The McCloud Judgment: What Is It and How Does It Affect You?

If you work in the Public Sector, it is likely you will have heard about ‘The McCloud Judgement’, especially over the last year. Many members have been left confused by what The McCloud Judgement actually is and what it means for their retirement.

To give you a better understanding of what these reforms mean and how they may affect your retirement plans we have provided a brief overview below on what we know about The McCloud Judgement so far.

Following the changes to the public service sector pension schemes in 2015, a court case was brought to the high court and as a result, the changes were deemed unlawful on the grounds of age discrimination. As a result, the Department of Finance consulted on proposals to fix age-related discrimination identified in the transitional arrangements of the 2015 public service pension reforms.

This applies to all the main public service pension schemes.

If you were in service on or before 31 March 2012 and still in service on or after 01 April 2015 then the consultation will apply to you.

If you are eligible, you will choose between your final salary (legacy) and career average (reformed) pensions scheme benefits for service between 01 April 2015 and 31 March 2022 (the remedy period). You will make this choice at the time you take your pension benefits (e.g. when you retire), this is named the Deferred Choice Underpin (DCU). The choice will apply for the whole remedy period in all cases.

All active members will be placed in the reformed scheme from 01 April 2022. This will mean that all future pension benefits accrued from this date will be added to the new reformed scheme. All previous benefits accrued under the legacy schemes are not affected and will remain in the old legacy scheme.

Initially, eligible members who were moved to the reformed scheme in 2015 (or later if you had tapered protection), will be moved back into the legacy scheme for the remedy period. However, when you take your pension benefits, for example at retirement, you’ll get to choose between your legacy and reformed scheme benefits.

You do not need to make a choice until you retire.

It will take some time before any changes to individuals’ pensions are implemented because the legislation has not passed through government. Once passed they will agree a timescale to implement the changes and then regulatory changes need to be put in place. It will take some time to implement these changes as the Pensions Department will need to make amendments to their systems and processes.

If you have already retired or are planning to retire before the changes are implemented, then your pension will be calculated as normal. Any eligible member who has retired since 2015 will make the choices retrospectively. You will make a choice between the old and the new scheme benefits for the service between 2015 and April 2022 or your retirement date if this was earlier.

You don’t have to make any immediate decision or choices now. We will issue further communications once the legislation and implementation process has been passed and further information becomes available.

As pension specialists, Platinum Financial Planning advisers have specialist knowledge on public sector pension schemes. We provide our clients with quality financial insight to ensure they are in an informed position and fully understand how they are going to achieve their financial goals.

We know after the last year, many people will want greater certainty on their options and what these reforms might mean for their retirement plans. If you do have any questions about The McCloud Judgement, and how it may affect you, then please book an appointment with a Platinum Financial Planning adviser.

This article is based on our understanding of current legislation which may change.