McCloud Judgment

To be ‘in scope’ for the underpin, you must:

1. Have contributed to a public service pension scheme before 1 April 2012, and
2. Be under the age of 65 by 31 March 2014, and
3. Have contributed to the LGPS at some point between 1 April 2014 and 31 March 2022, and
4. Not have a single period of more than five years between points (1) and (3), where you weren’t contributing to a public service pension scheme (known as a ‘disqualifying break’)

However, being ‘in scope’ simply means that you’ll be assessed for the underpin; it doesn’t necessarily mean that you’ll receive an increase to your benefits (please see ‘When am I assessed for the underpin?’, below).

The underpin calculation will be based on your final pay at the underpin date, even when this is after 31 March 2022. There’ll be two stages to the underpin calculation:

• The first stage occurs at the ‘underpin date’ – this will be your date of leaving the Scheme or, if earlier, age 65; the calculation will also be based on the CARE pension you’ve built up over the period 1 April 2014 to 31 March 2022 (known as ‘the remedy period’), as well as the final salary pension you would’ve built up over the same period, had the final salary scheme still been in place
• The second stage occurs when your benefits are paid, whether as retirement benefits, death benefits, or a transfer of pension rights from the EAPF to another pension scheme; it’s at this point that a proper assessment is carried out, to see whether the underpin ‘bites’.

In most cases, the underpin is not expected to ‘bite’, meaning most members are unlikely to see a change to their LGPS benefits. This is because your current CARE pension builds up much faster than the ‘old’ final salary pension. For example, £10,000 of pensionable pay would provide a CARE pension of £204.08, whereas the final salary pension would only provide a pension £166.67. A reduction for retiring early still needs to be applied to these amounts, with a greater reduction usually being applied to your CARE pension, as this is linked to a later retirement when compared to the ‘old’ final salary scheme; however, even after the early retirement reduction has been applied, the CARE pension you’ve built up over the remedy period is still expected to higher than your equivalent final salary pension over the same period.

Even though the underpin may rarely apply, it will be an automatic protection. This means you won’t need to apply for it; if you’re eligible to benefit from it, you’ll get it!

Examples of how the underpin ‘bites’ (but in most cases, it doesn’t)

Member (age 60) leaves employment, and takes immediate payment of EAPF pension

Member leaves employment, and takes payment of EAPF pension 5 years later (age 62)