25 October 2023

With the unseasonably warm weather over the past few weeks, it might have been easy for the beginning of October to slip by unnoticed. That is, unless you are the administrator of a public service pension scheme of course. Yes, in a flurry of late summer sunshine the day for beginning the gargantuan task of implementing the McCloud remedy has dawned. 

We say the day for beginning the task, but in reality we know that Funds across the country have already done a considerable amount of work to gather the data they need in order to implement the remedy. Nevertheless 1 October 2023 is a landmark date since it is the point at which many of the laws relating to the remedy come into force. 

With this in mind, in this article we have brought together the various strands of legislation and guidance that have been published, aiming to help Funds and their administrators navigate the ever-evolving McCloud-related landscape. In this article, we have focussed on the LGPS as a case study but some of the regulations and guidance, in particular in relation to tax, will apply across the public service schemes. Please note, the list of resources is non-exhaustive but should provide a useful overview of the key layers of regulations and guidance.


Funds and their administrators will of course be only too familiar with the background to the McCloud remedy they are now being asked to implement. However, for anyone new to public service pensions, briefly the issue arose in the context of the change from the 2008 scheme (based on “final salary” benefits) to the 2014 scheme, based on a “career average” benefit structure. This change to LGPS was part of a wider reform of public service pension schemes where all (subject to the following) were moved across from “final salary” to “career average” bases of accrual.

Transitional “grandfathering” protections were extended to those members closest to retirement as part of the change. However, younger members of the scheme successfully challenged the protections in the McCloud case, arguing that limiting the transitional protections to those older members was discrimination on the basis of age. The members in the McCloud case were part of the Firefighters and judicial pension schemes, but the government accepted that the Court’s judgment had implications across all public service pension schemes with similar transitional protections.

To address the discrimination, in the LGPS the statutory underpin protection originally afforded only to those members with transitional protection will be extended to all affected members. This means that they will automatically receive the better of benefits calculated on the “new” career average basis or the “old” final salary basis during the remedy period.

This factsheet document, published by DLUHC, is a helpful overview of the McCloud issue, aimed at explaining to members who is affected and what will happen next. 

What law do we have so far?

Against that background, we turn to consider what laws have been enacted to allow schemes to implement the remedy. 

The starting point for all affected schemes will be to identify the members with benefits in the relevant period who may be affected by the McCloud remedy. The Public Service Pensions and Judicial Offices Act 2022 (the “2022 Act”) provides the framework for doing so. Provisions relating to the LGPS are in Chapter 3 (sections 77 – 87). 

The relevant period is defined in s77(3) of the 2022 Act as the period between 1 April 2014 (for England and Wales, 1 April 2015 everywhere else) to 31 March 2022 (the “Remedy Period”). In order to be potentially affected, a member must have service in the Remedy Period which is “remediable” within the meaning of the remainder of s77 i.e. it is “continuous” service in the correct scheme and there is no “disqualifying gap in service”.

In the LGPS, affected members will receive an automatic uplift in their benefits for the Remedy Period. s78 of the 2022 Act is where we find the power to make regulations in order to implement that automatic uplift. The LGPS (Amendment) (No 3) Regulations 2023 (the “2023 Amendment Regulations”) have duly been made under those enabling provisions in Chapter 3 and came into force on 1 October 2023 (having only been laid 3 weeks before).

In the Amendment Regulations 2023, the automatic uplift applied to the benefits of affected members is called the “statutory underpin”. Two key sets of LGPS Regulations are amended in order to implement the statutory underpin–

  • the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 (the “2014 Regulations”) – these are the Regulations which set out the transitional and savings provisions when the 2008 Scheme was replaced by the 2014 Scheme (in England and Wales). The purpose of the 2014 Regulations was to protect the benefits accrued by members of the 2008 scheme before 1 April 2014, hence the need for them to be updated to reflect the new statutory underpin protection during the Remedy Period; and
  • the Local Government Pension Scheme Regulations 2013 (the “2013 Regulations”) – these are the Regulations establishing the 2014 Scheme with effect from 1 April 2014 and setting out the benefit structure for that scheme.

As well as inserting the statutory underpin into the 2013 and 2014 Regulations, the 2023 Amendment Regulations also deal with some of the nuances of implementing it e.g. how the underpin works in respect of aggregation of multiple LGPS memberships, flexible retirement, divorce etc.

The 2022 Act is also supported by the Public Service Pensions (Exercise of Powers, Compensation and Information) Directions 2022 from HM Treasury (the "Directions"). The Directions give details on how certain powers in the 2022 Act must be exercised and how compensation may be paid. Part 4 of the Directions contains the provisions relevant to the LGPS.

Further legislation and guidance to come

The consultation response accompanying the 2023 Amendment Regulations advised that in the period after the regulations come into force, the DLUHC will provide initial guidance on how McCloud cases should be prioritised to administrators via the LGA. 

The DLUHC has also set up a national guidance working group which will identify topics for statutory guidance (being those where “it is necessary to achieve a consistent approach on an important aspect of the McCloud remedy and that certainty is not already provided through the regulations”). 

The consultation response also highlights that there will be further regulations in relation to the McCloud remedy to follow, to deal with some further technical issues arising in relation to non-standard cases where the underpin applies.

What about sorting out the tax position?

Hand in hand with the regulations and guidance detailing how benefits accrued during the Remedy Period should be corrected, we also have the regulations from HMRC setting out the tax treatment of those benefit corrections.

The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023 (the “Tax No 1 Regulations”) came into force on 6 April 2023, following a period of consultation. The Tax No 1 Regulations modify tax legislation to make technical changes to the tax treatment of those impacted by the McCloud Remedy. According to the explanatory notes accompanying the legislation, the aim is to put the members, so far as is possible, in the same tax position as they would have been had the discrimination not happened.

The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) (No 2) Regulations 2023 (the “Tax No 2 Regulations”) were laid in the summer, following a consultation exercise and subsequent amendments, and came into force on 14 September 2023. Like the Tax No 1 Regulations, the purpose is to modify the tax laws to accommodate the implementation of McCloud remedy. The Tax No 2 Regulations also include changes to administrative provisions, to deal with those affected members who have paid too much or too little tax for the tax years 2019/20 to 2022/23.

Under the two sets of tax regulations taken together, administrators of public service pension schemes will be required to revisit pension input amount calculations and issue pension savings statements for the tax years during the Remedy Period to affected members. They also have to provide that information to HMRC. Where, as a result of applying the remedy, an overpayment of an annual allowance charge is identified, scheme administrators will have to make a claim to HMRC to recoup the overpayment. 

HMRC guidance on the Regulations is expected to follow (there was guidance published on the draft versions of each set of Regulations) so we would suggest keeping an eye on HMRC’s gov.uk website. In the meantime, HMRC’s public service pensions newsletters give helpful context, clarification and explanation to the Regulations (though always be aware that HMRC newsletters are not definitive statements of the law). 

The latest edition of the HMRC newsletter on the public service pensions remedy (from October 2023) launched two new services which are aimed primarily at affected members:

1. HMRC’s new “Calculate your public service pension adjustment service” which will allow members to submit information and calculate new / reduced / additional annual allowance charges. They can also make submissions for compensation; and

2. New interactive guidance which allows members to check if they are affected by the public service pensions remedy.

How do we deal with benefit statements while calculating the entitlements?

The DLUHC factsheet for members highlights that by 31 August 2025 annual benefit statements will include information about underpin protection for all members affected by the McCloud remedy. In the period from 2023 to 2025, members affected by the McCloud remedy will receive two benefit statements – their usual annual benefit statement, plus a remedial service statement.

The Pensions Regulator has offered some support to administrators on how to deal with annual benefit statements in the period 2023 – 2025 while the remedy is being applied and revised benefits are being calculated, by publishing a short guidance note explaining its approach during this period.

Key takeaways from the guidance include:

  • Given affected members will receive two statements at similar times it is more important than ever that the statements are accurate, clear and accessible;
  • The expectation is that annual benefit statements will still be provided to members within the statutory timeframe wherever possible. Where this hasn’t been possible due to the production of remedial service statements, a breach of law report must be submitted;
  • Failure to provide “accurate, complete or timely annual benefits statements” will be considered a material breach but TPR is aware of the challenge schemes face in view of the McCloud remedy and will take a “risk-based, practical approach” to such breaches during 2023-25.

How can we help?

We recognise that administrators have a great deal of work to do to implement the statutory underpin protection for affected members. We are extremely well placed to assist Funds with working through the legislative framework, particularly when it comes to non-standard cases. If you think we may be able to assist, please do get in touch.

Key contact

Michael Hayles

Michael Hayles Partner

  • Pensions
  • Public Sector Pension Schemes
  • Financial Services

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