The government has said that it will provide further guidance and regulation over the issue of excess teacher service in relation to the McCloud remedy.

Despite running detailed consultations on its proposed regulatory changes to public sector schemes in the first half of the year, civil servants will now draw up further planned amendments in order deal with the issue.

In a response to the results of its consultation on McCloud remedy in the Local Government Pension Scheme (LGPS) in England and Wales, the government has addressed a number of concerns raised over dealing with benefits accumulated by some teachers who have had periods when they were in both full-time and part-time employment.

Many of those responding to the consultation say that the proposals are overly complex.

There are also challenges of transferring data and collecting missing data, a need to reduce administrative difficulties that exist in information sharing between the LGPS and Teachers' Pension Scheme (TPS) and a need to clearly communicate changes to affected members.

In the paper, the government said that it has recognised the "strength of feeling on this issue".

"The approach we are taking will see the LGPS become the appropriate pension scheme for excess teacher service for the period up to 31 March 2022, in most cases, and the government believes this is the right policy, in line with the wider principles being adopted for McCloud remedy," said the government.

"We continue to work with the Department for Education, TPS administrators, the Local Government Association (LGA) and a group of LGPS administrators to consider issues relating to excess teacher service, including the transfer of data between the two schemes.

"Where relevant, communications regarding the process that will apply for this group will be shared with LGPS administrators via the LGA. We plan to discuss what guidance may be needed in relation to excess teacher service with the guidance working group."

Changes will also be made to in the area of interest, where there is a small change to the way interest will be applied to additional Pension Commencement Lump Sums (PCLSs).

Additional PCLSs may arise where members are entitled to a higher pension as a result of McCloud remedy and elect to convert some of their pension to lump sum.

As the increased pension (or lump sum) would result in a new benefit crystallisation event (BCE) for tax purposes, the government said it is appropriate that the amount of the PCLS is determined based on the rate of pension applicable at the time of the new BCE.

Applying interest on the PCLS backdated to the original retirement would therefore, be inappropriate, as the PCLS would be calculated at a "present rate" that includes an inflation-linked increase.

Under final regulations, interest will therefore only apply to an additional PCLS for the period from the new BCE, to the date of payment of that PCLS.

Commenting on the consultation response, Aon senior consultant Virginia Burke, said that most of the original proposals from the government will now be implemented.

"The response confirms that where it is required, updated Government Actuary’s Department guidance will be issued “as soon as possible”, as will an updated Public Sector Transfer Club memorandum.

"A national working group has been set up to consider the areas where guidance is needed, and the response sets out some of the areas where guidance will be statutory and where it will be non-statutory.

"Statutory guidance will be issued where it is necessary to have a consistent approach and this is not already achieved through regulations.

"This will include the prioritisation of McCloud cases and how to identify which members qualify for McCloud protection where there could be earlier service in another LGPS fund, or another public service pension scheme.

"Other areas will have non-statutory guidance, such as administrative guidance and complex case examples, and how to deal with flexible retirement cases. Where a need for guidance is identified, there will be a technical consultation “with selected stakeholders representing those affected”.”

“The consultation response and regulations should give administering authorities comfort to press ahead with their McCloud planning ready for the ‘go-live’ date on 1 October. However, it is imperative that guidance is published as soon as possible to give funds the full picture of what is needed.”

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