Understanding the McCloud Remedy

Who is affected by the McCloud Remedy?

The McCloud Remedy affects clients with membership in a public service pension scheme (NHS, teachers, police etc). If you are unsure whether this affects you, follow this link for further guidance.

What is the McCloud Remedy?

The McCloud remedy addresses the age discrimination that occurred when a new pension scheme was introduced in 2015 by the government. Initially, some members were required to move to the new scheme immediately, while others were transitioned gradually based on their proximity to retirement. This differential treatment was deemed discriminatory by the Court of Appeal in December 2018. As a result, all affected members have had their memberships retroactively moved back to their legacy schemes for the period from 1st April 2015 to 31st March 2022, before transitioning to the 2015 scheme from 1st April 2022. This change will impact the value of pensions on retirement and any tax charges will need to be reviewed. It is advised that members seek advice to understand the full implications of this transition and ensure they are prepared for any adjustments to their retirement plans.

How does the McCloud Remedy Impact Annual Allowance Tax Charges?

Public sector pension schemes are defined benefit schemes. Calculating any annual allowance tax charges involves comparing the pension 'growth' rather than the physical contributions. Since pension benefits accrue at different rates in the new and legacy schemes, members' pension growth figures will vary, leading to potential discrepancies in tax calculations. As a result, you will need to explore how your tax was calculated or seek professional assistance to ensure compliance and accuracy.

Timeline for Remedial Statements

The NHS Pensions Agency and other public sector schemes are currently issuing remedial statements with revised growth figures. Some of our clients have already begun receiving these statements. HMRC has advised that the deadline for declaring your tax position will be 3 months from the receipt of your remedial statement. Years up to the 2018/19 tax year will not require repaying underpaid tax, although any overpaid tax will be refunded to you.

What should you do next if you think you are affected by the McCloud Remedy?

NHS Pension Scheme Members

1. Utilising the McCloud Remedy service provided by MediFintech, who are experts in the NHS Pension scheme. Clients can upload their remedial statements to the MediFintech portal, where the team will handle the tax implications and HMRC communications on their behalf, with no service charge to the clients.

2. Clients who prefer our direct assistance can get in touch with their usual point of contact for more information. We can assist with the process of handling remedial statements and making necessary disclosures to HMRC, ensuring accurate reporting.

Members of Other Pension Schemes

For other schemes, we are developing a service to process remedial statements and assist with the necessary disclosures to HMRC. Please get in touch with a member of our team for further information.

Next Steps

For NHS staff, the additional reporting fees associated with the HMRC digital disclosure may be reimbursed through the NHS Cost Claim Back Scheme. This scheme allows you to claim back up to £1,000 (inclusive of VAT) for professional fees incurred. To make this process seamless, we ensure our fees will be within £1,000 including VAT.

We are here to support you with the process of handling remedial statements and making the necessary disclosures to HMRC, ensuring the reporting is accurate as the information required can be complex. If you receive any remedial statements, please do get in touch.