The McCloud Remedy: Public Sector Pension Reform (PSPR)

What is the McCloud remedy?

In 2023, the McCloud remedy, also known as The Public Service Pension Remedy (PSPR), was implemented to remove age discrimination across public sector pension schemes, including NHS pensions. The McCloud case is still very topical and for those supported by the NHS pension scheme will be almost unavoidable. This article aims to assist clients in understanding legislative action and to help detail exactly what the McCloud remedy is and its impact on doctors in the NHS pension.

A brief overview of the McCloud remedy

When the Government reformed public service pension schemes in 2014 from final salary schemes to career average schemes, older members were protected by transitional protection known as the ‘underpin’. Younger members weren’t protected.

Older members who were closer to retirement were protected from the changes to the pension if they:

• Had joined the local government pension scheme (LGPS) before 1 April 2012,
• had pensionable service between 1 April 2015 and the 31 March 2022 (or their retirement date if earlier), or they had left service after 31 March 2012 but returned within 5 years,
• their pensionable service was in the legacy scheme (1995 / 2008 Scheme), or pensionable service was in the 2015 Scheme, but would have been pensionable service in the legacy scheme but for the discrimination,
• did not choose to give up their transitional protection to move to the 2015 Scheme (option to give up protection – OTGUP).

This meant that when a protected member took their pension, the benefits payable under the career average scheme were compared with the benefits that would have been built up, had the earning accrual / final salary scheme continued and they received the higher amount. This protection is called the underpin.

In December 2018, the Court of Appeal recognised this age discrimination as a result of the underpin and decided qualifying younger members should also receive the underpin protection. This ruling was called the McCloud judgement after a member of the Judicial Pension Scheme was involved in the case. Finally, in 2023 the McCloud remedy removed the age discrimination found in the McCloud court case.

This change came into force on 1 October 2023. Underpin protection only applies to pensions built up in the remedy period, between 1 April 2015 and 31 March 2022. The underpin will have stopped earlier if you left the scheme or reached your final salary normal retirement age before 31 March 2022. From April 2022 onwards, the ongoing accrual of public service pensions are based on the reformed schemes.

Who does the McCloud remedy affect?

McCloud covers all NHS staff if you were part of the eligible group. Your pension will automatically be rolled back to the legacy scheme either 1995 or 2008, and your pension forecast will change.

How will the McCloud remedy affect me?

No one should be worse off from the McCloud judgement as you can choose which pension benefits you wish to have for the remedy period when you face retirement. The remedy is just returning you to where you would have been had the new scheme not been implemented in 2015. Pension services should automatically have rolled back.

There are also contingent decisions to consider, these are decisions you may have made or did not make because of actual or perceived implications of the 2015 Scheme reforms. For example, if you opted out of the pension scheme due to large Annual Allowance tax charges, you may now be able to reinstate this missing service.

McCloud compensation payout: NHS Cost Claim Back Scheme

Following the announced changes to NHS pensions, the government has confirmed that compensation may be available to those affected by ‘financial losses or tax losses incurred because of the remedy.’ If you believe you could be affected, full details are available on the Gov.uk website, as well as the claim form.

Our team of experts will happily assist you in completing your claim form (should you be eligible) or deciding if you are eligible for compensation as a result of the McCloud remedy.

Most recent updates in the McCloud remedy

In October 2023, many of the laws relating to the remedy came into force, NHS Pensions expect to send the majority of active or deferred remedy members their updated pension savings statement by October 2024. This article will be updated accordingly should there be any other details or updates regarding the McCloud remedy.

Updates from HMRC’s digital service are also highly anticipated as Annual Allowance tax charges will need to be reviewed and most likely amended for the remedy period and potentially beyond as the pension starting point will differ due to the roll back.

Should you have any questions regarding how the changes may affect you, or whether you are impacted by the McCloud remedy, please use the form below to contact one of our experts.