Rollback of remediable service to the legacy scheme takes effect

From 1 October 2023, remediable service in the reformed public service pension schemes is treated as never having been pensionable in that scheme and is instead treated as always having been pensionable service under the legacy scheme¹. The change applies to service in the remedy period, defined as 1 April 2015 to 31 March 2022².

The remedy follows the Court of Appeal's December 2018 finding in the McCloud/Sargeant case that the transitional protections unlawfully discriminated against younger members¹. The UK Government introduced the Public Service Pensions and Judicial Offices Act 2022, which gained Royal Assent on 10 March 2022¹. The first phase of secondary legislation, covering the prospective remedy, came into force on 1 April 2022¹.

The Scottish Public Pensions Agency consulted on the retrospective regulations for the NHS Scotland Pension Scheme from 25 May 2023 to 23 July 2023¹, and for the Scottish Teachers' Pension Scheme from 23 May 2023 to 23 July 2023². The NHS Scotland consultation described the effect of the change:

For the Teachers' Pension Scheme, service in the remedy period built up in the career average scheme was rolled back to the final salary scheme on 1 October 2023⁵. Members who had not retired by that date had their service rolled back automatically and their benefit statement updated; they will not need to decide between the two until they retire⁴. Retired members will be sent a Remediable Service Statement to confirm their choices, and will only see a difference to their benefits after the form is returned⁴. Excess service, which arises where a member has a full-time contract plus additional part-time contract, is not pensionable in the final salary scheme and so could not be rolled back⁵.

For the NHS Scotland Pension Scheme, affected members will be asked whether they want legacy scheme or reformed scheme benefits for the remedy period, either when they claim their pension or at a later time³. The legacy scheme in the NHS is the 1995/2008 Scheme³.

Why it matters for households

The change affects members of public service pension schemes who built up pension between 1 April 2015 and 31 March 2022, including those in the NHS and teaching schemes in Scotland¹. For those members, the scheme records for that period now sit in the legacy scheme rather than the reformed one¹. Members will be given a choice between legacy and reformed scheme benefits for the remedy period, and cannot opt for a mixture of the two². Pensioner members and representatives of deceased members make an immediate choice, while active and deferred members make a deferred choice².

Transfers completed in and out of the reformed scheme during the remedy period will be recalculated to reflect the rollback, and for transfers out on or after 1 October 2023 the scheme must calculate two transfer values¹. For club transfers, both values are given to the receiving scheme and the highest is paid; for non-club CETV transfers the highest value is used¹. For transfers in from the private sector there is no change to the amount of CETV receivable¹. Provision is also made for the return or recovery of overpaid or underpaid contributions, and for interest on amounts owed to or from the scheme, with the rate determined by the PSP Directions 2022¹.

Annual allowance positions may change. Affected members will receive updated statements known as remediable pension savings statements, and HMRC is introducing a digital service for members with new, increased or decreased annual allowance charges as a result of rollback³. The legislative deadline for the scheme to issue a remediable pension saving statement was 6 October 2024, but statements will continue into 2025⁷. Members who receive their statement by 31 October 2024 have until 31 January 2025 to report annual allowance charges; those receiving it on or after 1 November 2024 have three months from the date of issue⁷.

What happens next

The Scottish Teachers' Pension Scheme consultation proposed that all eligible members receive a remediable service statement by 1 April 2025². The election period in which a member must choose between legacy and reformed scheme 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 make their choice as soon as practicable on or after 1 October 2023, with a time limit of one year from receipt of the statement². For annual allowance, members who did not have a Scheme Pays election but are now subject to one have until 6 July 2027 to submit a request⁷.