Implementation of the McCloud remedy has been delayed until October 2023 according to the latest NHS Pension Scheme Annual Report (the Report). Initial expectations were that the McCloud remedy project would be delivering "Immediate Detriment" cases during 2021/22 on behalf of members most affected by the discrimination identified by the McCloud ruling. However, delays in the production of the required documents have meant that this has not materialised in practice.
Background
On 1 April 2015, the Government introduced reforms to most public sector pension schemes, which included the NHS Pension Scheme. We discussed the nature of the reforms and the implications for various public sector schemes in more detail in a previous blog. As a reminder, the reforms introduced new schemes based on the Career Average Revalued Earnings (CARE) design which replaced the previous final salary structure. Members that were closest to retirement at the time were protected from moving to the reformed schemes and were instead given the option to remain in their legacy schemes. While those with tapered protection were permitted to remain in their legacy scheme for a period of up to 7 years after 1 April 2015 before being required to move to the new scheme.
In December 2018, the Court of Appeal found that the decision to offer transitional protection to older members amounted to unlawful age discrimination. Following the Supreme Court's decision to deny the Government leave to appeal, it was announced that all public sector schemes would need to take steps to rectify any discrimination suffered by their members. The remedy is made up of two parts:
1. To ensure equal treatment from 1 April 2022, all active members were transferred to the 2015 NHS Pension Scheme.
2. To address the inequality that has already occurred, affected members will be offered a choice about whether they would like to receive 1995/2008 Section benefits or 2015 Scheme benefits for the period between 1 April 2015 to 31 March 2022.
The source of the problem
Successful delivery of the McCloud remedy necessitates the production of "Provision Definition Documents" which, according to the Report, are "required by all public sector schemes to enable them to commission system suppliers and complete resources and financial plans".
A factsheet produced by the Treasury in 2021 revealed that schemes would typically be responsible for producing Provision Definition Documents individually for their own stakeholders. However, on this occasion the Treasury opted to provide oversight to their production to minimise the risk that some provisions may be misinterpreted and to reduce the amount of duplicative work done by schemes. The aim being that this would result in a final set of 'core' approved Provision Definition Documents, which could then be customised by the addition of scheme specific detail.
However, the Report confirmed that there has been "little engagement work" on the NHS Pension Scheme remedy project owing to "delays in the production and release of a suite of Provision Definition Documents" by the Treasury.
Next steps
The administrative burden associated with McCloud remedy implementation is impacting a variety of public sector pension schemes and it remains to be seen whether the NHS Pension Scheme will be able to deliver the remedy by the new 'go live' date of October 2023. What we do know is that the remedy project is expected to transition away from the preparatory phase over the coming year in order to focus on delivery. Engagement with all stakeholders is also high on the agenda with preparations underway to ensure that a "substantive and comprehensive suite of support products" is made available to guide members and employers on the journey through McCloud remedy implementation.
If you would like to discuss anything raised in this blog, please get in touch with a member of the pensions team, or your usual Brodies contact.
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