McCloud Remedy - Immediate Choice Not What I Expected!

SillyOldHector

I retired early, from the Civil Service in early 2023. I am in the scope of McCloud because I was in the 'taper' group. This meant I stayed a bit longer in the Classic Scheme before being forced into the Alpha scheme. 
I've received my Immediate Choice letter only to find that both options (and I must choose one of them) equate to a lower annual pension than I'm currently on. My choices are, based on figures provided and then allowing for the 1.7% increase from April '25:
1) I lose £893 p/a but gain a one-off £9,556 due to an additional lump sum being due, plus interest and minus some pension I owe them.
2) I lose £596 p/a but also owe them £895.

Has anyone else experienced this? Any tips on how to decide which is the better option?

Dazed_and_C0nfused

SillyOldHector said:

I retired early, from the Civil Service in early 2023. I am in the scope of McCloud because I was in the 'taper' group. This meant I stayed a bit longer in the Classic Scheme before being forced into the Alpha scheme. 
I've received my Immediate Choice letter only to find that both options (and I must choose one of them) equate to a lower annual pension than I'm currently on. My choices are, based on figures provided and then allowing for the 1.7% increase from April '25:
1) I lose £893 p/a but gain a one-off £9,556 due to an additional lump sum being due, plus interest and minus some pension I owe them.
2) I lose £596 p/a but also owe them £895.

Has anyone else experienced this? Any tips on how to decide which is the better option?

If the only options are 1 & 2 as you have presented them then I can't see many takers for 2.

hugheskevi

SillyOldHector said:

I retired early, from the Civil Service in early 2023. I am in the scope of McCloud because I was in the 'taper' group. This meant I stayed a bit longer in the Classic Scheme before being forced into the Alpha scheme. 
I've received my Immediate Choice letter only to find that both options (and I must choose one of them) equate to a lower annual pension than I'm currently on. My choices are, based on figures provided and then allowing for the 1.7% increase from April '25:
1) I lose £893 p/a but gain a one-off £9,556 due to an additional lump sum being due, plus interest and minus some pension I owe them.
2) I lose £596 p/a but also owe them £895.

Has anyone else experienced this? Any tips on how to decide which is the better option?

Are you sure you would owe £895 under option 2? For taper members, arrears should be written off if making the same lump sum choice as your original retirement - make sure you are reading the descriptions carefully.

Under either option you lose at least £596 p/a, so take that away from both sides, meaning that under option 1 you lose £297 p/a but gain capital of £10,451 relative to Option 2.

You are effectively being offered a trade of £297 of taxable pension in return for a partially taxable lump sum of £10,451 relative to option 2. At a multiple of around 35, Option 1 appears a much better option than Option 2.  

SillyOldHector

hugheskevi said:

SillyOldHector said:

I retired early, from the Civil Service in early 2023. I am in the scope of McCloud because I was in the 'taper' group. This meant I stayed a bit longer in the Classic Scheme before being forced into the Alpha scheme. 
I've received my Immediate Choice letter only to find that both options (and I must choose one of them) equate to a lower annual pension than I'm currently on. My choices are, based on figures provided and then allowing for the 1.7% increase from April '25:
1) I lose £893 p/a but gain a one-off £9,556 due to an additional lump sum being due, plus interest and minus some pension I owe them.
2) I lose £596 p/a but also owe them £895.

Has anyone else experienced this? Any tips on how to decide which is the better option?

Are you sure you would owe £895 under option 2? For taper members, arrears should be written off if making the same lump sum choice as your original retirement - make sure you are reading the descriptions carefully.

Under either option you lose at least £596 p/a, so take that away from both sides, meaning that under option 1 you lose £297 p/a but gain capital of £10,451 relative to Option 2.

You are effectively being offered a trade of £297 of taxable pension in return for a partially taxable lump sum of £10,451 relative to option 2. At a multiple of around 35, Option 1 appears a much better option than Option 2.  

You're absolutely right - I would not have to pay back any sum they say is owed. I was sure I'd read that originally but then couldn't see the wood for the trees. "As a tapered-protection member, any overpayment amounts will not have to be repaid." On that basis I agree with you and the other person who commented - Option 2 seems unattractive.

I just can't get over the fact that both options result in me getting less than I get now. This possibility never entered my head until the offer arrived!

Lyncroft

I took the pension early in 2022. I've yet to receive my choice letter, but also hadn't appreciated my current pension (classic and alpha) could go down. I assumed the choice would be: remain as it is (classic and alpha), or choose classic plus classic for the remedial period plus alpha for whatever remains..

Think how much all this has cost and not a word from Francis Maude.

4justice2

I received my options letter back in February. Like everyone else I assumed my pension would either stay the same, or I get a small increase, pennies even.
Imagine my surprise when both options were a reduction. Only a small reduction, thankfully.

My choices were:
Option 1 
Pension reduction of £12 per year, lump sump due to me of £158, I owe them £41.

Option 2
Pension reduction of £32 per year, no lump sum due to me, I owe them £112.

I chose option 1.

FIREDreamer

4justice2 said:

I received my options letter back in February. Like everyone else I assumed my pension would either stay the same, or I get a small increase, pennies even.
Imagine my surprise when both options were a reduction. Only a small reduction, thankfully.

My choices were:
Option 1 
Pension reduction of £12 per year, lump sump due to me of £158, I owe them £41.

Option 2
Pension reduction of £32 per year, no lump sum due to me, I owe them £112.

I chose option 1.

Why would anybody choose Option 2 - bigger pension reduction, lower (zero) lump sum and bigger debt?

hugheskevi

FIREDreamer said:

4justice2 said:

I received my options letter back in February. Like everyone else I assumed my pension would either stay the same, or I get a small increase, pennies even.
Imagine my surprise when both options were a reduction. Only a small reduction, thankfully.

My choices were:
Option 1 
Pension reduction of £12 per year, lump sump due to me of £158, I owe them £41.

Option 2
Pension reduction of £32 per year, no lump sum due to me, I owe them £112.

I chose option 1.

Why would anybody choose Option 2 - bigger pension reduction, lower (zero) lump sum and bigger debt?

In theory, due to things like possible different levels of survivor benefits, which survivors would be elgible under each options, and so forth.

In the vast majority of cases, you could not say that one option was strictly better in every possible circumstance than the other, and hence members were given the right to make their own choice. That applies even where it is obvious which option is better. As an example, take someone who started to receive their benefits more than 5 years ago, has no children, and would be entitled to a higher pension and lump sum under classic than they would under alpha. However, they have a partner who would get survivor benefits under alpha but not under classic, and they are terminally ill and expect to die in a matter of weeks. Such a person might seem to be much better off under classic, but would probably choose alpha (a deliberately fanciful scenario to illustrate the point, I'm not suggesting it would be commonplace).

There are some scenarios where benefits are strictly better in every way, the most common one being for members of nuvos and alpha in the Civil Service. Alpha rules mirror alpha in most ways, meaning that one is better than the other in every way. Even there though, it isn't always one scheme being better than the other - nuvos is better for members with a State Pension age over 65 in good health, whereas alpha is better for those with a State Pension age of 65, or who are ill, or who die early. However, as all members were given the entitlement to make a choice, even where a member is strictly better off in every way, they will still be asked to make a choice.

4justice2

Just checked my paperwork again, with Option 2, it does give a higher level of survivor benefits than Option 1, so some may choose that if it's important to them.....

Just60

Rather surprised to learn that a reduction in current pension is likely. Not looking forward to receiving my letter!

hugheskevi

Just60 said:

Rather surprised to learn that a reduction in current pension is likely. Not looking forward to receiving my letter!

It is not likely - it is possible, but extremely unlikely. It requires someone to have been moved from legacy scheme to alpha just at the perfect moment. Usually, one of either the legacy or alpha pension for the Remedy period will be a better outcome than the actual pension in payment.

Remember, there are many tens of thousands of quotes issued, so just about every possible but unlikely scenario will emerge, and the more unlikely (and hence surprising) it is the more likely it is to be written about on a discussion board such as this.