Blog: 8th September 2023 - Nigel Bolton, Bevan Brittan

McCloud – The End of the Beginning?

We are on the cusp of implementing the McCloud Remedy, which is due to take place on 1 October 2023. This will draw to a close the current chapter, which began with government reforms of Public service pensions in 2014.

In implementing these reforms, the government was held to have introduced unlawful age discriminatory practices impacting on younger members of public sector pension schemes, by the Court of Appeal in 2018.  It took the DLUHC until April 2023 to finalise its approach to resolving the issue by use of an underpin  ̶ comparing Final Salary benefits and Career Average Revalued Earnings benefits, in relation to those benefits built up between 1 April 2014 and 31 March 2023, and giving the higher amount.

The first eight months of this year has seen a ricochet of consultations and responses between DLUHC and various local government bodies, including the LGA and LGPC, around the implementation of the compensation for members. These have rightly covered areas like taxation of compensation, aggregation, flexible retirement, pension sharing on divorce, and payment of interest on delayed payments. These consultations have been mirrored across all public sector schemes.

For many authorities their Local Government Pension Scheme fund will also administer the Firefighters Pension Schemes, and whilst there has been a lot of focus on Immediate Detriment cases, October will see not just the McCloud implementation, but also a remedy for the Mathews (retained fire fighters) discrimination, expected to be implemented simultaneously.

With less than a month to go live on McCloud and dribs and drabs of updates on progress to finalising regulations etc, the main concern is that there just won’t be enough time to implement all of the changes to scheme administration software before 1 October, let alone time to undertake training on the detailed impacts the changes might have for members.

This could leave funds in the invidious positon of reverting to manual calculations in the short term, or running the risk of breaches for being unable to produce information within statutory timescales, or even worse - producing it, but with the caveat it may be wrong and need further amendment to allow for McCloud.

Whilst it is hoped that once all statutory guidance and regulation is finalised the administration of the remedy for the future will be straight forward, the first few months of implementation following the end of the court cases and consultations run the risk of placing funds in an unnecessarily difficult positon, whilst having to face a mountain of work to deal with full implementation!