This blog is designed to help MSPs with queries they receive on public sector pensions and the impact of, and timeline for implementing, the McCloud remedy.
Public sector pensions in Scotland
Although occupational pensions policy is generally reserved to the UK, Scottish Ministers are designated the “responsible authority” for public sector pensions in Scotland by the Public Service Pensions Act 2013. This means that they have the power to make public sector pension scheme regulations and are responsible for the administration of the schemes.
The Scottish Public Pensions Agency (SPPA) carries out the administration of pensions for teachers, firefighters, the police and national health service employees on behalf of the Scottish Government.
The local government pension scheme (LGPS) is administered by 11 local government administering authorities, though the SPPA is responsible for maintaining and updating the scheme’s regulations.
Public sector pension reform / the McCloud judgment
The UK Government reformed public sector pensions in 2014/15. This meant that people were moved from their previous (final salary) pension scheme to a new CARE scheme (based on earnings across their employment). As part of this reform, the Government introduced transitional protections for older members of the schemes who were close to retirement. Members of the judicial and firefighters’ pension schemes appealed this decision and, in 2018, the Court of Appeal ruled that younger members of these pensions had been unlawfully discriminated against as the protections were not applied to them. Following this, the UK Government committed to changing all public sector pension schemes to remove this discrimination. These changes are known as the McCloud remedy.
Legislation and timelines
The McCloud remedy affects those who were members of public sector pension schemes on or before 31 March 2012 and were still members on or after 1 April 2015.
The UK legislation that implements the remedy is the Public Service Pensions and Judicial Offices Act 2022 (the “2022 Act”). This Act is then implemented in Scotland through the individual pension scheme regulations for each sector, for example The Police Pensions (Remediable Service) (Scotland) Regulations 2023.
Firefighters, teachers, police and NHS staff
Eligible active members of these schemes should begin to see a dual statement on their Annual Benefit Statement from August 2024. This will provide a comparison of their pension benefits under the new CARE scheme and the previous final salary scheme for the remedy period (1 April 2015 and 31 March 2022).
Eligible active and deferred members will then be required to make a choice between the benefits accrued under the new or legacy scheme during the remedy period at the time they apply to retire.
For eligible members of these pension schemes who retired after 1 April 2022, Section 29 of the 2022 Act contains details around the issuing of what are called Remediable Service Statements (RSS).
These Statements will show someone’s pension benefits from their previous final salary pension scheme and the new CARE scheme for the remedy period. The individual is then able to decide which has the greatest value for them, with any resulting change to their pension being applied retrospectively
The timeline for issuing RSS is set out in the 2022 Act. They must be provided on or before the “relevant date”, which is 18 months after the date the relevant section of the Act came into force. This was 1 October 2023, meaning that the date by which an RSS must be provided is 1 April 2025. The Act also states that this relevant date may also be “such later day as the scheme manager considers reasonable in all the circumstances in the case of a particular member or a particular class of member”.
Local government pension scheme (LGPS)
Members of the LGPS do not need to make a choice between new and legacy benefits. The pension fund will automatically take any protection into account when calculating pension benefits. If a member retired prior to 1 October 2023, the local government administering authority will automatically review and, if required, increase the pension, with backdated payments being made.
Eligible active and deferred members of this scheme will begin to see information included about the McCloud remedy on their Annual Benefit Statement from August 2025.
Further information
The SPPA has created “Remedy Hubs” with information about the McCloud remedy for employees in the different sectors for which they administer the pension scheme.
These Remedy Hubs include information for:
- those still paying into a pension scheme
- those nearing retirement
- those who have retired (including timetables setting out the different dates an RSS will be issued depending on the type of scheme member).
They can be accessed on the following links:
As the LGPS is not administered by the SPPA, they do not have a Remedy Hub. Information about how members of this scheme are affected can instead be found on the LGPS website. This includes information for both those who have and have not yet retired.
Kirsty Deacon, SPICe
Cover image source: SPICe