Autumn Clouds

Autumn has started; although we seem to be having an Indian Summer.  Schools (well, most of them) have restarted after the summer break.  It is the first full working week in September and in less than four weeks’ time it will be the McCloud remedy implementation day of 1 October 2023.

Here at Mathieson Consulting Ltd we have provided information on the background to the McCloud ruling in this webinar and the implications of the ruling for pensions and divorce were discussed in this earlier blog.

Whilst we have considered the 1 October 2023 deadline—by which time all work to implement the remedy should be complete—to be optimistic, we are not aware of anything that indicates one or more of the public sector schemes will miss the deadline.

Thus, it is possible that in less than a month from now the McCloud remedy will have been implemented across all public sector schemes.  This means that—in theory at least—for holders of public sector pensions the relevant pension scheme should be able to set out what the impact of the McCloud remedy is on benefits accrued from 1 April 2015 to 31 March 2022 (this being the remedy period).

Whilst the 1 October 2023 deadline may be met by each relevant public sector scheme, there is currently a lack of clarity over what each scheme may provide if asked for a CEV calculated after 1 October 2023.  Will it be clear as to what the accrued pension benefits are for the remedy period assuming (i) that all accrual occurred in the relevant legacy final salary scheme or (ii) on the basis that all accrual was in the replacement career average scheme?  Or, will it be clear from a public sector final salary pension CEV statement whether the underlying pension benefits include those accrued over the remedy period, following the reversal of such accrual into a final salary scheme (as explained in this earlier blog).  It is unlikely that the way in which information will be provided will be consistent from scheme to scheme and initially it may even be difficult to fully understand the information that we receive.

Over the coming weeks we will be working on cases where there are pensions in one or more of the public sector schemes with a mishmash of pre- and post-1 October 2023 pensions information.  Care is needed with such cases to ensure the approach taken is fair.  For example, it is arguably unfair to allow for post McCloud implementation pension benefits on one side but not on the other.  This is just one example of the additional issues that a PODE will need to consider when looking at cases with public sector pensions.

In light of this cloudy outlook, it is useful to set out the general approach that we will adopt when dealing with cases involving public sector pensions.  We will:

• Continue to write reports and take on new cases that involve public sector pensions.  We do not want to “shut the door” to such cases until such time when the various public sector schemes are well placed to provide the information we require in a clear and consistent manner.  It is only through the efforts and perseverance of our skilled administration team that we will have exposure to the relevant schemes and have a good understanding of what each scheme can provide and the timescales involved.
• Contact all instructing solicitors for which we have a case in progress that involves a public sector pension that may be subject to revision on 1 October 2023, but for which we only have pre-1 October 2023 pensions information. We will highlight the issues for consideration and the options available.
• For PODE reports where we are using pre-1 October 2023 CEVs that do not reflect the McCloud remedy, put forward a pragmatic solution that is deemed to be suitably robust to the changes in pension benefits that may occur with effect from 1 October 2023.
• Include within out reports relevant caveats that are case specific, to allow instructing solicitors (and their clients) to understand any risks inherent in the various solutions.  One such caveat may be that where a solution is based on the pre-1 October 2023 position, should a new (post-October 2023) CEV be requested in the future, a new PODE report would be required.  The results of the original report would no longer apply.
• Over the next few days, contact instructing solicitors where there are cases for which a pragmatic and robust solution cannot be constructed using pre-1 October 2023 information, due to the specifics of that case (this could include those with tapered protection or mixed service, as discussed in this earlier blog).

We will not:

• Produce PODE report that ignores the potential impact of the McCloud remedial work when putting forward a solution.
• Rely on information obtained by a pension holder from an online McCloud benefits calculator, on grounds that we are unable to verify the input used in such calculations.
• Cause delays to the divorce or Court timetable by requesting unnecessary information that is judged to not have a material impact on the solution.

Conclusions

In conclusion, given the clouds on the horizon, there is no “one size fits all” solution for cases with public sector pensions.  We will use our expertise to determine a way forward.  We will clearly explain any risks associated with proposed solutions.