McCloud and how it affects the Shropshire County Pension Fund
This page will be regularly updated on the latest information on the McCloud judgement.
If you are a scheme member, you do not need to take any action. If you are affected by McCloud, we will automatically apply the protection to your benefits at the appropriate time. There's no need to contact us, we will contact you. More information can be found below.
If you are a scheme employer, there is some information which we will be asking you for in the coming months and more information can be found below.
What is the McCloud court case?
The Public Service Pensions Act 2013 laid out reforms to public service pension schemes. The Local Government Pension Scheme (LGPS) was the first to undergo its reform in 2014, with other schemes following in 2015. This meant that the LGPS changed from a final salary scheme to a career average revalued earnings scheme (CARE) on 1 April 2014 for active members.
When the scheme changed there was protection from the changes put in place for members who were within ten years of their normal pension age on 1 April 2012 who generally had a normal pension age in 2012 of age 65. The protection meant that when the benefits become payable, the career average and final salary benefits were compared, and the higher amount is paid. This is called the underpin.
On 20 December 2018 the Court of Appeal found that these protections were unlawful on the grounds of age discrimination and the Government has confirmed that there should be changes to all the main public service pension schemes, including the LGPS, to remove the discrimination.
To remove the discrimination the LGPS needs to provide protection to younger members, not just those within ten years of normal pension age on 1 April 2012.
This ruling is often called the ‘McCloud judgment’ after a member of the Judges’ Pension Scheme who was involved in the case.
How does the McCloud ruling affect your pension from the LGPS?
What is McCloud?
When the Government reformed public service pension schemes in 2014 and 2015, older members were protected from the changes. 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.
This ruling is called the McCloud judgment after a member of the judges' pension scheme involved in the case.
The rules of all public service pension schemes, including the LGPS, changed from 1 October 2023 because of the ruling. The changes are known as the McCloud remedy and they remove the age discrimination found in the McCloud judgment.
In the LGPS, older members were protected by the underpin. When a protected member retired, their pension in the career average scheme was compared with the pension they would have built up in the final salary scheme. If the final salary pension would have been higher, their pension increased.
From 1 October 2023, eligible younger members are also protected by the underpin. Not all LGPS members are eligible for protection. The underpin will protect the pensions of eligible members that they built up in the remedy period. The remedy period is from 1 April 2014 / 2015 to 31 March 2022. Underpin protection stopped earlier if you left the LGPS or reached your final salary normal pension age before 31 March 2022.
What do you need to do?
You do not need to take any action. We will work out if you are protected. If you are, when you take your pension, we will work out if it will increase because of the underpin. Any increase is known as a ‘final guarantee amount’.
Not many members will get a final guarantee amount because, for most members, the pension they built up in the career average scheme is higher than they would have built up in the final salary scheme.
If you are a protected active member, we will include information about how the underpin might affect your pension in your 2025 annual benefit statement. We must issue this 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 (a final guarantee amount) when you take your pension.
If you are a protected deferred member, we will include information about how the underpin might affect your pension in your 2025 annual benefit statement. We must issue this by 31 August 2025.
We will work out final figures and any increase to your pension (a final guarantee amount) when you take your pension.
If you are protected and your LGPS pension is already being paid to you, we will work out if your pension will increase. We will do this as soon as we can, but reviewing all pensions in payment will take some time.
You do not need to contact us. Please be assured that we will contact anyone whose pension in payment will increase because of the McCloud remedy. We will only write to you if the new rules mean that your pension will increase.
Find out more
You can find out more about the judgment by reading the McCloud member factsheet / McCloud pages of our website or the McCloud pages of the national LGPS member website: www.lgpsmember.org/mccloud-remedy/
What McCloud means for scheme employers
To implement McCloud, we need to hold the correct data. This means we need up-to-date and accurate working hours, service breaks and final pensionable pay for all members. You should have been continuing to provide this data since 1 April 2014.
Hours changes should be provided for your employees through i-Connect and you should have told us about any service breaks, by sending us the relevant form found in the employers area on our website. The end of year compliance return also asks you to confirm you have sent us this data.
If you know your organisation hasn’t provided the full working hours and details of service breaks for all your members since 1 April 2014, we will need to collect this data. Please don't destroy any relevant data. If you've changed your payroll provider since 1 April 2014, you must make sure you still have access to this information. We are in the process of checking the data you have sent the fund.
On 22 March 2022, the Department of Levelling Up, Housing and Communities (DLUHC) issued a letter on how funds should take the McCloud remedy into account in the 2022 triennial valuation. During the 2019 valuation, scheme employers were given the option to include the potential costs for the McCloud remedy in their employer contribution and some employers took up this option.
As the McCloud remedy position is slightly further on since the 2019 valuation, the fund’s calculation approach for member benefits for the 2022 valuation will automatically include the assumptions listed in the letter from DLUHC and will apply in the calculation of employer contribution rates by the fund’s actuary.
We have also been working with our software supplier, to ensure the changes that will need to be made to the pension administration system can be implemented in good time.
You can find out more about McCloud on the LGPS member site at https://www.lgpsmember.org/help-and-support/frequently-asked-questions/?faq-type=mccloud-court-case.