HM Treasury has shared the Treasury Directions for the Public Service Pensions and Judicial Offices Act 2022, which will allow the government to consult stakeholders ahead of the 1 October 2023 'go live' date for the McCloud remedy.

The directions explain how powers under the act are to be used by public service pension schemes in their scheme regulations, as part of ongoing work to address age discrimination identified in the 2018 McCloud ruling.

The directions are also needed to allow the Secretaries of State and the Scottish and Welsh governments to consult stakeholders ahead of making scheme regulations by 1 October 2023 to remedy the discrimination in each public service pension scheme.

The directions include further details on interest, with HM Treasury explaining that, when selecting an appropriate interest rate for payments from members to schemes, it considered what the member may have done with the money in the additional time they have had access to it.

Although HM Treasury acknowledged that this will vary by member, it suggested that the two most likely options as using the money to purchase goods and services or saving it in an easy access savings account.

HM Treasury therefore concluded that opting for a savings account rate, which has typically been below inflation since 2015, is most appropriate approach and in line with the government's objectives.

HMRC will apply their own rates of interest to tax refunds and additional tax charges, meanwhile, and these will apply as usual for any tax related changes as a consequence of the remedy.

Although these rates of interest are not in scope of the HM Treasury Directions, for consistency with HMRC tax refunds, the directions provide that any compensation payments for tax related refunds that are in years ‘out of scope’ of HMRC will attract interest at the same rate as HMRC’s interest rate on tax refunds.

The choice of interest rates set out in the directions will also be subject to review every five years, or in response to unexpected events, in an effort to ensure that the directions continue to deliver the government’s objectives.

It was recently confirmed that the McCloud remedy for the NHS Pension Scheme had been delayed, with a new 'go live' date of October 2023 confirmed following "continued delays in the production and release of a suite of Provision Definition Documents (PDD) from HM Treasury".

However, work is underway, as HM Treasury is also currently consulting on draft regulations for proposed changes to the pensions tax framework as part of the public service pension scheme 'McCloud' remedy.

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