McCloud Remedy: Exploring the common questions
We’ve been working closely with many NHS Pension Scheme members who are affected by the McCloud Remedy. For some, this may mean entitlement to revised pension benefits and, in certain cases, a tax refund.
During a recent webinar on this topic, we received a number of questions from clients. To help provide clarity, we’ve set out answers to the most common queries below - covering who is affected, how the Remedy works, and what steps may be relevant depending on your circumstances.
1. I was born in 1956 - is the McCloud Remedy relevant to me?
No. If you were within 10 to 13 and a half years of your normal pension age on the 1 April 2012, then you were covered by what's called the tapered protection.
So, being born in 1956, you are covered by that protection, and therefore you were never moved into the 2015 scheme - which is where the McCloud Remedy has an impact.
2. How can I tell if I transferred into the 2015 scheme?
There's a correlation between your date of birth and the date you entered the scheme.
- Born in 1966 or later: Transferred into the 2015 scheme
- Born before 1966: You either remained in your original section under tapered protection or were protected from transfer if you were over 50 as of April 2012.
3. I was born in 1960 and remained in the 1995 section under the tapered protection. I left the pension scheme in 2020 at age 60. Does McCloud help me?
In general, no. If you remained in the 1995 section under tapered protection, the McCloud remedy is not applicable. However, if you paid a tax charge in 2019/20, a special compensation scheme may be available.
4. What if I haven't received my RPSS? How can I request one?
A Remediable Pension Savings Statement (RPSS) is used to provide individuals affected by the McCloud remedy with a revised calculation of their pension growth and pension input amounts, and they are being rolled out gradually by the government as part of the McCloud Remedy process.
If you feel you need this urgently, you can self-identify with the NHS here. Strictly speaking, that only applies if you have had a tax liability that you paid personally. You can also email NHS pensions to ask them for one.
5. When are tax refunds repaid, and do I have to claim them?
HMRC deals with this, though delays are currently being experienced. If the form shows that you are due a refund, it's submitted to HMRC; their team then go through it and check it. When they're happy, they repay the money either to the scheme or to you.
6. What is ‘Scheme Pays’?
Scheme Pays is an arrangement where the pension scheme pays your annual allowance tax charge on your behalf. In return:
- You incur an actuarial reduction to your annual pension and lump sum at retirement.
- Interest is charged on the amount paid.
Example (simplified):
If you ask the scheme to pay a £20,000 charge:
- Your pension could reduce by ~£1,000 per year.
- Your 1995 scheme lump sum could reduce by ~£3,000.
It’s important to compare this option to paying the tax yourself, especially if you’re far from retirement.
7. Should I use Scheme Pays or pay the tax charge myself?
Consider the following:
- Interest costs can be significant the further you are from retirement.
- Pension reduction may not suit everyone, especially if income will be taxed at 40% regardless.
- For 2019/20, a special government compensation mechanism may make Scheme Pays more attractive.
Each case is unique, so tailored advice is recommended.
8. What’s the impact of Added Years?
Added Years is a way to boost your pension. However:
- It increases annual pension accrual, potentially triggering annual allowance charges.
- Assess cost-effectiveness and compare to other savings/investment options.
- Do the tax and value-for-money calculations before committing.
9. Can I undo Scheme Pays if I now want to pay the tax myself?
While Scheme Pays elections are irrevocable, you can reduce the amount elected—down to as little as £1. This allows you to personally cover the remaining amount.
For example:
If McCloud reduces your original tax charge from £10,000 to £500, you can reduce your Scheme Pays election to £1 and pay the £499 difference yourself.
If McCloud reduces your original tax charge from £10,000 to £500, you can reduce your Scheme Pays election to £1 and pay the £499 difference yourself.
10. I opted out of the pension between 2015 and 2022 to avoid tax charges. What are my options?
You may now be eligible to make a contingent decision to opt back in for that period, if you can show that - had you known about McCloud - you would not have opted out.
This is a retirement-time election and does involve both contribution payments and tax implications.
This is a retirement-time election and does involve both contribution payments and tax implications.
11. Can I rejoin the 2015 scheme after drawing my 1995 scheme pension?
Yes, rejoining the 2015 scheme is possible even after drawing your 1995 benefits. Whether it’s advantageous depends on your personal circumstances, so it’s worth exploring in detail.
We’re here to help
If you need help understanding your tax/pension position or have questions about the McCloud Remedy, please get in touch with our Medical sector specialists.
