Annual Allowance

Annual allowance (AA) is the amount by which a member’s pension, their Pension Input Amount (PIA), can grow in a Pension Input Period (PIP). All members are assessed annually and where the growth of a member’s PIA in a PIP is greater than the AA available to the member, they may be subject to a tax charge on the excess. Any charges along with payment options are provided to members via a Pension Saving Statement (PSS).

As a result of Transitional Protection, benefits accrued in the remedy period (1 April 2015 to 31 March 2022) are being ‘rolled back’ from career average to final salary on 1 October 2023. Due to rollback, the deadline has been extended to provide those affected with a PSS for the 2022/23 tax year PIP.

Pension Savings Statements

Protected will receive their 2022/23 tax year PSS (if they’re due one) as usual by 6 October 2023. This is because when rollback occurs on 1 October 2023, their service won’t change as they were already in final salary for the remedy period. If they make an alternative choice for remedy period service, this could affect their AA position in the year they make their choice.

If they’re a tapered or unprotected member, they’ll receive their PSS by 6 October 2024 on account of rollback.

A PSS covering the remedy period tax years will be issued to affected active and deferred members by 6 October 2024, if the PIAs change for remedy period years. Retired members affected will receive their PSS six months after their Immediate Choice election or six months after the end of the election period if no choice is made. Members will need to reassess their Annual Allowance position.

If, as a result of the PIA amendments relating to the remedy period they owe an additional AA charge for a relevant tax year (2019/20, 2020/21, 2021/22 and 2022/23), and don’t wish to pay this themselves, they can request that we pay this via ‘Scheme Pays’.

Scheme Pays

Any adjustment to Scheme Pays elections for remedy period years will need to be made by completing the Scheme Pays election form once the Scheme has issued a member their revised PSS.

If they didn’t have a Scheme Pays election, but because of the remedy are now subject to one, they’ll have until 6 July 2025 to submit a request. They can still elect for scheme pays after these deadlines; however, this will be paid under the Scheme’s voluntary scheme pays facility.

HMRC's Digital Service

A small number of members’ pension tax position in remedy period years may be affected due to ‘rollback’.

HMRC has introduced a calculator and interactive guidance, to help you identify whether they’re affected and need to take any action. If they were:

  • a ‘protected member’ joining the career average scheme for the first time from 1 April 2022, they’ll not have their service ‘rolled back’ and their previous Pension Input Amounts won’t be revisited. However, their Annual Allowance will be affected in the tax year that they make their choice if they choose career average benefits for the remedy period, following receipt of their ‘Remediable Service Statement’
  • a ‘tapered’ and ‘unprotected’ member, they’ll see a change in their Pension Input Amounts for some or all of the remedy period tax years.

If they’ve any new annual allowance charges or changes to their annual allowance charges, due to rollback, they can use the service to calculate:

  • If they’ve previously overpaid annual allowance charges for tax years 2019/20 to 2021/22, and how to apply for a refund
  • If they’ve previously overpaid annual allowance charges for tax years 2015/16 to 2018/19, and how to apply for compensation
  • If they’ve underpaid annual allowance charges for tax years 2019/20 to 2021/22, and how to make payment

If they’re a former tapered or non-protected member, the deadline for the Scheme issuing them with a combined Pension Savings Statements for the remedy period is 6 October 2024.

Once they receive their combined Pension Savings Statements, they’ll be able to input their previous and revised Pension Input Amount into HMRC’s calculator (This link opens in a new window) for the relevant tax years in the remedy period.

Last Updated: 24/10/2023 12:45


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