02 April 2025
3 min
Although it may seem that there are hotter topics in the LGPS these days - pensions investment reform is a major priority for the Government and attention is turning to the 2025 valuation in England and Wales - for many working in the LGPS, McCloud remains front and centre amongst their priorities. With a key deadline and decision point looming, McCloud is certainly something that decision-makers, pension committees and boards cannot afford to take their eyes off, despite all the other competing priorities.
Under annual benefit statement (ABS) regulations made last year [England & Wales / Scotland] and the Government’s McCloud implementation guidance [England & Wales / Scotland], the default position is that all the McCloud remedy work has to be concluded by 31 August this year, in order that members’ 2024/25 ABSs can reflect their potential entitlements relating to the underpin. The deadline doesn’t just apply to ABSs either - for both England & Wales and Scotland the default position is that all the qualifying checks, processes and retrospective recalculations for all members who qualify would have to be completed by 31 August 2025 too.
However, there is an important flexibility giving administering authorities the ability to make a ‘determination’ to extend ‘the McCloud implementation phase’ (the term used by the Government to describe the period in which LGPS funds will be implementing the requirements of the 2023 McCloud remedy regulations) until 31 August 2026. This determination can be made for individual members or classes of member where authorities believe it is ‘reasonable in all the circumstances’ to make that determination.
If an administering authority makes a determination for any of its members, this will mean that ABSs for those members will not need to reflect the McCloud remedy until the 2025/26 statements are issued, giving administering authorities an extra year to work with employers to obtain relevant data, check qualifying criteria and update records. In addition, it would provide an extra year to retrospectively adjust pensions, pay arrears, etc. Whilst it's therefore quite a broad power, use of the flexibility should be considered carefully in order to strike the right balance. Whilst it'll allow time to get member records up to date it will also be in the interests of those members for the unlawful discrimination to be addressed sooner rather than later.
Where an administering authority wishes to make use of this flexibility, the key deadline for exercising the determination power is 31 August 2025. Where this is the case, affected members who will receive an ABS for 2024/25 that doesn’t reflect the McCloud remedy should be notified of this in that statement.
If you would like to discuss the determination power, how it can be used and the circumstances it may be appropriate to exercise the power, please get in touch.
The importance of McCloud and the potential risk to the LGPS stemming from failure to progress the work was drawn into focus in a recent BBC report. This report highlighted that the National Association of Schoolmasters Union of Women Teachers, are working with a legal firm and members of the Teacher Pension Scheme (TPS) to take legal action against the Department for Education for delays in the provision of cash equivalent values. These are required as part of divorce proceedings arising as a consequence of the implementation of the McCloud remedy. Whilst the context in the TPS is very different to the LGPS, the situation is a reminder of the fact that unlawful discrimination remains in the LGPS until the remedy is fully implemented. It's also a reminder of the fact that there are wider statutory deadlines that continue to apply even whilst the remedy is being delivered – for example, on divorce and transfer calculations.
To assist administering authorities with work required on the McCloud discrimination, we've been developing a handbook on the McCloud remedy for the LGPS.
The handbook is designed to be a ‘one stop shop’ for the McCloud remedy, covering all the key issues and calculations. It's highly visual and, with a lot of navigation shortcuts, the required information can be easily found. It can be referred back to by administrators who will be carrying out the underpin calculations for the foreseeable future.
It contains chapters on every element relating to McCloud, including the historic background, retrospection, ongoing duties, implementation, compensation and tax. The core of the handbook is the calculations section, which breaks down all the McCloud calculations into a detailed step-by-step processes, which can be used by all administrators.
For those funds who have attended our McCloud training sessions, we've adopted the same step-by-step approach to the examples in the handbook; breaking scenarios down into digestible chunks so that users can follow them through methodically. For the handbook , we've expanded the range of examples to cover significantly more situations and also included examples on areas like the award of compensation and tax implications resulting from the McCloud remedy.
We're also publishing separate versions for Scotland and England and Wales, so all the information included is relevant to the particular scheme.
We’ll be holding a live demo of the handbook for English & Welsh funds on Friday 11 April, and another for Scottish funds on Friday 25 April. If you are interested in attending, please get in touch with Con Hargrave by clicking below.
We pride ourselves on being thought leaders and are constantly discussing the many issues facing and shaping our industry. Sign up to find our current thinking on topical issues.
Opens in new window Subscribe
