What is the McCloud Remedy?
When public service pension schemes were reformed in 2015 older members were protected from the changes. In 2018, the Courts found that younger members of the Judges’ and Firefighters’ pension schemes had been discriminated against as the protections did not apply to them. The changes made to the Scheme from 1 October 2023 are called the McCloud Remedy and remove the discrimination found in the McCloud court case. These changes are backdated to 1 April 2015.
In the LGPS (NI) when a protected member retires, their pension in the career average pension scheme built up over the underpin period is compared with the pension that they would have built up in the final salary scheme, had it continued. If the final salary pension would have been higher, their pension is increased. This is known as the ‘statutory underpin’. The underpin period is from 1 April 2015 to 31 March 2022.
Since 1 October 2023, eligible younger members are also retrospectively protected by the underpin. This does not apply to all members.
Who has underpin protections?
A member will have underpin protections in the LGPS (NI) if they meet all the following conditions:
- they were paying into the LGPS (NI) at any time between 1 April 2015 and 31 March 2022
- they were paying into the LGPS (NI) or another public service pension scheme before 1 April 2012
- they do not have a disqualifying break
- they were under their final salary normal retirement age, usually age 65, at any time between 1 April 2015 and 31 March 2022.
Underpin protection only applies to pensions built up from 1 April 2015 to 31 March 2022. The underpin period is shorter if a member left the Scheme or reached final salary normal retirement age (usually age 65) before 31 March 2022. There is no underpin protection on any pension benefits built up after 31 March 2022; these are career average pensions only.
A member does not not have underpin protections if they:
- left the Scheme before 1 April 2015 and did not become active in the Scheme again, or
- reached their final salary normal retirement age (usually age 65) before 31 March 2015.
A disqualifying break is a continuous period of more than five years where an individual was not paying into either the LGPS (NI) or any other public service pension scheme.
A public service pension scheme is one that covers civil servants, the judiciary, the armed forces, local government workers, teachers, health service workers, fire and rescue workers, members of the police forces or members of a new public body pension scheme.
An individual can check if they are affected by the McCloud remedy by using the gov.uk online tool.
Do members need to do anything?
Most members do not need to do anything as NILGOSC can identify which members have underpin protection based on their LGPS (NI) pension records. Members do not need to combine their pension records for the underpin to apply. If they have membership in another public service pension scheme before 1 April 2012 they will need to tell us, but only when we ask for this information.
If a member is protected, when they take their pension, we will work out whether they are due any increase because of the underpin.
Most members are unlikely to see an increase in their pension because, for most members, the pension that they have built up in the career average pension scheme is higher than they would have built up in the final salary scheme.
The new rules became law on 1 October 2023 and will mean a significant amount of extra work. It will take time to review all the cases. We will contact anyone whose pension is in payment and will increase because of the McCloud Remedy. We will only write to members if the new rules mean their pension will increase or if we need more information from them to establish if their pension will increase under the new rules.
Will member’s pensions increase?
Most members are unlikely to see an increase in their pension because they have built up a higher pension in the career average scheme than they would have in the final salary scheme.
A pension does not increase because of the underpin until a member finally takes it at retirement. At that time, any reductions for early payment or increases for late payment will be included when the comparison between the final salary pension and career average pension for the underpin period is made. The underpin period runs from 1 April 2015 to 31 March 2022.
Any increases that do apply are likely to be small.
How does the underpin work?
The calculation of the underpin is a two-step process:
Step 1 – If a member leaves the LGPS (NI) before they take their pension or when they reach age 65 as an active member, NILGOSC will work out provisional underpin figures.
Step 2 – When they take their pension, NILGOSC will adjust the provisional underpin figures calculated in Step 1 to work out final underpin figures. These final figures will take account of revaluation and pension increases as well as any early retirement reductions or late retirement increases that may apply.
Who is likely to be affected by the underpin?
Most members are unlikely to see an increase in their pension because they have built up a higher pension in the career average scheme than they would have in the final salary scheme.
An increase to a member’s pension is more likely if:
- they have a significant increase in pay late in their career.
- they transfer protected pension benefits to the LGPS (NI) from another public service pension scheme and their new pay is much higher than the pay they were on when they left the other scheme.
- their pension is adjusted because they are taking it early and their State Pension Age is over age 65.
- they leave the LGPS (NI) and the best of the last three years’ pay or a three year average pay in the last 10 years is used to work out their final pay.
However, even if one of above applies to an individual, this does not guarantee an increase to their pension.
What will NILGOSC do?
Since 1 October 2023 NILGOSC has been reviewing the records of its members who are protected by the underpin. There are approximately 50,000 records to review and this will take time. Not all the guidance or information that is required is immediately available.
Pensions in payment will be reviewed as soon as possible. We will contact anyone whose pension is in payment and will increase because of the McCloud Remedy. We will only write to individuals if the new rules mean their pension will increase or if we need more information from them to establish if their pension will increase under the new rules.
IMPORTANT: NILGOSC will look at its pension records to work out if members are protected by the underpin. If they were paying into another public service pension scheme before 1 April 2012 NILGOSC will not know about this unless they have transferred this previous pension to us. We will ask them to let us know about any relevant pension scheme membership. It is essential that they provide the information that is needed so that they get the protection they are entitled to.
Training for employers on the McCloud Remedy
The McCloud Remedy Employer Training Session, Video Transcription (PDF, 280KB)