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This is commonly used to refer to the court judgment which ruled that the protection given to older members of the public service pension schemes, when they reformed to become Career Average Revalued Earnings (CARE) pension schemes, was discriminatory against younger members of these schemes.

What is the McCloud remedy?

For the LGPS, the discrimination related to the underpinning of the pension a member would receive for pensionable service during the period 1 April 2014 to 31 March 2022; as it only applied to members who, on 31 March 2012, were within 10 years of reaching their 65th birthday. Members who benefited from this protection would, on their retirement, receive the higher of their CARE pension or the pension they would have received if the LGPS had continued to be a final salary scheme; this protection is referred to as ‘the underpin’.

After a long wait, the government have now amended the LGPS regulations, to ensure that the underpin protection previously applied to older members is also applied to younger members, and that this protection is backdated to April 2014. This change to the scheme rules is known as the ‘McCloud remedy’.

How do I know if I’m ‘in scope’ for McCloud?

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).

When am I assessed for the underpin?

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

CARE pension built up during remedy period

= £5,000 (based on State Pension Age of 67) 
Less 27.4% (7-year reduction) = £3,630
Final salary under during remedy period = £4,000 (based on Pension Age of 65)
Less 20.9% (5-year reduction) = £3,164 (underpin doesn't 'bite')

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

CARE pension built up during remedy period

= £4,300 (based on State Pension Age of 67) 
Plus 5 years of (est.) inflationary increases = £5,375
Less 20.9% (5-year reduction) = £4,252
Final salary under during remedy period = £4,000 (based on Pension Age of 65)
Plus 5 years of (est.) inflationary period = £5,000
Less 13.5% (3-year reduction) = £4,325 (underpin 'bites')
Further resources

McCloud Webinar

We’ve created a webinar video to help you understand the McCloud remedy. It covers useful information on how the McCloud remedy started, what it means, why the changes are happening and who might be affected by it.

McCloud factsheet

We’ve produced a McCloud factsheet, which explains the McCloud judgment and changes to the Local Government Pension Scheme (LGPS) in England and Wales.

It’s really useful, and it explains what the McCloud judgment is, how to determine if you’re affected, key dates, and what’s going to happen over the coming months.

Further resources

Retirement options

EAPF - Annual Pension Statement image
If you're planning retirement, we have some useful resources such as our Budget Planner tool, a Retirement Options video and helpful links to factsheets and calculators all to help you plan.
Find out more
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