The McCloud remedy and public sector pension tax

The McCloud remedy moves public service pension benefits built up between 1 April 2015 and 31 March 2022 back into the legacy schemes, or gives members a choice of scheme, so the pension input amounts used for annual allowance can change for those years. Members whose annual allowance charge goes up, down or appears for the first time correct it through HMRC’s Calculate your public service pension adjustment service, not by amending their Self Assessment returns.

What was the McCloud remedy and why does it change my tax?

When the public service pension schemes were reformed in 2014 and 2015, members with transitional protection stayed in the legacy schemes while others moved into the new schemes. Litigation found that the reforms discriminated on grounds of age, and the case became known as McCloud. Part 1 of the Public Service Pensions and Judicial Offices Act 2022 puts that discrimination right, and it does so retrospectively.

Because the remedy changes which scheme a member is treated as having been in, it also changes the value of the pension built up in each year. That value is the pension input amount tested against the annual allowance. The tax regulations made for the remedy, starting with the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023 (SI 2023/113), aim to put members as far as possible in the tax position they would have been in had the discrimination not happened. Further sets of regulations followed in 2023, 2025 and 2026, the latest being SI 2026/673.

Who has remediable service?

HMRC’s guidance for Chapter 1 schemes says the remedy only applies if you have remediable service. In broad terms that means all of the following:

• you had pensionable service on or before 31 March 2012
• you had pensionable service in a Chapter 1 scheme at some point in the remedy period, which runs from 1 April 2015 to 31 March 2022 (1 April 2016 for an agency scheme)
• you did not have a gap in pensionable service of more than 5 years that started or ended between 1 April 2012 and 31 March 2015

Chapter 1 schemes are the public service schemes other than the judicial and local government schemes. They include the NHS, armed forces, teachers, police, firefighters and civil service schemes. Chapter 2 covers judicial schemes and Chapter 3 covers the local government scheme, where the remedy works through a final salary underpin rather than rollback.

How does the remedy change my pension input amounts?

Chapter 1 members

Service in the new scheme up to 31 March 2022 is rolled back and treated as always having been in the legacy scheme. If you had not started taking benefits on 1 October 2023, your pension input amounts for the remedy years are recalculated as if you had been in the legacy scheme throughout. You then choose legacy or new scheme benefits for the remedy period when you retire, but that later choice does not change the remedy year figures. It can only reduce the pension input amount in the year you take benefits, and only if you choose new scheme benefits with a lower value.

If you were already a pensioner on 1 October 2023, you get an immediate choice. Your input amounts for new scheme years change only if you choose legacy benefits. Voluntary contributions paid into the new scheme during the remedy period are generally not rolled back, so their input amounts stay as they were.

Chapter 2 and Chapter 3 members

A judicial member who makes a legacy scheme election moves into an unregistered scheme, so there is no pension input amount for the basic benefits, although voluntary contributions left in the 2015 scheme are still tested. A local government member’s input amounts are not normally changed retrospectively. Any increase from the final salary underpin is ignored and the input amount is worked out on the career average basis.

Your scheme administrator works out the new figures and sends a revised pension savings statement where one was issued before. You can also ask for statements. Our guides to defined benefit pension input amounts and pension savings statements explain what those figures mean.

What if I had, or nearly had, a tapered annual allowance?

Rollback can change threshold income and adjusted income as well as the input amount. A Chapter 1 member has to rework both figures for years spent in the new scheme, using the contributions that should have been paid to the legacy scheme rather than those actually paid. A judicial member who chooses the 2015 scheme does the same in reverse. Your scheme gives you the contribution figures where they differ. The tapered annual allowance guide explains how the taper itself works.

How do I correct the tax for earlier years?

HMRC is clear that every change to a tax charge caused by the remedy must go through the Calculate your public service pension adjustment service, and not through your Self Assessment return. That includes annual allowance charges for the 2022 to 2023 tax year, because schemes had extra time to issue statements and members would otherwise miss the normal filing deadline. The service handles the years 2019 to 2020 to 2021 to 2022 for new or increased charges and reductions. An agent can use it for you if you give written permission.

What happens next depends on the result:

• New or higher charge. You can pay it yourself, in which case HMRC issues an assessment telling you how, or elect for your scheme to pay.
• Lower charge you paid yourself, 6 April 2019 to 5 April 2023. HMRC refunds you directly, with repayment interest worked out by reference to the year the charge relates to.
• Lower charge your scheme paid, same years. HMRC passes the details to the scheme, which increases your benefits to reflect the overpaid charge.
• Lower charge for 6 April 2015 to 5 April 2019. HMRC sends the details to your scheme, which may pay compensation or increase your benefits.

Can my scheme pay a new or increased charge?

Yes. Scheme pays elections can be made through the same service, and HMRC forwards them to the scheme. For remedy charges, the mandatory scheme pays conditions are relaxed: the election can be made even if the input amount did not exceed £40,000, the tax is under £2,000, or you have already taken all your benefits. Regulations made in 2026 gave active and deferred members until 6 July 2027 to make a mandatory election, the same date as pensioners. An election after that date becomes a voluntary scheme pays request: the scheme still pays, but it is not jointly liable for the charge. See scheme pays for annual allowance charges for the general rules.

What deadlines apply?

HMRC’s member guidance sets the reporting deadline for new charges or changes by member status. Pensioners, and the personal representatives of members who died, before 1 October 2023 have until 31 January 2027. For other members the deadline given was 31 January 2025. If you hold a revised statement you have not acted on, check the current position with HMRC rather than assuming the door is closed. Personal representatives also get extra time where a member dies before or soon after a late statement arrives: three months from receiving the statement, or from the date of death.

A worked illustration

Illustration only. Priya, a hospital consultant, moved from the NHS legacy final salary scheme to the 2015 career average scheme. For 2020 to 2021 her pension savings statement originally showed an input amount of £38,000. After rollback her scheme issues a revised statement showing £52,000 under the legacy scheme. Suppose her available annual allowance for that year, after carry forward, was £45,000. She now has £7,000 of excess where before she had none.

Priya enters the revised figures in the HMRC service, which calculates the new charge at her marginal rate. She elects for the NHS scheme to pay before 6 July 2027, so the charge comes out of her pension benefits rather than her bank account. She does not amend her 2020 to 2021 tax return.

What mistakes come up most often?

• Amending a Self Assessment return to change a remedy year charge, instead of using the HMRC service.
• Assuming the revised statement is only relevant if the input amount went up. A reduction may mean a refund or extra benefits.
• Forgetting to rework threshold and adjusted income for the taper.
• Missing the 6 July 2027 date and losing the scheme’s joint liability for the charge.
• Applying for a transitional tax free amount certificate before the remedy figures are settled. HMRC has told schemes not to issue one where the underlying data is uncertain. See transitional tax free amount certificates.

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Related Accountapedia entries

• Off payroll rules in the public sector
• Public limited companies: requirements
• The CCAB AML guidance for the accountancy sector
• Public interest entities and audit
• Public benefit entities and concessionary loans

Sources

• GOV.UK: Changes in your annual allowance following the public service pensions
• GOV.UK: Explanatory memorandum on the public services pension schemes rectific
• GOV.UK: Newsletter on the public service pensions remedy june 2026
• GOV.UK: Chapter 1 pension scheme guidance
• GOV.UK: Changes in annual allowance as a result of the public service pensions

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.