The Cabinet Office, Home Office, Department for Education and Ministry of Defence have each opened consultations into the first phase of the McCloud remedy, covering regulations that will see all legacy schemes close to future accrual from March 2022. However, new consultations on phase two of the remedy will be launched next year.
The McCloud remedy is to be implemented in two stages, with the goal of stage one being to close legacy schemes to future accrual from March 31 next year, while ensuring all members remaining in service from April 2022 are moved to the reformed scheme, thereby removing the discriminatory treatment arising from the government’s 2015 public sector pension reforms.
Stage two will concern the choice of benefits available to members during the remedy period, which covers the period between April 1 2015 and March 31 2022.
Most public sector schemes have opted for the deferred choice underpin remedy, under which members will be able to choose between the benefits accrued under both the legacy and the reformed schemes and pick the larger of the two.
We will give due regard to the interaction of retirement ages between schemes and consider whether any changes are needed to ensure any cohort of police pension scheme members are not unduly disadvantaged
Home Office
Members of the Judicial Pension Scheme, which operates differently to other public sector schemes, will face an immediate choice in 2022.
Teachers’ scheme ends full protected status
The DfE is the latest to open a consultation into the first stage of the McCloud remedy, publishing its consultation document on Tuesday. It follows the consultation published by other government departments, including the Cabinet Office consultation for the Civil Service Scheme.
The Teachers’ Pension Scheme currently consists of two schemes with a total of three sections, it explained.
The legacy scheme has two sections, with normal pension ages of 60 and 65, and pays benefits according to the final salary of the member. The reformed scheme, meanwhile, is a career average scheme and has a normal pension age equal to the state pension age or 65, whichever is higher.
Regulations published in 2014 established transitional protections for members of the legacy scheme moving over to the new scheme, and so the DfE estimates that “only a small number of amendments are required to implement this first phase of the McCloud remedy for full protection members”.
As such, there are no meaningful changes proposed in the consultation to ill-health benefits or the contribution rate to the scheme. However, it does include regulations to end the provision of “full protected” status, under which anyone who was an active member and who was within 10 years of normal pension age as at April 1 2012 remains in the final salary arrangement until they take their pension entitlement in full.
It also makes amendments ensuring that members will cease to build up additional teaching service under the Local Government Pension Scheme, instead being enrolled into the TPS.
The consultation closes on January 24 2022, and the expectation is that changes will come into force from April 1.
Police scheme consultation identifies concerns
The Home Office opened its own consultation into changes to the Police Pension Scheme on November 8. Scheme members have previously expressed their dissatisfaction with the proposed remedy.
As Pensions Expert reported in May, members from every federated rank in the UK wrote to the chairs of the Police Pension Scheme advisory board, slating the “deeply unfair” ramifications of the remedy and arguing that it will undermine protected pension rights and result in sex discrimination.
In its consultation document, the Home Office said there are three areas where it is “considering whether further amendments to the regulations may be needed”.
The first of these concerns measures to ensure that it is still possible to purchase additional benefits under the legacy scheme after March 2022, and that no new legacy scheme arrangements can be entered into after that date.
“In both police legacy pension schemes, it is possible for members to purchase additional pensionable service, where they meet certain criteria. They do this by agreement with the scheme manager, and pay for it either as a lump sum or by way of periodical contributions over a period of years, until a set age (typically NPA),” the consultation explained.
“All such existing agreements will remain in force after March 31 2022. This is because they do not involve continuing to accrue legacy scheme benefits in relation to service after the closing date; rather, the scheme members concerned are paying in instalments for a previously agreed enhancement to their pre-transfer service.”
The consultation invites views on whether the amendments, as they stand, are sufficient to achieve these objectives.
The second of the three areas under discussion concerns the provision of ill-health benefits, to ensure that “a protected member who applies for ill-health retirement before March 31 2022, where the application is determined in their favour after that date, is treated no less favourably than if the application had been determined on that date”.
The third area concerns the interaction of retirement ages between the schemes, as the reformed and legacy schemes currently allow members to draw their pensions at different ages.
The 1987 scheme allows many members to draw their pension before age 55, the consultation explained.
However, if members do retire before age 55 and have pension accrued in the 2015 scheme, “they either have to wait until state pension age (rather than age 60) to take an unreduced 2015 pension, or wait until the age of 55 and take an actuarily reduced 2015 pension (the reduction being based on state pension age)”.
“We will give due regard to the interaction of retirement ages between schemes and consider whether any changes are needed to ensure that any cohort of police pension scheme members are not unduly disadvantaged, especially having regard to the needs of members from protected groups where these are different from the needs of other members,” it stated.
The consultation closes on January 2.
Firefighters’ consultation questions additional benefits
Firefighters have likewise expressed their unhappiness at the proposed remedy. The Fire Brigades Union is one of a number of public sector unions to have written to the government threatening to open a judicial review over plans to make members pay the cost of the remedy.
As with amendments to the Police Pension Scheme, the Home Office is considering whether further amendments are required around the purchasing of additional benefits under the legacy scheme, as well as ensuring equitable treatment with regard to ill-health benefits.
“For any ill-health cases that straddle April 1 2022, the intended policy is the introduction of an ‘ill-health retirement underpin’,” the consultation explained.
Firefighters threaten legal action over McCloud costs
The government is braced for more McCloud drama after the Fire Brigades Union published a letter threatening legal action to stop the cost of the remedy falling on members.
“This will mean that such members receive a 2015 Scheme ill-health pension calculated at the date they actually retire; but that if a legacy scheme ill-health pension calculated as at March 31 2022 would have been higher, the 2015 Scheme pension must be increased by the difference between the two.
“The underpin will effectively guarantee the member an ill-health pension that is at least as much as they would receive had they been ill-health retired under the terms of their legacy scheme on March 31 2022,” it stated.
The consultation closes on January 2.
