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The McCloud remedy is not without risks for public sector employers

Millions of public service pension scheme members are affected by the McCloud and Sargeant court judgements.

Legislation is in place to correct the age discrimination that arose from the 2014–15 public service pension reforms. In April 2022, the Public Service Pensions and Judicial Offices Act 2022 moved all public service scheme members into ‘reformed schemes’, which are free from age discrimination. Further provisions under the Act to deliver a remedy for the age discrimination that affected millions of scheme members between 2015 and 2022 are now in force.

However, the remedy presents a number of challenges for both administrators and employers:

  • Volume of work – The remedy must be applied to all the millions of people affected, individually
  • Short timeframe – The legislation sets tight time limits within which the age discrimination must be rectified
  • Capacity shortage – Many employers, trade unions and other parties lack the skills and resources needed
  • Incomplete data – Scheme administrators will need information they may not currently hold
  • Misinformation – Not all information about the McCloud remedy is accurate and reliable.

What’s more, those responsible for delivering remedy face ongoing financial and legal risks if they misapply the McCloud remedy to any individual.

How can First Actuarial help with the McCloud remedy?

Our dedicated public service pension team provide all the support you need to implement the McCloud remedy.

We help public sector employers, scheme administrators, trade unions and other affected parties to navigate the complexity of McCloud remedy work.

We provide:

  • Guidance on supporting scheme members – We deliver training and guidance for people responsible for supporting members through the decision process.
  • Support for members – We deliver education and support for members affected by the McCloud remedy. We can deliver this support as individual or group sessions, and through employer or member representatives, as required.
  • Guidance for administrators – We give administrators clear information on technical remedy issues, including process implementation and quality assurance.
  • Support for trade unions – We can work with trade unions to support the orderly delivery of the remedy.
  • Training and advice to stakeholders – We help support oversight of the remedy and effective governance.

Why First Actuarial?

  • We are a leading provider of pensions advice to the UK not-for-profit sector. Our public service pension scheme expertise includes the police and firefighters’ pension schemes, the NHS Pension Scheme, the Teachers’ Pension Scheme (TPS), the Local Government Pension Scheme (LGPS) and the Civil Service Pension Scheme.
  • We are clear communicators. We’re good at listening, and we avoid jargon where possible.
  • We know how to talk to people about pensions. Our established financial wellbeing section is particularly experienced at explaining pensions to scheme members and employees.
  • We excel at scheme administration. In our latest client survey, 97% of respondents using administration services were satisfied or very satisfied with our administrators.
  • We are unrivalled in the advice and support we give to trade unions on pensions issues. We provide negotiation and consultation support to leading trade unions, including Unite, CWU and the FBU.
  • We are transparent and fair on fees.

Meet First Actuarial’s McCloud specialists

Dale Walmsley has many years’ experience of advising 
the UK’s largest public service pension scheme.

His knowledge of McCloud stems from working directly in this area – from the introduction of the transitional 
protections through to policy design and delivery.

Dale understands the importance of clear communications, and has worked hard to keep employers and their staff informed of the McCloud developments.
Dale Walmsley
Partner and Head of Public Service Pensions
Email Link LinkedIn Link
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Get in touch

Contact Dale and Sue to discuss how we can help you meet the challenges of the McCloud remedy.

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McCloud remedy – FAQs

Applying the McCloud remedy correctly starts with a sound understanding of what’s involved. We’ve put together some frequently asked questions to help employers and administrators navigate the challenges of McCloud.

If you’re unclear of any of the terminology here, consult our McCloud glossary.

The McCloud remedy seeks to undo the age discrimination introduced by 2015 changes, which affected 5 million members of public 
service pension schemes.

The McCloud remedy consists of two parts:

The prospective McCloud remedy
This part of the remedy prevents any future age discrimination.

The prospective remedy was implemented on 1 April 2022, when all public service scheme members were moved to the reformed pension schemes.

The retrospective remedy
This part of the remedy corrects any past age discrimination.

Delivery of the retrospective remedy started on 1 October 2023, with all affected members being rolled back to their relevant legacy scheme. Those members will be offered a choice of either legacy or reform scheme benefits for remediable service (pensionable service between 1st April 2015 and 31st March 2022).

Members already in receipt of benefits on 1st October 2023 will be offered a choice between legacy or reform scheme benefits. For other members, the same choice will be offered when benefits become payable – this is known as a deferred choice underpin.

Remediable service statements, along with focused letters, are being used to explain options to members.

For organisations with direct responsibility for administering the remedy, and those delegating responsibility for it, successful delivery of the remedy will be a key priority, because it brings significant organisational challenges and risks.

If you employ affected members, you will already have been asked to provide your scheme administrator with additional information to support delivery of the remedy.

Your employees may already be receiving information from the administrator about the remedy, through remediable service statements or communications. The volume of information provided may be overwhelming and there are many indications that the remedy is poorly understood by members.

Your managers may be ill equipped to manage employee expectations and may become overwhelmed with questions they can’t answer.

Affected members may need reminding about information they’ve already received about the remedy, for example in their remediable service statements. But they may be confused or overwhelmed. Those members seeking support may reasonably expect to have access to well-informed assistance.

It’s also worth noting that member choices are not restricted to when benefits become payable. For example, some members paid voluntarily contributions between 2015 and 2022 and have more immediate decisions to make around refunds and changes to their benefits.

Although relatively simple in principle, the remedy is complex involving an Act of Parliament – the Public Service Pensions and Judicial Offices Act 2022 (PSPJOA 2022) – HM Treasury directions, and tax and scheme regulations.

Those directly affected by the McCloud remedy, as well as their managers, may struggle to understand what’s happening.

There will be cases where significant under- or over-payments have been made over a lengthy period, and contribution adjustments may be necessary. Tax liabilities may need to be revisited and divorce settlements reassessed.

The multiplicity of individual member scenarios, given the number of people affected, is huge.

McCloud – A glossary of terms

The terminology around the McCloud judgement can be baffling. Here’s our simple A-Z guide to common terms you may encounter.

2015 remedy Age discrimination CARE (career average revalued earnings) Contribution adjustment Deferred choice underpin (DCU) Directions Eligible member HMRC digital service Immediate choice (IC) In scope Legacy scheme McCloud judgement McCloud remedy Mixed service New scheme election Out of scope Pension savings statement (PSS) Prospective remedy Protected members The Public Service Pensions and Judicial Offices Act 2022 (PSPJOA 2022) Public service pension remedy Reform scheme Regulations Remediable service Remediable service statement (RSS) Retrospective remedy Rollback Taper-protected members Transitional protection Unprotected members

2015 remedy

See Public service pension remedy.

Age discrimination

An unjustifiable distinction between individuals based purely on age.

CARE (career average revalued earnings)

In a CARE pension scheme, an individual’s pension is based on earnings across their career. This contrasts with a final salary scheme, in which a pension is based on an individual’s earnings at or near to leaving service.

Contribution adjustment

The amount of money to be paid by or repaid to a member as a result of rollback, and due to differences in member contribution rates in legacy schemes and reform schemes.

Deferred choice underpin (DCU)

The choice offered to those eligible for the public service pension remedy who were not in receipt of benefits by 1 October 2023. Remedial service statements (RSS) should be issued to these members no later than 31 March 2025. After that date, members in service will receive a revised RSS annually, with a final RSS to support their choice at retirement.

Directions

This refers to directions made by HM Treasury under The Public Service Pensions and Judicial Offices Act 2022 to specify the McCloud remedy in more detail.

Eligible member

As far as the McCloud remedy is concerned, an eligible member is one who was in service at 31 March 2012, has some remediable service, and has no disqualifying break in service of more than five years.

HMRC digital service

This service, provided by HMRC, must be used by rolled-back members (see rollback) when reporting their corrected pensions tax position for remediable service and for the tax year 2022/23.

Immediate choice (IC)

This refers to the choice offered to those eligible for the public service pension remedy, who were already in receipt of benefits by 1 October 2023. RSSs should be issued to these members no later than 31 March 2025.

In scope

In-scope tax years are 2019/20 to 2021/22 – the years for which tax corrections for the public service pensions remedy can be made directly.

Legacy scheme

A legacy scheme is a final salary public service pension scheme established under the Superannuation Act 1972. Some legacy schemes have CARE sections, such as the Civil Service nuvos arrangement and one for NHS practitioners.

McCloud judgement

A Court of Appeal ruling that the Government’s public service pension changes in 2014/15 unlawfully discriminated against younger members on the basis of their age. The McCloud case applied to the Judicial Pension Scheme, whereas the Sargeant case applied to the Firefighters’ Pension Scheme. The Government later conceded that the ruling should apply to all public service pension schemes.

McCloud remedy

See Public service pension remedy.

Mixed service

Mixed service benefits arise in the case of members who were taper-protected under transitional protection, and were moved to the reform scheme after 1 April 2015 and before 1 April 2022.

Prior to the remedy, these members would have received benefits from both their legacy scheme and reform scheme for remediable service. Under the remedy, such members will be offered the choice of all legacy scheme or all reform scheme benefits for the whole of their remediable service.

New scheme election

When offered an IC or a DCU, a member may elect to take reform scheme benefits for remediable service. This is called a new scheme election.

Out of scope

Out-of-scope tax years are those years for which tax corrections for the public service pensions remedy cannot be made directly, and for which compensation may be due. The tax years in question are the remediable service years before 2019/20.

Pension savings statement (PSS)

This is a statement setting out the amount of growth in pension benefits in a tax year. A remediable PSS will be issued to affected members who were rolled back (see rollback) into the legacy schemes on 1 October 2023. A single remediable PSS will cover the whole remediable service period – three years prior to and including the 2022/23 tax year.

Prospective remedy

The prospective part of the public service pension remedy was implemented on 1 April 2022, when all members of the public service pension schemes were moved into the reform schemes.

Protected members

Under transitional protection, these older (based on their age at 31 March 2012) protected members were allowed to remain in their legacy scheme when the 2015 reforms were implemented.

The Public Service Pensions and Judicial Offices Act 2022 (PSPJOA 2022)

The Public Service Pensions and Judicial Offices Act 2022 (commonly known as PSPJOA 2022) provides the legislative framework for the public service pensions remedy.

Public service pension remedy

Also known as the McCloud remedy or 2015 remedy, the public service pension remedy refers to the way in which the unlawful age discrimination – the focus of the McCloud judgement – is corrected.

The remedy took two parts:

  1. On 1 April 2022, all public service scheme members were moved to the 2015 reform schemes.
  2. On 1 October 2023, those members moved to the reform scheme at an earlier stage were rolled back to the legacy schemes for remediable service. They then had to choose from the benefits available for that service.

Reform scheme

A CARE public service pension scheme established under the Public Service Pensions Act 2013. These schemes include:

  • Armed Forces Pension Scheme
  • Civil Service Pension Scheme
  • NHS Pension Scheme
  • Teachers’ Pension Scheme (TPS)
  • Police Pension Scheme
  • Firefighters’ Pension Scheme
  • Local Government Pension Scheme (LGPS).

Regulations

Regulations created under The Public Service Pensions and Judicial Offices Act 2022 to specify the remedy in more detail. Regulations have been created by each public service scheme manager and by HMRC.

Remediable service

An eligible public pension service scheme member’s reckonable service between 1 April 2015 (1 April 2014 for the LGPS) and 31 March 2022.

Remediable service statement (RSS)

A statement which has to be provided to eligible remedy members to enable them to make an informed choice about their benefits for remediable service.

Retrospective remedy

The retrospective part of the public service pension remedy was implemented on 1 October 2023. On this date, members of the public service pension schemes who were first moved to the reform schemes before 1 April 2022 (unprotected members and taper-protected members) were rolled back (see rollback) to the relevant legacy scheme for remediable service. All eligible members (unprotected members, taper-protected members and protected members) will be offered a choice of benefits for remediable service.

Rollback

Rollback is the process by which unprotected members and taper-protected members, who were moved from the legacy schemes to the reform schemes before 1 April 2022, were retrospectively returned to the legacy schemes on 1 October 2023.

Taper-protected members

Under transitional protection, taper-protected members were allowed to remain in the legacy scheme when the 2015 reforms were implemented (based on their age at 31 March 2012), but were later moved to the reform scheme before 1 April 2022. Taper-protected members were those aged between protected and unprotected members.

Transitional protection

Under the 2015 public service pension reforms, those members closest to retirement were allowed to remain in the legacy schemes. It is this element of the reforms that has been found to be age discriminatory. Transitional protection created three types of member – protected members, taper-protected members and unprotected members.

Unprotected members

Under transitional protection, these younger, unprotected members were moved to the reform scheme when the 2015 reforms were implemented, based in their age at 31 March 2012.

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