The McCloud ruling has introduced significant complexity for divorcing couples with public sector pensions, particularly in determining pension sharing orders (PSOs). For family law practitioners, understanding these nuances is essential to ensure equitable outcomes.

What Is the McCloud Ruling?

The McCloud ruling mandates adjustments to public sector pensions, requiring service between 2015–2022 to be assessed under both the legacy (pre-2015) and new (CARE) schemes. The more favourable valuation determines the final "McCloud-compliant" cash equivalent value (CEV). These adjustments have significantly increased some pensions' value while complicating the process for pension sharing.

Key Challenges in Divorce Cases

1. Outdated CEVs:
   Many PSOs issued before 2024 relied on pre-McCloud non-compliant CEVs. When applied to updated McCloud-compliant CEVs, these PSOs can lead to unequal division, often leaving one party—typically the non-member spouse—at a disadvantage.
2. Risk of Inequality:
   Using pre-McCloud CEVs can result in the non-member spouse receiving a smaller pension credit than intended. This mismatch undermines the goal of equality in pension division.
3. Administrative Gaps:
   Pension administrators now prioritise producing compliant CEVs, potentially neglecting the use of pre-McCloud CEVs. This could exacerbate errors in implementing PSOs based on older valuations.

Practical Solutions

1. Request Updated Reports:
   If an outdated PODE (Pensions on Divorce Expert) report was used, the safest approach is to start anew. Request McCloud-compliant CEVs and prepare fresh PODE calculations to ensure fairness.
2. Review Existing PSOs:
   Practitioners should revisit PSOs issued in 2023 or early 2024, ensuring they reflect the updated valuations to prevent discrepancies.
3. Collaborate with Experts:
   Engaging experienced actuaries and pension consultants can help navigate these changes and minimise risks of inequity.

Conclusion

The McCloud ruling complicates what were once straightforward public sector pension cases. For family lawyers, vigilance is key—ensuring CEVs are current and aligned with the latest compliance standards is essential to avoid unintended disparities in pension sharing orders. As with any complex financial remedy, collaboration with pension experts is critical to achieving equitable outcomes for clients.