The Court of Appeal ruling on 'protection', known as the McCloud Judgment
In 2015 the government made changes to reform the majority of public service pension schemes. These reforms did not apply to members within 10 years of their normal pension age on the 31 March 2012, who remained in their legacy schemes with ‘transitional protection’.
The Court of Appeal later found this to be discriminatory against younger members in the judicial and firefighters’ schemes – the government accepted that this discrimination existed in all schemes where transitional protection was introduced. It is sometimes referred to as the McCloud judgment.
The period this discrimination will apply is between 1 April 2015 and 31 March 2022, and this is called the remedy period.
The government is removing this discrimination from all public service pension schemes.
If an individual was a member of the scheme on 31 March 2012 and continued in service between 1 April 2015 and the 31 March 2022 (or their retirement date if earlier), or they were a member of the scheme on 31 March 2012 then left service but returned within 5 years, they will be asked to decide which pension scheme benefits they would like to receive for that period.
This is because automatically moving all members back into the legacy pension scheme, without giving them a choice, would leave some worse off, so it is important they can choose the scheme benefits that are best for them.
The government published a consultation in July 2020 to look at how best to do this. The consultation set out two ways of asking affected members to make a choice:
- in the near future – this is called the Immediate Choice Exercise
- when you retire – this is called the Deferred Choice Underpin
The government published a consultation response in February 2021. The government has now decided to implement a ‘deferred choice underpin’ which was the preferred approach for the majority of the respondents to the consultation.
Only some members are affected
If a member joined a public service pension scheme on or before 31 March 2012 and they were still a member of the scheme on 1 April 2015, they will be asked to make a choice.
How members will make their choice
When benefits become payable, affected members will be asked if they want to receive legacy scheme or reformed scheme pension benefits for their service between 1 April 2015 and 1 April 2022. We’ll provide them with information at the time to help inform their decision.
Asking affected members to make this choice when they retire means they’ll know what they’re entitled to under each option, making it easier for them to make the right decision for their personal circumstances.
Where affected members have already retired or will retire before the introduction of the new legislation, we’ll write to them and ask them to make their choice retrospectively. All payments will be backdated to the point where benefits became payable.
In some cases, it may be possible for us to offer this choice sooner but the legislation that allows schemes to do this is limited. We’ll share more information on this once the process for supporting new retirees has been confirmed.
Reforming public service pension schemes for all members
To make sure all members are treated equally, from 1 April 2022 all active legacy scheme members, regardless of their age, will be members of the reformed scheme that many of our members are already part of. All legacy pension schemes will be closed, including the 1995/2008 NHS Pension Scheme.
Members of the 1995/2008 Scheme, will keep any service they have earned up until 1 April 2022 in the legacy scheme and they will be able to access these benefits in the same way and at the same time as they can now. Any pension benefits they earn on or after the 1 April 2022 will be in the reformed pension scheme.
This ensures the government’s aims of rewarding hardworking public servants, as well as making sure schemes are sustainable and affordable in the future, are met.
We’ll keep NHS Pension Scheme members updated
Following the consultation response, the government will be introducing new legislation and intends for the processes needed to support members to make a choice once they retire to be in place by 1 October 2023, or earlier if schemes are able to do so.
Helping members who are affected to make their choice of pension scheme benefits with confidence is our priority, and we’re putting in place processes to help them to do this. Once this is completed, we’ll share more information with employers and members on what’s next.
For now, all our processes will remain the same and there is nothing you need to do. We’ll share more information with you once it is available and we will contact affected members directly when they need to take action.
You can find more information in the FAQs on our knowledge base.
For more information on the changes, please visit gov.uk.