In this article, Madeleine Dowling, technical team lead at Wesleyan Financial Services explains the latest on McCloud:
It all started more than a decade ago, when changes were announced to public sector pension schemes that some said were unfair to younger members.
But it’s taken until now for the Government to come up with a final remedy, which is called the McCloud judgement.
So, what is the McCloud judgement, and what does it mean for you?
First, a little background.
On 1 April 2015, the NHS Pension Scheme (NHSPS) was reformed.
As part of that process, older members who were close to retirement received some protections, meaning they would not be moved into the new reformed scheme.
But a legal case was brought against the Government, arguing that this discriminated against some younger pension scheme members, who did not enjoy the same protections.
In 2018, the Court of Appeal agreed that this amounted to age discrimination.
Following a consultation, the Government has now come up with a solution, called the McCloud remedy.
Do you qualify?
This means that certain qualifying younger members will also now receive the same protections as those older members.
But you only qualify if:
- you were paying into the NHSPS before 1 April 2012
- and you were also paying into the NHSPS anytime between 1 April 2015 and 31 March 2022, or your retirement date is earlier
- and if you opted out after 31 March 2012 but returned within five years
If you do qualify, and you’re still paying into the NHSPS, you’ll notice that your next annual pension statement looks a bit different.
It will lay out two options for you: your benefits assuming you remained in the old scheme during the remedy period, 1 April 2015 to 31 March 2022, and your benefits assuming you moved to the reformed scheme for the remedy period.
It’s up to you which one you choose, but you won’t have to do this until you retire or start claiming your pension, which could be many years away.
If you have already retired, you will have to make that choice sooner, but don’t panic, nothing will happen for a few months yet.
When to expect more information
There are thousands of NHSPS members to get through and the scheme is taking a phased approach to contacting everyone who qualifies, starting from April 2024.
At some point, you will receive a pension statement in the post laying out your two options. That said, the level of detail in these statements is still unknown, so you may need to deep dive into the data to understand what option is best for you and your retirement.
But it might not be as simple as just choosing the option with the biggest pension pot. Those who have previously left the scheme, or left and then rejoined, may want to check that benefits such as death in service cover are at the levels you need.
What to consider
When making your McCloud decision there will be other factors to think about too, like whether you want a standard pension, or to claim a lump sum.
The rules about dependents may also vary.
But any additional benefits that you are due will be backdated to when you started earning them, so you won’t lose out financially and, in the meantime, you will keep receiving your pension.
There are also arrangements in place if you don’t qualify because you decided to opt out of the NHSPS because of the changes that were introduced in 2014/15.
If this is the case, it may mean you having to pay the contributions you missed during this time to ensure you do now qualify for the protection, which may or may not be worth it.
For the vast majority of people who qualify, the McCloud judgement will leave you better off, though the amounts of money involved may not be life changing.
Still, when the time comes to make a decision which scheme to choose, you’d be well advised to speak to an expert to make sure you are choosing the best option for your circumstances.
They will be able to help you understand your rights and make sure you receive all the pension you deserve to help secure your financial future.