The McCloud Remedy: What it is and how it could change my divorce settlement?

Quick answer

The McCloud Remedy can affect divorce settlements where either party has a public sector pension. It may change the pension value, so it should be checked before any pension sharing or offsetting agreement is finalised.

Introduction

If you or the other party have a public sector pension. NHS, teachers, civil service, or local government, there's an important legal correction underway that could significantly change how that pension is valued in your divorce. It's called the McCloud Remedy.

Does McCloud affect me?

This may apply if:

• You or the other party has a public sector pension

• The pension includes service between 1 April 2015 and 31 March 2022

• You have an NHS, teachers’, civil service, police, armed forces, firefighters’ or local government pension

• You are relying on an old CEV or unclear scheme valuation

• You are considering pension sharing or offsetting before the scheme has confirmed whether McCloud has been applied

What is the McCloud Remedy?

In short: the government changed the way pensions were calculated back in 2015, and that change was later ruled unfair. Now they're fixing it. That fix is called The McCloud Remedy. But it's complicated and taking time for the pension providers to apply. It could make your pension worth more than you were first told, so it’s vital that its applicability be checked.

Why this matters for your divorce

Pensions are often the biggest or second-biggest asset in a divorce. So it's really important they're valued correctly. But right now, many public sector pensions are still being re-calculated because of McCloud. That means:

• Older and newer pension values might be different

• Some quotes (called CEVs or CETVs) are still wrong

• You could be losing out, or giving away too much, if you don't check

What has changed?

Between 2015 and 2022 many public service workers were moved to a new type of pension scheme. The court said this was unfair to younger workers. So now, anyone affected is being put back into their ‘old’ (often more generous) scheme, at least for that 7-year period.

This matters because when you retire, your scheme will work out which version of your pension gives you more, and that's what you'll get. But in a divorce, decisions are often made before you retire. So how do you know what your pension is really worth now?

What should I do about McCloud?

Here's a simple checklist:

1. Ask the pension scheme if the quote you have includes the McCloud remedy

2. Look out for the ‘remedy period’ (usually 1 April 2015 to 31 March 2022)

3. Don't accept old or unclear pension quotes. They may be wrong

4. Use a Pensions on Divorce Expert to help check what the pension is really worth

Mistakes are happening

Here are a few common mistakes to watch out for as scheme administrators work through the complexities of the McCloud Remedy:

Using outdated pension values. Some CEVs still don't include the McCloud remedy, which means they could be incorrect

Only getting one version of the pension value. You should be given both the old (legacy) and new (reformed) scheme values, with the higher one used

No mention of the McCloud remedy. If McCloud isn't mentioned in your pension statement or CEV, it might not have been applied

Remedy period missing. The time from 1 April 2015 to 31 March 2022 (or from 2014 for LGPS) must be included in the figures. If it's not, the numbers may be wrong

Assuming the value is final. Even recent pension quotes can be wrong if McCloud hasn't been processed yet. Values may change after adjustments

Pension credits not adjusted. If you're getting a share of the other party's pension, make sure it reflects the right scheme (usually the older one) and the McCloud correction

Assuming all schemes work the same. NHS, LGPS, Civil Service and other schemes apply the remedy differently. What's correct in one may not apply in another

The bottom line

If you or the other party have a public sector pension, and your divorce involves splitting it, you need to know about McCloud. It's not just legal jargon, it could make a real difference to your financial future. And if you don't ask the right questions or get the right help, you could both walk away with less than you deserve.

FAQs

• What is the McCloud Remedy in simple terms?

  The McCloud Remedy is a correction to public sector pension rules after changes introduced from 2015 were found to be age discriminatory. It affects how some public sector pension benefits are calculated.

• Can the McCloud Remedy change a divorce settlement?

  Yes. If a public sector pension value changes because of McCloud, it can affect pension sharing, offsetting and the overall fairness of the settlement.

• Which pensions are affected by the McCloud Remedy?

  It mainly affects public sector schemes, including NHS, teachers’, civil service, police, armed forces, firefighters’ and local government pensions, though the exact rules vary by scheme.

• What should I ask my pension scheme about McCloud?

  Ask whether your Cash Equivalent Value or pension statement includes the McCloud Remedy, whether the remedy period has been included, and whether any revised figures are expected.

What to do next

If you or the other party have a public sector pension, it's essential to get expert input to ensure the McCloud Remedy has been properly applied before any settlement is agreed. Our team has extensive experience with public sector schemes. Take our free assessment to work out whether getting expert input would be beneficial for you.

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