The McCloud judgement
You may have heard that the Local Government Pension Scheme (LGPS) is going to change for some people as a result of The Court of Appeal ruling known as, The McCloud judgement. The ruling, made on 20 December 2018, found that when public service pension schemes changed in 2014 and 2015, they had discriminated on the grounds of age, by only providing protection for older members.
In the LGPS, these protections were applied in 2014 when the scheme changed from a final salary scheme to a CARE scheme. All members were automatically moved across to the new scheme, but older members, closer to retirement, were given additional protections, called the Underpin. These protections were set up to ensure members do not receive less pension in the new scheme, than they would have in the old scheme. You can find out more about these protections in the scheme guide. As the protections were only applied to members of a certain age, the court has decided that it was ‘unlawful on the grounds of age discrimination’.
The government made a statement to the treasury on 15 July 2019, announcing that, as a result of the McCloud judgment, it would ‘take steps to remove the discrimination.’ Although the original ruling only directly involved two schemes, the government has confirmed it will be applied to all public service pension schemes. These protections in the LGPS will need to be revised. As a result, if you’re affected by the changes, how much pension you get may change.
A government consultation was released on 16 July 2020 with proposals on changes that could be made to the scheme to remove the discrimination. The consultation closes on 8 October 2020.
You may be wondering if these changes will apply to you, and if so, how they will impact on your pension.
It’s important to understand that the consultation is only a draft of possible changes to the Scheme. We do not know what the final outcome will be. The FAQs below are based on the draft and may be subject to change. We expect things to become clearer over the coming months and will continue to update this page as the situation develops.
Will the change apply to me?
Currently, members who were active in the scheme on 31 March 2012 and within 10 years of retirement received the Underpin protection. The proposal is that this protection should now apply to all qualifying members that were in the scheme on 31 March 2012, and then moved to the CARE scheme on 1 April 2014.
Do I need to do something to claim these protections?
The government’s statement confirms that you do not need to do anything to claim the protections. When the full outcome is known, and if it is found that you are affected, we will automatically assess your pension entitlement under the revised rules.
If I qualify, will I get moved back to the old scheme?
You will not be moved back to the old scheme. This is because in 2014, everybody was moved into the CARE scheme, so there was no age discrimination.
The judgment only applies to The Underpin provisions. If you’re an active member, you will continue to accrue benefits under the CARE scheme. The Underpin is only calculated at retirement and the changes will not impact your pension until then. If you qualify, when you retire, we will need to calculate your pension under the scheme that was most beneficial for your individual circumstances.
Some people will not be better off under the old scheme rules. The government has been quick to reassure members that it will be an ‘upward’ lift. We will not simply decide your benefits should be calculated under the old scheme rules.
We will need to compare what you would have got in both schemes and see which one would have been better for you.
Will these changes apply to pensions in payment and deferred members?
The consultation proposes that these changes will apply ‘retrospectively’.
This means that deferred members and those already receiving a pension would also be included.
Will these changes apply to those that are receiving a survivors pension?
The proposal includes applying Underpin protection to qualifying member’s pensions and their survivors pensions in cases where the member has died either while in service, in deferment or while the pension was in payment.
Will this mean everyone who qualifies will have Underpin protection on all pension benefits accrued after 1 April 2014?
The Consultation proposes that Underpin protection will apply to any pension benefits accrued between 1 April 2014 and 31 March 2022 only. Underpin protection will not apply to membership after this date.
If I choose to combine two pension accounts (Aggregation), will I still receive protection if I qualify?
The consultation proposes that the Revised Underpin will cover qualifying members that have aggregated their pension and have not had a disqualifying five-year break in service.
Will any changes that take place impact upon the tax I pay?
Yes they may do.
As pension is counted as earned income, any increase to pension benefits could change the tax you will pay when the pension comes into payment. It could also increase the lifetime allowance percentage used up by your Buckinghamshire pension and could also impact your annual allowance assessment
When will these changes take place?
We do not know exactly how or when the changes will be put in place, however, we do not expect any changes to be introduced until April 2022.
Please check back on this page for further updates. This page contains the latest information we have about the case. We will continue to update it regularly as the situation develops and hope we can provide further clarity soon.