Annual allowance

  • Answer:

    The government’s consultation response set out the treatment of Annual Allowance:

    Under the DCU, reformed scheme members will be legally restored to membership of their legacy schemes by 2023 in respect of the remedy period. This will retrospectively alter the pension benefits they have accrued in each of the tax years during the remedy period. For the minority of members with sufficiently high income and/or pension accrual to trigger an AA charge, this could change their liability for that AA charge in a tax year or tax years falling within the remedy period. Most of these individuals will see a reduction in AA charge owed.

    Where an individual paid their original AA charge up front, they will receive a refund. If the individual originally used Scheme Pays to meet the tax charge, then the associated pension debit will be amended as appropriate, and schemes will receive the refund. In those cases where additional AA charge is owed, the individual will have the opportunity to utilise Scheme Pays if they do not want to pay the tax charge upfront. If a member then faces an increased AA charge as a result of choosing reformed scheme benefits when they take their benefits, the government will ensure they do not bear the cost of any additional AA charge that is directly caused by the member exercising that choice.

    We await further details on the above points and how changes will be processed.

    Until the legislation process is completed there’s no legal basis for the Scheme to implement the remedy. We therefore won’t be able to provide options to those affected during the remedy period until October 2023 at the earliest. As we’ll have to contact all members affected by the remedy from this date, please bear with us as it’s likely to take some time to reach everyone.


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