McCloud remedy
Information for employers about the McCloud remedy, how it impacts members of the NHS Pension Scheme and how employers can support staff with the changes.
The McCloud remedy removes the age discrimination that was judged to have arisen in public service pension schemes, including the NHS Pension Scheme. The discrimination resulted from allowing older members to remain in the 1995/2008 scheme when the 2015 scheme was introduced on 1 April 2015.
The remedy is made up of two parts:
- All active members of the NHS Pension Scheme joined the 2015 scheme from 1 April 2022, to ensure equal treatment from 1 April 2022 onwards.
- All members affected by the discrimination will be offered a choice about their pension benefits for the period between 1 April 2015 and 31 March 2022 to address the unequal treatment that occurred during that time.
Members will be asked to make a choice on whether they would like to receive 1995/2008 Scheme pension benefits or 2015 Scheme pension benefits for their membership between 1 April 2015 and 31 March 2022, known as the ‘remedy period’.
Most members will not need to make this choice until they apply to take their pension. NHS Pensions are working to update the retirement application process to offer members their McCloud choice at retirement.
Members who have already retired, or who will retire before the new retirement application process is in place, will be asked to make their choice retrospectively, after they have retired. NHS Pensions will contact these members directly and offer them a retrospective choice, along with a remedial service statement (RSS) which contains personalised information to help them make their choice. RSS are being produced and issued in priority order, starting with those for members at the greatest financial detriment.
McCloud communications- what to expect
A remediable service statement (RSS) is a document which sets out the alternative pension benefit that a member is entitled to under their choice of remedy benefits. The statement will show two sets of figures showing the value of their pension benefits to date with their membership for the remedy period (1 April 2015 – 31 March 2022) in the 1995/2008 scheme, or in the 2015 scheme.
The impact of McCloud on pension taxation
Some members who are affected by the McCloud remedy may need to check their pension tax position and update their pension tax information with HMRC.
This is because, from 1 October 2023, pensionable service between 1 April 2015 and 31 March 2022 was moved back to the 1995/2008 scheme. This process is known as rollback. Rollback may change the value of pension earned in the tax years 2015/2016 - 2021/22 and may change the pension tax position for affected McCloud members. This could mean some members have an annual allowance tax refund to claim, or a small number may have extra tax to pay.
Members will need a remedial pensions savings statement (RPSS) from NHS Pensions before they can check their pension tax position with HMRC.
Many members may find there is little or no change to their pension tax position. However, all members who receive an RPSS need to check their pension tax position with HMRC.
An online tool from HMRC is in place to help members check if their tax position has changed and guides them through claiming refunds or paying additional charges.
Calculate your public service pension adjustment - GOV.UK
A step-by-step guide to using the HMRC tool is available on the NHS Pensions website.
Many members may wish to use an independent financial adviser for help with this process and members may be able to claim back some of the associated costs through the NHS Cost Claim Back Scheme (link to info below).
Members can use our ready reckoner, in conjunction with their RPSS to assess their annual allowance liability for the tax year. The ready reckoner is designed to help staff understand the benefits they are building up in the scheme and their annual allowance liability.
Cost claim back scheme
The NHS Cost Claim Back Scheme is designed for members affected by the McCloud remedy. This scheme allows eligible members to claim back certain direct financial losses incurred due to the remedy.
Members may claim back costs for:
- Advice on the 2015 scheme move: if previous advice is no longer applicable due to the McCloud ruling.
- Additional advice due to the remedy: if members required further professional services because of the remedy.
This includes costs for advice from an IFA or accountant.
Members can claim up to £500 including VAT for IFA services related to pension benefit decisions for the remedy period. For accountancy services related to using the HMRC Digital Service for applications, the maximum claim is £1,000 including VAT per piece of advice.
For further information on claims, process and eligibility please see The NHS Cost Claim Back Scheme.
Contingent decisions
A contingent decision is a decision a member made or did not make because of actual or perceived implications of the 2015 scheme reforms. Members might have acted differently if they knew they would be staying in the 1995/2008 Scheme for the remedy period.
Examples include opting out of the scheme or cancelling additional pension arrangements. Points for employers and members to consider are:
- Voluntary contributions and additional pension: members who cancelled these due to the reforms may be able to undo the cancellation.
- Early Retirement Reduction Buy-out (ERRBO): members who paid ERRBO contributions will have options regarding these contributions.
- Choice 2: members who moved from the 1995 to the 2008 section may revisit this decision.
The NHSBSA is working on processes to address these contingent decisions and will contact affected members with details on how to proceed.
More information on contingent decisions on the NHSBSA website.
