McCloud: you and your workforce. Are you ready?
Pensions for Post 1992 Universities
Learn how McCloud affects you and your workforce, and what actions you can take now to ensure you are fulfilling your responsibilities as an employer and improve employee wellbeing and retention.
What is McCloud and which employees are affected?
The McCloud judgement – the ruling that public service pension scheme reforms were discriminatory on the basis of age because protections were put in place for those closest to retirement.
The McCloud ‘Remedy’ – the process to remove this discrimination for all main public service pension schemes.
Those affected by the Remedy are employees who were members of the Teachers’ Pension Scheme (TPS) on or before 31 March 2012 and on or after 1 April 2015 or Local Government Pension Scheme (LGPS) on or before 31 March 2012 and on or after 1 April 2014.
Is the McCloud Remedy good for my employees?
The McCloud Remedy may be regarded as a positive change for members as it can mean they receive a higher pension. However, change is often met with suspicion, especially when there is a lack of information or if it feels too complicated – both of which are likely with pensions.
The TPS and LGPS are a very significant part of your employees’ reward. You pay a lot towards them, and you need them to provide value for money, especially when McCloud improves these benefits for members. If McCloud is perceived as negative, this will reduce the value your employees place on their pension benefits.
How McCloud is communicated to your employees will significantly impact their ‘McCloud experience’. A positive experience will leave members feeling the benefit change is a positive step and with a greater appreciation of their pension.
The role of the University
The TPS and LGPS will provide members with a pension illustration at retirement, but a lot of the supporting communications will be generalised, designed for all members and employers in each scheme.
You know your employees best, and the McCloud Remedy provides you with an opportunity to engage with your employees to reassure them that the change is good news and to reinforce how valuable their pension scheme benefits are.
Whenever there is a lack of information rumours or ‘myths’ appear, and the McCloud remedy is no different. For example – “My pension is less valuable now” or “I can’t retire until I’m 67”. Many of these myths are not true and can be busted with clear and targeted communication.
A workforce that understands and appreciates their benefits will generally be more content in their working life, with knock-on positives for staff retention and recruitment.
How the McCloud Remedy works for TPS and LGPS
Effective McCloud communications will allow employees to know what is coming and what they need to know now.
The McCloud Remedy works differently for TPS and LGPS:
TPS (Teachers’ pension scheme)
TPS members will need to choose which pension benefits they want for their time in the TPS between 1 April 2015 to 31 March 2022. Members may choose the benefits which provide the highest pension, the most tax-free cash or the right protection benefits for them.
TPS members won’t need to make the choice now; they only need to make the choice when they retire.
The McCloud Remedy has significant implications for higher earners concerning the Annual Allowance and they will need to act sooner. TPS members will be required to
revisit up to seven previous tax years to assess if under or over payments have been made, and take corrective action.
In addition, from 2024, Annual Benefit Statements will show two benefits side by side, which is likely to cause confusion.
LGPS (Local government pension scheme)
LGPS members automatically receive the highest pension benefits once they reach retirement. There is no choice for LGPS members at retirement.
However, there are some changes to the way that benefits are calculated and some members with unaggregated LGPS service periods may need to choose whether to aggregate their records.
How we can help
Our research shows that members often find pensions communications overwhelming, leading to decision paralysis. We can help members make sense of McCloud, empowering them to make a decision that best suits their circumstances.
Support for you
We have been helping employers across the sector understand how the McCloud Remedy affects them and their workforce. Our support includes:
- An Impact analysis report setting out the key features, risks and opportunities for you and your employees.
- Pensions education to key stakeholders/decision makers to improve governance and decision making (including pensions tax implications).
- Employee analysis and population segmentation to assist with workforce planning and member engagement.
Support for your employees
We have a wealth of experience in helping employees understand changes to their pension benefits. This includes written communication, videos, face-to-face sessions - all of which can be enhanced further through technology (e.g. interactive tools which enable member-focussed content).
Examples of our face-to-face offerings include:
Group or Individual McCloud sessions helping staff to understand what the impact of the McCloud Remedy might mean for them.
Group and individual Annual Allowance sessions helping senior employees understand the implications of McCloud and prepare for any necessary actions.