Govt publishes McCloud ruling guidance

The government has published guidance on its response to the public service pension scheme consultation, which followed the Court of Appeal’s McCloud ruling in 2018.

The government announced that it intends to proceed with the deferred choice underpin (DCU) approach when providing members with their options following the McCloud judgment, which will mean that members will make their decision between legacy and reformed scheme benefits shortly before benefits are paid from the scheme.

The decision to offer the DCU to the affected members of the NHS, Teachers, Firefighters, Police, Armed forces and Civil Service pension schemes was preferred to an immediate choice exercise.

However, from 1 April 2022, the changes still mean that all those who continue in service will do so as members of the reformed schemes, regardless of age, meaning that all members should be treated equally in terms of which pension scheme they are a member of.

This is of particular importance, as the ruling hinges on the fact that the government’s allowance of savers nearing their normal pension age to remain in legacy schemes was discriminatory against younger savers.

However, the guidance stated that members will not need to submit a legal claim to receive any pension changes addressing the discrimination they have faced, as the government will apply any changes across the main public service pension schemes, therefore both claimants and non-claimants who are eligible members will receive the pension changes.

However, savers cannot simply be returned to their legacy schemes without consultation as some would be left worse off by this move, so a DCU approach that would allow them to decide for themselves has been adopted.

The government said it would look to introduce new legislation to enact its new approach when parliamentary time allows, which is not expected to be until halfway through 2021, adding that it intends that the provisions for the DCU will be implemented by 1 October 2023, or earlier where schemes are able to implement legislative change and processes ahead of that date.

It was noted that, in addition to the passing of new legislation, “scheme specific” decisions would need to be made with regard to the police pension scheme, with the government stating it would seek to engage with stakeholders including the Police Pension Scheme Advisory Board for England and Wales (SAB) during this process.

Furthermore, the Home Office will engage with scheme managers and administrators to allow them to prepare for implementation of the DCU.

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