Frequently asked questions
Response to McCloud
Am I affected?
- You are an active or former member (who may or may not have retired) of the MPs’ Pension Scheme; and
- You were an MP on 7 May 2015 and have also served as an MP since 8 May 2015.
This is regardless of whether you received full, tapered or no transitional protection in May 2015 and irrespective of whether or not you are currently an MP.
I’ve already retired and have started receiving my pension. Am I affected?
Yes, provided that you were an MP on 7 May 2015 and have also served as an MP since 8 May 2015. You will be offered the same choice as all other affected members.
What choice will I be offered?
All affected members will be given a choice over how they want their benefits to be treated (i.e. as Final Salary or CARE benefits) for the period between 8 May 2015 and 31 March 2023. You will be offered the choice of whether to:
- Move your benefits for this period to the Final Salary Section;
- Move your benefits for this period to the CARE Section; or
- Make no change.
What impact will this choice have on my pension arrangements?
As there is a no change option, this choice doesn’t need to have any impact on your pension arrangements. If you do choose to move your benefits to a different section, the impact will depend on your personal situation – including factors such as Retained Benefits and tax allowances – which is why we will be sending out personalised ‘options packs’ to all members from spring 2023. These packs will illustrate the differences between the benefits you could receive depending on the choice you make and what contributions you may need to pay or be refunded for. The major difference will be between the value of the available pension under each option, but you will also need to consider the implications of each option, such as retirement age, maximum benefit restrictions under Final Salary section, or level of dependant pension payable.
What are the main differences between the Final Salary Section and the CARE Section?
| Final Salary | CARE | |
|---|---|---|
| Accrual Rate | 1/40th, 1/50th or 1/60th | 1/51st |
| Adult Dependant Pension | 5/8ths | 3/8ths |
| Pension Age | 65 | State Pension Age |
| Increases during pension build-up phase | Pension built up is increased in line with Final Pensionable Salary | Pension built up is increased in line with inflation (currently as measured by CPI) |
| Lump sum | Age-related commutation factors are used to calculate the maximum lump sum, generally resulting in a higher maximum tax free lump sum at a lower cost to the member | Calculated using a fixed commutation of £12 of lump sum for every £1 of pension given up. This tends to result in a lower maximum tax fee lump sum than in the Final Salary Section |
| Voluntary Pension Enhancements | None currently available (although prior to 2014, Added Years could be purchased) | Option to increase your pension by purchasing Added Pension (AP) or to receive your pension earlier by purchasing an Effective Pension Age (EPA) reduction |
| Early Retirement | Higher Early Retirement reductions apply in the Final Salary Section | Early Retirement reductions tend to be lower than in the Final Salary Section |
| Late Retirement | Late Retirement is not possible; if no longer a serving MP, pension is payable at age 65 | Option to defer receipt of pension. Late Retirement uplifts are applied to the value of your pension if taken after Normal Retirement Age (which is the same as your State Pension Age) |
| Pension Increases | Pensions increased in deferment and retirement by inflation (currently as measured by CPI) | Pensions increased in deferment and retirement by inflation (currently as measured by CPI) |
| Death Benefits | Lump sum death benefits only payable for active members | Lump sum death benefits for active, deferred and pensioner members, including a refund of contributions paid into the CARE Section |
| Scheme limits | Pension is restricted to 2/3rds of the value of your Final Salary, less the value of any pension benefits built up prior to becoming an MP (Retained Benefits) | No scheme-specific restrictions apply |
Can I stay in the Final Salary Section after 31 March 2023?
No. The Final Salary Section closed to all members on 31 March 2023 and no members will be able to accrue further benefits in the Final Salary Section after this date.
Will the closure of the Final Salary Section affect my pension built up before 8 May 2015?
No. Any pension built up before 8 May 2015 will remain in the Final Salary Section, along with a link to your Final Pensionable Salary.
Will my Final Salary Section benefits still be tied to my Final Pensionable Salary?
Yes, any benefits that you have in the Final Salary Section will continue to be calculated with reference to your future Final Pensionable Salary. You must begin drawing these benefits at age 65, as long as you are no longer serving as an MP.
How much will it cost to move from the Final Salary Section to the CARE Section (or vice versa) for the period 8 May 2015 to 31 March 2023?
For some people, moving sections will require them to pay additional contributions. This is because the different sections have different contribution rates.
You would only pay the difference in the contributions that would have been paid during the 2015-2023 period had you been in that Section at the time. This figure will depend on your personal circumstances and will be provided in your personalised options pack. As an indication, if you were moved into the CARE Section on 8 May 2015 and you wished to move back into the Final Salary Section (on a 1/40th accrual) for the period, the amount you would need to repay would be approximately £16,500. However, the exact amount due will depend on your individual circumstances.
If you moved to a section with a lower contribution rate, you would similarly be due a refund of contributions. This will also be shown in your personalised options pack.
If you reached the 2/3rds Final Salary Section limit during the 2015-2023 period, you will not pay contributions from that point until the date you move into the CARE Section.
Will my choice affect my Effective Pension Age / Added Pension?
If you are in the CARE Section and choose to move into the Final Salary Section, any Effective Pension Age (EPA) or Added Pension (AP) you have purchased will be refunded to you, or you may use the refund value to offset any contributions you may need to repay to move to the Final Salary Section.
Will my choice affect my Added Years?
If you are in the Final Salary Section and have purchased an Added Years contract, this will cease on 31 March 2023, with the Added Years benefit pro-rated accordingly. No further Added Years payments will be taken from 1 April 2023.
When will I need to make my choice?
You have until 31 January 2025 to make your choice. This long timeframe is to ensure that all members have sufficient time to review the implications of each option and obtain advice if necessary.
When will I receive my options pack?
The options packs were issued in 2023 or Q1 2024.
Where can I get further help?
Once you receive your options pack, you will be able to access further guidance and advice, including:
- 1-to-1 Guidance Sessions: The Trustees have arranged for 1-to-1 guidance sessions with an Independent Financial Advisor (IFA) from Origen. Origen is a firm of IFAs with knowledge of the PCPF scheme, who host annual seminars on behalf of the PCPF regarding the Annual Allowance and Lifetime Allowance tax changes, and Origen are also the firm who have hosted the McCloud seminars. The session will help you understand the potential impact of the McCloud choice on your pension and retirement plans. Please note that this is not Financial Advice but will provide guidance only. If you have not already registered your interest to attend a session, please do so by contacting the Secretariat on 0207 219 6481 or pensionsmp@parliament.uk
- Digital modelling (provided by Guiide): parliament.guiide.co.uk Guiide is a popular online guidance tool developed by a pensions actuary and other pension professionals. Guiide have built a custom journey to help PCPF members understand their specific McCloud options. This journey will consider how these choices may affect your benefits, contributions and tax implications. This may be enough for you to make a decision without advice. Use your personal log in detailed in your options pack, to access the modeller, which has been pre-populated with the personalised information shown on your Statement.
- Financial advice: We recommend that you take independent financial advice before making your choice. You may already have a financial adviser or accountant from whom you can take advice. Alternatively, Guiide have selected two regulated independent financial advisers from their adviser panel, who are both very experienced in scheme option exercises, to provide you advice at a fixed price. Please access the Guiide modeller above for details of these advisers.
If you need further guidance ahead of the options packs being issued, please contact the PCPF Secretariat by emailing pensionsmp@parliament.uk or calling 0207 219 6481. However, please note that no figures will be available for members ahead of the options packs being issued.
Where can I read more about the Response to McCloud?
Upcoming events
Guidance Sessions
If you have not already registered your interest to attend a session, please do so by contacting the Secretariat on 0207 219 6481 or pensionsmp@parliament.uk.