What is the McCloud judgment?

The Government reformed public service pension schemes in 2014 and 2015 moving from final salary schemes to career average schemes. Members who were born before 1 April 1957 had their pensions protected from the changes.

In essence this meant that when they retired, their pension fund compared:

• the career average pension they built up before age 65, with
• the pension they would have built up in the final salary scheme.

If the final salary pension was higher, the difference was added to their pension. This protection is called the underpin.

In December 2018, the Courts ruled that younger members of the judges’ and firefighters’ pension schemes had been discriminated against because the protections did not apply to them. As a result, the rules of all public service pension schemes, including the LGPS, changed from 1 October 2023. The changes are known as the McCloud remedy and they remove the age discrimination found in the McCloud judgment.

Eligible younger members are now protected by the underpin, although we do not expect many people to be affected. For those few members that are affected we do not anticipate the impact to be material.

You may qualify for underpin protection if you were a member of the LGPS or another public service pension scheme before 1 April 2012 and were a member of the LGPS at any time between 1 April 2014 and 31 March 2022 as long as you did not have a disqualifying break. A disqualifying break is a continuous period of more than five years when you were not a member of a public service pension scheme. You won’t be affected if you were not paying in to the LGPS before the 1 April 2012.

What happens next?

As an active member, we will include information about how the underpin might affect your pension in your 2025 annual benefit statement, which you will receive by 31 August 2025.

If you leave the LGPS, we will work out provisional underpin figures for you. We can only work out the final figures and any increase to your pension when you take your pension.

When you take your pension, we will work out if an increase is due because of the underpin. Any increase is known as a ‘final guarantee amount’. Very few members will get a final guarantee amount because, for most members, the pension they built up in the career average scheme will be higher than they would have built up in the final salary scheme. This is because benefits in the career average scheme build up at a faster rate than the final salary scheme.

Further information

You can find out more about McCloud by visiting the national LGPS member website:

www.lgpsmember.org/mccloud-remedy/

Contact us

Call:     0300 200 1022

Email:   [email protected]

Please note that our Helpdesk is closed for the festive period from 1 pm on 22nd of December until 10 am on the 2nd of January 2024.

Paul Punter

Head of Pensions Administration - East Sussex Pension Fund