What Is the McCloud Remedy and Why Does It Matter to Dentists?

The McCloud remedy is the government's response to a 2018 Court of Appeal judgment (McCloud v Ministry of Justice) which found that transitional protections in the 2015 public service pension reforms amounted to unlawful age discrimination. The protections allowed older members (those within 10 years of normal pension age on 1 April 2012) to remain in their legacy 1995 or 2008 NHS Pension Scheme sections. Younger members were moved to the 2015 CARE scheme. The court ruled this was discriminatory.

For dentists in the NHS Pension Scheme, the remedy means that if you had benefits in the 1995 or 2008 sections between 1 April 2015 and 31 March 2022 (the "remedy period"), you now have a choice at retirement. You can elect to have your pension benefits for that period calculated under either the legacy scheme rules (1995 or 2008) or the 2015 CARE scheme rules. This is not a one-size-fits-all decision. The better option depends on your individual circumstances, including your pensionable earnings history, your expected retirement age, and your overall tax position.

This article explains the mechanics of the McCloud remedy for dentist members, the factors that influence which choice is better, and the practical steps you need to take. It is general guidance only. You should take personalised advice from a dental-specialist accountant or an independent financial adviser (IFA) with NHS Pension expertise before making an election.

Who Is Affected by the McCloud Remedy?

The remedy applies to any member of the NHS Pension Scheme who had pensionable service in the 1995 or 2008 sections during the period from 1 April 2015 to 31 March 2022. This includes:

  • Dentists who were in the 1995 section and remained in it (with transitional protection) until the remedy period ended.
  • Dentists who were in the 2008 section and remained in it during the remedy period.
  • Dentists who were moved from the 1995 or 2008 sections to the 2015 CARE scheme during the remedy period (typically on or after 1 April 2015, depending on their age and proximity to normal pension age).

If you joined the NHS Pension Scheme for the first time on or after 1 April 2015, you are a 2015 CARE scheme member only. The McCloud remedy does not apply to you because you never had legacy section benefits. Similarly, if you left the NHS Pension Scheme entirely before 1 April 2015, the remedy does not affect you.

For most affected dentists, the remedy period covers seven full tax years: 2015/16 through 2021/22. The 2022/23 tax year onwards is not part of the remedy period. From 1 April 2022, all active members (including those with legacy benefits) are in the 2015 CARE scheme.

How the Remedy Works: The Choice at Retirement

When you retire and take your NHS Pension benefits, you will receive two sets of calculations for your remedy period service:

  • Legacy scheme calculation: Your remedy period service is calculated as if you had remained in the 1995 or 2008 section throughout. For the 1995 section, this means a final salary pension based on your best of the last three years' pensionable earnings, with an accrual rate of 1/80th plus a lump sum (3/80ths per year). For the 2008 section, it is an accrual rate of 1/60th with no automatic lump sum (you can commute pension for lump sum at retirement).
  • 2015 CARE scheme calculation: Your remedy period service is calculated under the 2015 CARE rules. Each year's pensionable earnings are revalued in line with CPI plus 1.5%, and you accrue 1/54th of that revalued earnings figure each year. There is no final salary link.

You then choose which calculation applies to your remedy period service. This is an individual choice. You do not have to take the same option for the whole remedy period. You can mix and match year by year if that produces a better result, though in practice most members choose one option for the entire period.

Importantly, the remedy is applied at the point you take your benefits. You do not need to decide now. However, understanding the implications now can help you plan your retirement timing and manage any tax consequences.

Key Factors That Influence Which Choice Is Better for Dentists

The most significant difference between the legacy schemes and the 2015 CARE scheme is the final salary link. Under the 1995 and 2008 sections, your pension is based on your pensionable earnings at retirement (or your best year in the last three). If your earnings have increased significantly over your career, the final salary link can produce a much higher pension than a CARE calculation based on each year's earnings revalued at CPI + 1.5%.

For a dentist who has seen substantial earnings growth during the remedy period (for example, moving from an associate role to a practice principal role, or building a high-earning private practice), the legacy scheme calculation is likely to be more favourable. The final salary link captures that growth. The CARE scheme only revalues each year's earnings at a fixed rate, so it does not benefit from earnings progression.

Conversely, if your earnings were relatively flat or declining during the remedy period, the CARE calculation may be better. The CARE scheme revalues each year's earnings at CPI + 1.5%, which may exceed the growth in your actual earnings. This is more common for dentists who reduced their NHS commitment or moved to part-time work later in their careers.

Retirement Age and Scheme Normal Pension Ages

The 1995 section has a normal pension age (NPA) of 60. The 2008 section has an NPA of 65. The 2015 CARE scheme has an NPA of 67 (state pension age for most). If you choose the legacy scheme calculation for your remedy period, those benefits will be payable from the NPA of the legacy section you were in (60 for 1995, 65 for 2008). If you choose the 2015 CARE calculation, those benefits will be payable from age 67.

If you plan to retire before age 67, choosing the legacy calculation may allow you to access your remedy period benefits earlier without actuarial reduction (or with a smaller reduction). This is a significant factor for many dentists who want to retire in their late 50s or early 60s.

However, if you plan to work beyond age 67, the 2015 CARE calculation may be more valuable because the benefits continue to revalue in deferment until you take them.

Lump Sum Entitlement

The 1995 section provides an automatic lump sum of 3/80ths of final salary for each year of service. The 2008 section and the 2015 CARE scheme do not provide an automatic lump sum. If you want a tax-free lump sum at retirement, you can commute part of your pension (typically up to 25% of the capital value) under HMRC rules, but the commutation rate may be less favourable than the automatic 1995 section entitlement.

If you were in the 1995 section and choose the legacy calculation for the remedy period, you will receive the automatic lump sum on that portion of your service. If you choose the 2015 CARE calculation, you will not. This can affect your overall retirement income planning.

Tax Considerations: Annual Allowance and Lifetime Allowance

The McCloud remedy can trigger tax charges under the Annual Allowance (AA) and the now-abolished Lifetime Allowance (LTA). The remedy period service will be recalculated, and the pension input amounts for those years may change. If the legacy calculation produces a higher pension input amount than the CARE calculation, you could face an AA charge for that year if you exceeded the AA (which was £40,000 for most of the remedy period, with tapering for high earners).

HMRC has introduced a "remedy" for the remedy: the pension input amounts for the remedy period are recalculated using the scheme that you ultimately choose. If you choose the legacy calculation, the pension input amounts are based on the legacy scheme. If you choose the CARE calculation, they are based on the CARE scheme. This means your choice affects whether you have an AA charge for any remedy period year.

For dentists with high NHS pensionable earnings (typically principals with significant NHS contract income), the AA is a real concern. The tapered AA can reduce the allowance to as low as £10,000 for those with adjusted income over £312,000. Choosing the CARE calculation may produce lower pension input amounts and reduce the risk of an AA charge. This is a complex area and requires professional modelling.

The LTA was abolished from 6 April 2024, but the McCloud remedy may still affect LTA protection positions for those who had fixed or individual protection before abolition. If you held LTA protection, you need to check whether the remedy period recalculation breaches the protected level.

Practical Steps for Dentists: What You Need to Do Now

Check Your Membership History

Log into your NHS Pension Scheme online account (via NHSBSA) and check your membership history. Confirm which sections you were in and during which periods. If you are unsure, contact NHSBSA or your practice's pension administrator. You need to know whether you have remedy period service.

Model the Two Options

You cannot make an informed choice without modelling both options. This requires:

  • Your pensionable earnings history for each year of the remedy period (2015/16 to 2021/22).
  • Your expected pensionable earnings at retirement (for the final salary linkage).
  • Your expected retirement age and whether you plan to take benefits early or late.
  • Your other pension savings (SIPP, private pensions, etc.) to assess AA and LTA positions.

Most dentists will need an IFA or a dental-specialist accountant to run these calculations. The NHSBSA will provide a "remedy statement" closer to your retirement date, but you can request an early estimate. Do not wait until retirement to start thinking about this.

Consider the Interaction with Your Wider Tax Position

The choice you make for the McCloud remedy affects not just your pension but also your income tax position in retirement. A larger pension may push you into a higher tax bracket, especially if you have other income (rental properties, dividends from your practice company, etc.). The automatic lump sum from the 1995 section is tax-free, but the pension income is taxable. The 2015 CARE scheme gives you more flexibility to commute pension for lump sum, but at a less favourable rate.

For dentists who are also practice owners, the interaction with practice profits and dividend extraction is important. A higher pension income in retirement may reduce the amount you can take from your practice without triggering higher-rate tax. This is where a dental-specialist accountant can help you model the full picture.

Review Your Retirement Timing

The McCloud remedy gives you a choice, but the value of that choice depends on when you retire. If you are planning to retire soon, the choice is more immediate. If you are 20 years away, the choice matters less now because future earnings growth and inflation will affect the outcome. However, you should still understand the principles so you can factor them into your long-term planning.

For dentists approaching retirement, the McCloud remedy may influence whether you take your NHS Pension early (with actuarial reduction) or defer it. The legacy scheme calculation may make early retirement more attractive because the final salary linkage is locked in at your current earnings level.

Common Scenarios for Dentists

Scenario 1: The Associate Who Became a Principal

Dr Patel worked as an NHS associate from 2010 to 2018, earning £60,000 per year. In 2018, she bought a practice and became a principal, with NHS pensionable earnings rising to £120,000 by 2022. Under the legacy scheme calculation, her remedy period pension is based on her final salary of £120,000. Under the CARE calculation, it is based on each year's earnings revalued at CPI + 1.5%. The legacy calculation is clearly better for her. She should choose the 1995 section calculation for the remedy period.

Scenario 2: The Principal Reducing NHS Commitment

Dr Jones was a high-earning principal in 2015, earning £150,000. He reduced his NHS commitment from 2018 onwards, earning £80,000 by 2022. Under the legacy scheme, his remedy period pension is based on his final salary of £80,000. Under the CARE calculation, his earlier higher earnings are revalued at CPI + 1.5%, which may produce a higher pension than the final salary link. The CARE calculation is likely better for him.

Scenario 3: The Locum Dentist with Variable Earnings

Dr Khan worked as a locum dentist throughout the remedy period, with earnings fluctuating between £40,000 and £90,000 depending on NHS contract availability. Her final salary linkage is weak because her best year may not be the last three years. The CARE calculation, which revalues each year's earnings, may be more predictable and potentially higher. She needs to model both options carefully.

What About the 1995 vs 2008 Section Choice?

If you were in the 1995 section during the remedy period, your legacy choice is the 1995 section rules. If you were in the 2008 section, your legacy choice is the 2008 section rules. You cannot choose between 1995 and 2008 for the remedy period. The choice is between the legacy section you were in and the 2015 CARE scheme.

However, the McCloud remedy also affects members who transferred between sections during the remedy period. If you moved from the 1995 section to the 2008 section (or vice versa) before the 2015 reforms, the remedy period service is attributed to the section you were in at the time. This is a technical area that may require NHSBSA clarification.

Tax Planning Around the McCloud Remedy

The McCloud remedy creates a tax planning opportunity for some dentists. If you are close to the tapered AA threshold, choosing the CARE calculation for the remedy period may reduce your pension input amounts and keep you within the AA. This is particularly relevant for practice principals with high NHS contract income and significant practice profits.

Conversely, if you have headroom in your AA, choosing the legacy calculation may allow you to build a larger pension without triggering tax charges. The key is to model both options with your actual earnings history and your expected retirement date.

For dentists who have already taken benefits (ill-health retirement, redundancy, or early retirement), the McCloud remedy may require a retrospective adjustment. NHSBSA is handling these cases on a case-by-case basis. If you have already retired and are affected, you should receive a letter from NHSBSA explaining your options.

Where to Get Help

The McCloud remedy is one of the most complex changes to the NHS Pension Scheme in decades. The choice you make can affect your retirement income by tens of thousands of pounds. Do not rely on general online calculators or advice from non-specialist sources.

Start by reading the NHSBSA's official McCloud remedy guidance on gov.uk. Then speak to a dental-specialist accountant who understands NHS Pension Scheme rules and can model the tax implications. You may also need an IFA who specialises in NHS pensions to model the pension outcomes.

At Dental Finance Partners, we work with dentists across all career stages to optimise their tax position around the NHS Pension Scheme. Our practice accounting and associate tax services include pension tax modelling as standard. We also offer a free practice health check that can identify whether the McCloud remedy is a material issue for you.

For a deeper dive into the NHS Pension Scheme generally, see our NHS Pension Scheme Essentials for Dentists guide. And if you are planning retirement and need to understand how your pension interacts with your practice sale, our Goodwill Valuation and Sale Playbook covers the full picture.