05 February 2021

Government decision on McCloud brings greater certainty for members

3 min read

Helen Morrissey, Personal Finance Specialist
Helen Morrissey

Corporate PR Specialist – Long Term Savings

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Moira Warner, senior intermediary development and technical manager at Royal London, comments on the government’s decision to opt for a deferred choice underpin as a solution for public sector workers affected by the McCloud judgement.

“Royal London welcomes the greater certainty for unfunded public service pension scheme members from this decision.  The preferred approach, which will give members in scope the choice between (usually) final salary benefits and reformed scheme, career average benefits at the point of retirement means they will have a high degree of certainty over their benefit entitlements at the point that decision will need to be made.   Although both of the solutions originally tabled have drawbacks the one most likely to produce the best outcomes for members must be preferred and is rightly being taken forward.

“Although these proposals seek to bring to an end a longstanding legal issue and prevent further litigation going forward, this is above all a human issue.   The solution is complex and, for some impacted members, means that the position won’t be completely resolved for many decades.  Responses to the consultation from individuals make clear that many are worried about the continuing uncertainty at a time when life itself seems uncertain due to the pandemic.  They are concerned at the possible additional personal burden of having to revisit their tax position over a number of years.   Others are concerned that putting things right will simply be forgotten or overlooked by their scheme many years into the future.  As the Chief Secretary to the Treasury has noted, these workers “provide vital services that all of us count on, and their unwavering commitment is inspiring”.   So public service pension schemes have a real and moral duty to ensure relevant member communications and other support is as clear, balanced and jargon-free as possible.”

For further information please contact:

Helen Morrissey, Corporate PR Specialist – Long Term Savings

About McCloud

The McCloud judgement refers to the 2018 Court of Appeal ruling declaring various government reforms of public sector schemes unlawful due to age discrimination

The judgement came after two Employment Tribunals concerning the pensions of Judges’ (McCloud) and Firefighters’ (Sargeant). The Government has confirmed that there will be changes to all main public sector schemes to remove this age discrimination. 

Under the 2015 reforms, older members were entitled to transitional protection and able to remain in the original scheme. However these protections did not apply to younger workers who were forced to move into new schemes.

Now, from 2022, all legacy schemes will be closed, and all members will be transitioned to the new schemes. There will also be no tapered approach to accrual of benefits for the 2015 to 22 period, with members deciding at the point of taking benefits whether membership for this period falls entirely within the legacy or reformed scheme. There will be no option to select the most appealing aspects of each scheme.

About Royal London:

Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £139 billion, 8.6 million policies in force and 4,348 employees. Figures quoted are as at 30 June 2020.