The McCloud remedy, the government’s solution to age discrimination arising from certain public sector pension reforms in the UK, continues to have a significant impact on pension loss calculations in personal injury, clinical negligence and employment litigation. Although the legal principles are now established, the practical implications remain anything but straightforward.
As financial expert witnesses, we continue to see cases in which the McCloud remedy materially affects the value of pension loss and once-reasonable assumptions no longer produce an accurate result. This article recaps the McCloud and Sargeant judgements and explains how the reactive legislation affects expert witness and pension loss calculations.
What Is the McCloud Remedy?
The McCloud remedy is government legislation to remove unlawful age discrimination from public sector pension schemes following the 2015 reforms. At the time, transitional protections allowed many older members to remain in their existing schemes while younger members were moved directly into the reformed arrangements and therefore disadvantaged.
The decisions affected numerous public sector pension schemes, including those covering:
- NHS staff
- Teachers
- Firefighters
- Police officers
- Civil servants
- Members of the judiciary
- Armed Forces personnel
Employment tribunal claims were brought by members of the judges’ (McCloud judgement) and firefighters’ (Sargeant judgement) pension schemes. In a landmark ruling, the Court of Appeal subsequently found that these transitional protections amounted to unlawful age discrimination because they favoured older members without sufficient justification.
In response, the government introduced the McCloud remedy to remove the discriminatory treatment across all public sector schemes and give eligible members the opportunity to receive whichever pension benefits are more favourable for the remedy period (1 April 2015 to 31 March 2022). This is commonly referred to as the Deferred Choice Underpin (DCU).
While this helps correct historical discrimination, it adds complexity to valuing future pension benefits and calculating pension losses in the UK for litigation purposes.
How Does the McCloud Remedy Affect Pension Loss Claims?
This is where the issue becomes particularly important for solicitors and the Courts. A pension loss calculation is only as reliable as the assumptions underpinning it. For claimants who are members of the reformed public sector pension schemes, the expert financial witness must consider:
- Whether the McCloud remedy applies
- Which pension arrangement is likely to produce the greater benefit
- How future career progression affects that outcome
- Whether different employment scenarios alter the preferred option
- The impact on retirement benefits, ill-health retirement and survivor benefits where relevant
There is rarely a ‘standard’ answer as to how the McCloud remedy affects pension loss claims. Each case depends on the individual’s employment history, age, salary progression, retirement assumptions and likely future career path.
Why Expert Analysis Matters
The McCloud remedy cannot be applied to pension loss claims as a blanket adjustment. Instead, expert financial witnesses must perform detailed ‘better-off’ modelling to determine which pension benefits should be reflected within the loss calculations in several alternative career scenarios.
For example, a claimant who remains in employment may benefit from one outcome, whereas an individual forced to retire early because of injury or illness may achieve a different result. It’s only once we have completed these comparisons that we can form an accurate opinion on the claimant’s pension losses in the UK.
Examples of McCloud Remedy Pitfalls
Our independent expert witnesses at Paladin Experts regularly encounter cases where:
- The McCloud remedy has been overlooked entirely
- Incorrect pension scheme assumptions have been used
- Legacy and reformed benefits have been mixed incorrectly
- Career progression assumptions are inconsistent with the pension calculations
- Pension loss has been calculated without considering the claimant’s likely DCU outcome
These issues can have a significant impact on the overall valuation of a claim.
Our Approach
At Paladin Experts, we specialise in preparing independent expert witness reports involving complex pension loss calculations. Our reports consider the relevant pension legislation, the McCloud remedy, future career scenarios and the financial evidence to provide robust, transparent calculations suitable for litigation. Whether we are formally instructed as an independent financial expert witness or engaged on an advisory basis to assist solicitors, our objective is always the same: to ensure pension losses in the UK are calculated fairly.
Need Assistance with a McCloud Remedy Pension Loss Calculation?
If your case involves a member of a reformed UK public sector pension scheme, it is important to ensure the McCloud remedy has been considered appropriately. To discuss a case, or arrange assistance with pension loss calculations or expert witness evidence, please get in touch with our team.
