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What is the McCloud pension remedy?

In 2018 the Government was found to have discriminated against younger members of public service pension schemes. The judgment, known as McCloud, resulted in the Government making changes to public service pension schemes to remedy discrimination which had taken place.

What discrimination happened?

The Government reformed public service pensions in 2014 and 2015 following a review into their long-term affordability.

It decided that those closest to retirement would not be affected by the reforms. In many cases they could stay in the existing ‘legacy’ schemes rather than moving to the newer ‘reformed’ schemes.

In the Lord Chancellor v McCloud and others, the Court of Appeal ruled that younger members of the judges’ and firefighters’ pension schemes had been unlawfully discriminated against because the protections from the reforms did not apply to them. As a result, the Government accepted that the judgment would apply to all public service schemes which had similar arrangements protecting members closer to retirement from the reforms.

What is the McCloud remedy?

The McCloud remedy is specific to the discrimination in each scheme. There are particular differences for the judges’ pension schemes, where a new scheme was introduced as part of the remedy, and the Local Government Pension Scheme, where those closest to retirement were received protection in the reformed scheme rather than remaining in the legacy scheme.

The remedy is available to members of public service pension schemes which protected members closest to retirement from the reforms. It applies both to the younger members without the protections and the older members with protections.

The prospective remedy

To prevent further discrimination, the main legacy schemes were closed on 1 April 2022. Those who had been able to remain in these schemes would build up pensions in the newer reformed schemes from this point.

The retrospective remedy

To remedy the discrimination which had already occurred, most schemes allow those affected to retrospectively choose which scheme they were a member of between 1 April 2015 and 31 March 2022.

As shown in the Government’s response to a consultation on public service pension schemes, an individual’s circumstance may determine whether they would receive better pension benefits in their legacy scheme or their reformed scheme. For example, pensions in the reformed schemes based on career average earnings generally built up at a faster rate than those in the legacy schemes which were based on final salary.

When do scheme members have to make a choice?

For members who have already retired, schemes will set out their options in ‘remedial service statements’. These need to be provided by the end of March 2025 or “such later day as the scheme manager considers reasonable in all the circumstances in the case of a particular member or a particular class of member,” as set out in the Public Service Pensions and Judicial Offices Act 2022.

Generally, those who have not started receiving their pension will not have to make a choice about the pension they receive until they decide to retire. There are some situations where the scheme might ask members to make an earlier choice, for example if the member used flexibilities in their scheme to increase the pension they would receive.

If a member affected by the McCloud remedy dies before making a choice their beneficiaries should be contacted by the relevant scheme.

Who is eligible?

Members need to have been in pensionable employment on or before 31 March 2012 and not have had a gap in service of more than five years to be eligible for the remedy.

Ineligible members

The remedy does not apply to anyone who joined after 31 March 2012 as they were not subject to the unlawful discrimination identified in the McCloud judgment.

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