable service to the legacy scheme, set out how remedy information is provided, and correct pensions already in payment, including underpayments and overpayments¹. The NHS Scotland consultation ran from 25 May 2023 to 23 July 2023; the teachers' consultation ran from 23 May 2023 to 23 July 2023¹.

Why it matters for households

Members of the NHS Scotland Pension Scheme and the Teachers' Pension Scheme who were in service on or after 1 April 2022 now accrue pension in the reformed career average schemes, not the legacy final salary schemes¹. For the earlier remedy period, eligible members will be offered a choice between legacy and reformed benefits, and the retrospective regulations propose that remediable service in the reformed scheme is treated as never having been pensionable there and instead as always having been pensionable service under the legacy scheme from 1 October 2023¹.

The proposals cover the recalculation of transfers. For transfers out of the NHS scheme on or after 1 October 2023, the scheme must calculate two transfer values, and for club transfers both values go to the receiving scheme with the highest paid; for non-club CETV transfers the highest value is used¹. Transfers completed in and out of the reformed scheme during the remediable period would be recalculated, and club transfers completed before 1 October 2023 require revisiting, with a top up payment possibly due either to or from the Local Government Pension Schemes in Scotland, Northern Ireland or England and Wales¹. For transfers in from the private sector there is no change to the amount of CETV receivable¹.

The regulations also make provision for returning or recovering overpaid or underpaid contributions for unprotected and tapered protected members, with an option to waive a return of contributions until a DC election is made, and for interest on amounts owed to or from the scheme, at rates determined by the PSP Directions 2022¹. Amounts owed by an eligible member may be reduced or waived, and payment of further employer costs will be waived¹.

What happens next

Under the proposals, members would receive a remediable service statement, with the teachers' consultation proposing that all eligible members receive one by 1 April 2025². The election period for choosing between legacy and reformed benefits is proposed at 12 months from the statement being issued, and a deferred choice may be revoked at any point until two weeks before the first pension payment is due at retirement². Under immediate choice, members would make their choice as soon as practicable on or after 1 October 2023, within a time limit of one year from receipt of the statement set in the PSPJOA 2022². The teachers' consultation notes that lifetime allowance provisions are due to be removed from pensions taxation rules by April 2024².