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What is ‘McCloud’?
You may have heard about the McCloud remedy, judgement or even ruling. It is also more formally called the Public Services Pension remedy. What is McCloud and how could it impact you?
When the 2015 NHS Pension Scheme was first introduced, older scheme members (those within ten years of retiring) were allowed to continue in their original 1995 or 2008 NHS sections. In fact, this was allowed across all relevant public service pension schemes.
In 2018, the Court of Appeal found this situation to be discriminatory against younger members in a case brought by judges (one named McCloud) and firefighters.
The government agreed to redress this discrimination across all public sector pension schemes in a move expected to cost around £17billion.
What will the remedy look like?
After several consultations and many discussions, the McCloud remedy was officially implemented on 1 October 2023.
Everyone who is impacted by the discrimination will receive ‘compensation’ benefits and can choose whether these will be from their previous 1995 / 2008 pension scheme or from the 2015 scheme for the ‘remedy’ period which will run from 1 April 2015 to 31 March 2022.
Members have the right to make a ‘deferred choice’ of which remedy benefits to take rather than an ‘immediate choice’. This means that if you are affected, you can make your decision about which set of remedy benefits you would like to take at the time of your retirement. This means you can calculate which set of benefits are the most valuable to you at the time.
What do you need to be aware of?
HMRC has created a digital service which ‘should’ allow scheme members to correct their tax payments for the years within the remedy period and apply for compensation online for any tax overpayments.
The rules surrounding McCloud are extremely complex and it is likely that this service will not be straightforward to use without expert help. Importantly, members will need to be sure that the figures inputted into the online calculator are correct.
What if you opted out?
One of the significant announcements of the final McCloud implementation consultation is that if members opted out of the pension scheme within six months of the remedy period starting, they will be able to ‘buy back’ their missing service without having to provide too much evidence that they opted out because of the discrimination.
Members can therefore elect for their ‘opted out’ service during the remedy period to be reinstated in their legacy pension scheme – as long as their employer is satisfied that their decision to opt out would have been different if not for the discrimination.
What about annual allowance charges?
For tax year 2022/23, members will not need to include an annual allowance charge on their tax return or resubmit a self-assessment tax return for any tax year during the remedy period.
Scheme members who are affected by McCloud will not receive an annual pensions savings statement in 2023 as usual, as the NHS Pensions Agency attempts to rework the calculations for every year of the remedy period. Instead, these should be provided by 6 October 2024.
What should you do now?
There are many factors to consider when looking at your own situation in relation to McCloud. There are caveats which could impact the decisions you need to make if impacted by the remedy. Seek expert help as soon as possible to ensure the steps you take are right for you and your future.
Our adviser team are always happy to help.
Please contact them on 020 7252 5765 or firstname.lastname@example.org
Approver Quilter Mortgage Planning Limited Quilter Financial Services Ltd 24/10/2023