Written by Tax Associate Director, Kelly Gould
The McCloud ruling has major implications for public service pension schemes, with significant changes to pension tax records and retirement planning. If you’re affected, it’s important to understand what’s happening and take the right steps to protect your financial position while ensuring compliance with HMRC. Here’s what you need to know.
Table of Contents
Understanding the McCloud ruling and what it means for you
The McCloud ruling relates to changes made to public service pensions between 2015 and 2022. The government has introduced a remedy to correct age discrimination in these schemes, which means pension calculations and tax liabilities may now need to be retrospectively adjusted.
This has created a complex situation, and affected individuals will now receive a Remediable Service Statement (RPSS) outlining changes to their pension input amounts for each relevant scheme year. These adjustments could impact tax obligations and retirement planning decisions.
Key tax and pension considerations
Consideration | Details |
The remedial period | Covers 01 April 2015 to 31 March 2022, meaning tax years from 2015/16 to 2021/22 are affected. |
The Remedial Pension Saving Statement (RPSS) | This will be issued to all affected individuals and include both the original and revised pension input amounts for the seven-year remedy period, in addition to pension figures for 2022/23. |
Reporting requirements | Affected individuals must report their changes using an online remedial tool. There are two types of submissions: full submission and summary submission (for those who do not meet the full submission criteria). |
Underpayments and overpayments | If tax has been underpaid, HMRC will collect it for tax years from 2019/20 onwards. If tax has been overpaid, individuals may be eligible for a refund dating back to 2015/16. Without a submission, opportunity to reclaim overpaid taxes will be lost. |
Deadline for submission | Originally set for 31 January 2025 but now extended to three months from receipt of the RPSS statement due to delays in issuing them. |
No penalties confirmed yet | HMRC has stated that no penalties will be issued for late submissions at this stage, but this could change. |
Processing time | HMRC typically takes up to 90 days to process submissions, after which a payslip will be issued if tax is due. Payment must be made within 30 days. |
Refund claims | If due a repayment, submissions must be made by 31 January 2029. |
The impact on your pension choices
Aside from tax reporting, the McCloud remedy gives affected individuals the opportunity to make pension choices that could significantly influence retirement income. This includes:
- Deferred choice options. Selecting how benefits are calculated for the remedy period at the point of retirement.
- Potential pension increases. Understanding whether changes to contributions and calculations could enhance retirement income.
- Retirement planning strategies. Ensuring the best choices are made based on your specific financial situation.
Support available for professional fees
The NHS and MOD have introduced schemes that allow eligible individuals to reclaim some professional fees incurred while addressing their pension position, such as hiring a tax advisor to assist with remedial pension reporting.
How Gravita can help
With the complexity of pension adjustments, tax implications, and submission requirements, obtaining expert advice is crucial.
At Gravita, we support clients in understanding the impact of these changes, completing necessary submissions, we also work very closely with financial advisors who can assist with exploring pension choices to maximise retirement benefits.
If you’re affected by the McCloud or in receipt of a RPSS statement and unsure on what your next step is, don’t hesitate to reach out to Tax Associate Director, Kelly Gould.
