McCloud FAQ’s for pensioners

You do not need to do anything.  When you take your pension, NILGOSC will compare the pension that you have built up from 1 April 2015 to 31 March 2022 in the career average scheme with the pension you could have built up had the final salary scheme continued.  If the final salary pension would have been higher, the difference is added to your pension.

Left the LGPS (NI) before 1 October 2023 – NILGOSC will recheck your record and work out provisional underpin figures.  The final underpin figures will not be worked out until you take your pension at retirement.

Left the LGPS (NI) on or after 1 October 2023 – NILGOSC will include the underpin in the calculation of your deferred benefits. Provisional underpin figures will be calculated at the date you left the LGPS (NI).  Final underpin figures will not be worked out until you take your pension at retirement.

Took your pension before 1 October 2023 – NILGOSC will review the pension that you are being paid.  If the pension you would have built up between 1 April 2015 and 31 March 2022 in the final salary scheme would have been higher than in the career average scheme, then your pension will be increased.  NILGOSC will also pay you arrears of pension and interest. 

NILGOSC has over 50,000 records to review so it will take some time to review all the cases.  For most members the pension that they built up in the career average scheme will have been higher, so no increase will be due.

Take your pension on or after 1 October 2023 – if you are protected NILGOSC will take this into account when it works out your pension.  If your pension is increased because of the underpin we will tell you how much has been added.  You do not need to do anything as the protection will automatically apply.  For most members the pension that they built up in the career average scheme will have been higher, so no increase will be due.

Retired before 1 October 2023 – If you retired on ill-health from deferred membership and are protected, NILGOSC will review the pension that you are being paid.  If the pension you would have built up between 1 April 2015 and 31 March 2022 in the final salary scheme would have been higher than in the career average scheme, then your pension will be increased.  NILGOSC will also pay you arrears of pension and interest.

If you retired with a tier 1 or tier 2 ill-health pension (from active membership) before 1 April 2022 your pension will have been increased by a proportion of the amount of pension you could have built up between your leaving date and your Normal Pension Age.  Providing you are protected, NILGOSC will check your underpin calculation and it will include any part of the increase that applied in the period up to 31 March 2022 or age 65 if this is earlier.  If your pension is increased, then NILGOSC will pay you arrears of pension and interest.

Retired on or after 1 October 2023 – If you retire on ill-health on or after 1 October 2023 and have protections, NILGOSC will include the underpin in your calculations in the same way as for all retirements.

On flexible retirement you can choose whether to take all or some of the pension you have built up.  The underpin check is carried out when you flexibly retire, and if your pension increases, a proportion of the increase will be paid to match the proportion of benefits that you are taking that were built up after 31 March 2015.  A further underpin check will be carried out when you take the remainder of your pension.

If you flexibly retired before 1 April 2022 and remained a member of the LGPS (NI) you will build up further pension that also has underpin protection.  NILGOSC will carry out a further underpin check when you retire.

The public service pension scheme that you are transferring to will generally give you protection in their scheme.  This will not be an underpin as it is unique to the LGPS, instead, you are given a choice between a career average pension and a final salary pension for the relevant pension benefits built up from 1 April 2015 to 31 March 2022. 

If you transfer and have a disqualifying break you will lose underpin protection.

Criminals are known to target pension savings so please make sure you read NILGOSC’s pension scam pages before deciding to transfer.  https://nilgosc.org.uk/members/leaving/be-fraud-aware/protecting-your-pension-from-scammers/

If you were protected by the underpin and have already transferred your pension out, then NILGOSC will review the transfer value paid and will contact you if an additional payment is due.  NILGOSC has over 50,000 records to review so it will take some time before these cases will be reviewed.

For most members the pension that they built up in the career average scheme will have been higher than what would have been built up had the final salary scheme continued, therefore the career average transfer value paid will have been higher than any final salary transfer amount for the period from 1 April 2015 to 31 March 2022 and no payment will be due.

Transfer into the LGPS (NI) before 1 October 2023 – the McCloud Remedy applies to all public service pension schemes.  Pension benefits that originally had protection in another scheme will continue to be protected in the LGPS (NI), provided you did not have a disqualifying break.  When you take your pension, the underpin check will include your transferred in service that relates to the protected period from 1 April 2015 to 31 March 2022.  This is complicated and it could be some time before all the guidance and information is in place to deal with these transfers.

Transfer into the LGPS (NI) on or after 1 October 2023 – you have 12 months after joining the LGPS (NI) to decide to proceed with a pension transfer from another public service pension scheme.  The protections in other public service schemes gives you the choice of either final salary or career average pension benefits for the period from 1 April 2015 to 31 March 2022.  The protection is different in the LGPS (NI) where, if you transfer, you receive career average pension with a final salary underpin.  If you transfer protected benefits after a disqualifying break, you will lose your protection and receive a career average pension with no underpin protection in the LGPS (NI).

If you were a deferred member and you re-join the LGPS (NI) on or after 1 October 2023 you can choose to combine your two periods of membership within 12 months of re-joining. Only your employer can choose to extend the 12-month period, NILGOSC cannot do this.

There is a lot to consider when you are thinking about combining your benefits and the Re-joining the Scheme Guide sets out these considerations in Section 3.  As a result of the recent rule changes, you will also need to consider what happens if you have underpin protection on your deferred benefits.  The main considerations if your deferred benefits are protected by the underpin are:

• If you keep your benefits separate, your deferred benefits will retain their underpin protection, but your new pension record will not have underpin protections.
• If you have a disqualifying break and combine your pension records, you will lose underpin protection.
• If you do not have a disqualifying break and combine your benefits, you will keep your underpin protection.

If you have membership in another public service pension scheme before 1 April 2012 you will need to tell us, when we ask you for this information.

If you are protected, when you take your pension, we will work out whether you are due any increase because of the underpin.

NILGOSC has over 50,000 records to review to ensure that members receive the correct pension, so it may be some time before we ask for this information.  We may also need additional information from your employer to enable us to check your record.

When you take your pension, NILGOSC will check the pension that you have built up from 1 April 2015 to 31 March 2022.  We will compare the career average pension built up with what you could have built up in the final salary scheme, had it continued.  If the final salary pension is higher, the difference (the underpin) is added to your pension.

However, the check is complicated as the following parts of a member’s pension are excluded from the underpin check:

• extra pension bought by additional pension contributions (APCs) to boost your pension.
• extra pension your employer bought for you.
• extra pension you bought by paying additional regular contributions (ARCs) or added years that you have bought.
• transfers from a non-public service pension scheme.
• reduced contributions you paid while in the 50/50 section of the Scheme.
• any pension debits which apply because your pension was shared with your former spouse or civil partner.
• any Scheme pays debits where you have asked NILGOSC to pay your annual allowance tax charge for you with a corresponding reduction to your pension.
• additional voluntary contributions (AVCs).

Any additional pension contributions (APCs) that you paid to buy back pension that was ‘lost’ while you were away from work during the remedy period (1 April 2015 to 31 March 2022) are included in the underpin check.  The corresponding period that you have paid for will also be included to work out the final salary pension for the underpin check.

When you get divorced or a civil partnership is dissolved, the Court takes the value of your pension into account in any settlement.  If your pension includes an underpin amount, then that increase is included and, if your pension is shared, part of that increase will be passed to your former spouse or civil partner.

If your pension was shared before 1 October 2023, then NILGOSC will have to recheck the value of your pension at the date of the pension sharing order.  If the value is increased because of underpin protection, then the share awarded to your former spouse or civil partner will be recalculated.  The pension credit member will have arrears paid plus interest.

For most members the pension they built up in the career average scheme is higher than they would have built up in the final salary scheme, so no underpin applies and there is no change to the pension share awarded to their former spouse or civil partner.

Death grants – underpin protection does not change the death grant if you die as an active member, as the death grant is a multiple of your pay and not the pension that you have built up.

If you die after taking your pension, then the death grant is calculated based on your annual pension.  If your pension is increased because of the underpin, then the death grant will be increased too.

If you die as a deferred member, the death grant is calculated on your yearly deferred pension.  If you are protected by the underpin, the provisional underpin figures from when you left the Scheme are used to work out if your pension should be increased.  If an increase applies, then the death grant will be increased too. 

Death grant paid before 1 October 2023 – NILGOSC will review death grants paid before 1 October 2023 for deceased protected deferred and pensioner members.  If underpin protection means a higher death grant should have applied, then the difference will be paid.

NILGOSC has thousands of payments to review so it will take some time to work through the exercise.

In most cases, the deceased member’s pension will not increase because of underpin protection and the death grant will not increase.

Survivor pensions – these are payable to your spouse, civil partner, cohabiting partner or eligible children after your die.  If you are protected by the underpin, then NILGOSC will work out whether any survivors’ pensions should be increased to reflect the part of the increase that would have applied to your pension.  Any adjustments to your pension because of early or late retirement are ignored when working out the survivor pension and any increase.

NILGOSC will review any eligible survivors’ pensions that started before 1 October 2023. If the pension should have been increased, then we will pay arrears and interest.

NILGOSC has thousands of payments to review so it will take some time to work through the exercise.

If your pension is increased because of underpin protection, the increase is excluded for annual allowance purposes.  You may still have a tax charge, but it’s based on your pension excluding the underpin addition.

It is possible that a few members may have retired before 1 October 2023 under the old underpin rules, had an underpin increase and an annual allowance tax charge in the year they retired.  If you are in this group you may have paid too much tax, or asked NILGOSC to pay too much tax on your behalf.  HMRC has processes in place to deal with these overpayments and NILGOSC will contact you if this applies to you.

In addition, a few members may have taken their pension before 1 October 2023 and paid a lifetime allowance tax charge and are now due an increase to their pension because of the new underpin rules from 1 October 2023.  You will not pay another lifetime allowance tax charge because of this increase and the lifetime allowance is undergoing steps to be abolished from April 2024 onwards.