I am a Remedy affected member. I was expecting to receive a Pension Savings Statement (PSS) for 2022/23 by 6 October 2023. Why have I not received it?
Members affected by the 2015 Remedy (McCloud), who had alpha service between 1 April 2015 and 31 March 2022 and are eligible for a PSS can therefore expect to receive one by 6 October 2024. Any requests for a 2022/23 PSS to be issued earlier cannot be processed.
This is because any service which Remedy affected members had in alpha, between 1 April 2015 and 31 March 2022 (the Remedy period), has now been rolled back into their Legacy scheme (Classic, Classic Plus, Premium or Nuvos). The rollback of this service could lead to changes in Pension Input Amounts (PIA) and subsequently the deadline for public service pension schemes to issue affected members with their 2022/23 PSS has changed, to 6 October 2024.
Civil Service Pensions [CSP(NI)] will recalculate the PIAs for all members affected by rollback, and a PSS for the Remedy period and for the 2022/23 tax year will be issued to each affected member by 6 October 2024 if they are eligible to receive one.
Eligibility criteria
CSP(NI) will send you a Pension Savings Statement if:
- your Pension Input Amount has exceeded/breached the Annual Allowance limit of £40,000*
- you request one
(*Please note – individuals with adjusted income over £240,000 may be subject to a tapered (reduced) Annual Allowance and therefore may need to request a Pension Savings Statement as one will not automatically be issued. It should be noted that this is not based on salary alone, if you have other sources of income you may need to include this when calculating your adjusted income. Further information on how to calculate your adjusted income and tapered annual allowance can be found at: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance )
The deadline for a PSS to be issued is normally 6 October each year.
The deadline for completing my HMRC Self-Assessment tax return is 31 January 2024, I need my Pension Savings Statement (PSS) for 2022/23 to do this.
Members who have been rolled back into their Legacy section from alpha, should not include information relating to an Annual Allowance tax charge on their 2022/23 Self-Assessment return.
For those who need to complete Self-Assessment this year, they do not need to include any Annual Allowance tax charge deriving from their impacted public sector pension scheme. When the PSS is issued, this can be reported through an electronic form at www.gov.uk/guidance/calculate-your-public-service-pension-adjustment.
If due to the Remedy, there are changes to the amount of Annual Allowance for earlier years this should also be reported to HMRC using the electronic form, previously submitted Self-Assessment tax returns should not be amended. However, members will only be able to use this service once they have received their 2022/23 PSS and any revised PSS for an earlier tax year.
Please note that this doesn’t mean that members won’t have to complete Self-Assessment, to deal with and pay any other tax charges, for which they are individually liable for by 31 January 2024.
You’ve explained that I will get my Pension Saving Statement (PSS) for 2022/23 by 6 October 2024 and that the deadline for informing HMRC (via Self-Assessment) about Pension Input Amounts (PIA) is now 31 January 2025. How will this affect my access to Scheme Pays for tax year 2022/23?
The deadline for Remedy affected members to ask the scheme to pay all, or part, of an Annual Allowance tax charge (a scheme pays election) for 2022/23 has been extended to 6 July 2025.
You have sent me a letter in response to my request for a Pension Saving Statement (PSS) for 2022/23. The letter explains that I can expect to receive one by 6 October 2024. I am not happy with this, and I would like you to send me one now.
For members affected by the 2015 Remedy (McCloud), who had alpha service between 1 April 2015 and 31 March 2022, a PSS issued now will not conform to the law. This is because it doesn’t present accurate values of pension savings growth in either alpha or the Principal Civil Service Pension Scheme [PCSPS(NI)] (Classic, Classic Plus, Premium or Nuvos).
CSP(NI) will recalculate the PIAs for all members affected by rollback, and a PSS for the Remedy period and for the 2022/23 tax year will be issued to each affected member by 6 October 2024 if they are eligible to receive one.
Eligibility criteria
CSP(NI) will send you a Pension Savings Statement if:
- your Pension Input Amount has exceeded/breached the Annual Allowance limit of £40,000*
- you request one
(*Please note – individuals with adjusted income over £240,000 may be subject to a tapered (reduced) Annual Allowance and therefore may need to request a Pension Savings Statement as one will not automatically be issued. It should be noted that this is not based on salary alone, if you have other sources of income you may need to include this when calculating your adjusted income. Further information on how to calculate your adjusted income and tapered annual allowance can be found at: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance )
The deadline for a PSS to be issued is normally 6 October each year.
You have sent me a letter to advise me that because I received a Pension Saving Statement last year, I may be expecting one this year. The letter explains that I can expect to receive one by 6 October 2024. I am not happy with this, and I would like you to send me one now.
For members affected by the 2015 Remedy (McCloud), who had alpha service between 1 April 2015 and 31 March 2022, a PSS issued now will not conform to the law. This is because it doesn’t present accurate values of pension savings growth in either alpha or the Principal Civil Service Pension Scheme [PCSPS(NI)] (Classic, Classic Plus, Premium or Nuvos). CSP(NI) will recalculate the PIAs for all members affected by rollback, and a PSS for the Remedy period and for the 2022/23 tax year will be issued to each affected member by 6 October 2024 if they are eligible to receive one.
Eligibility criteria
CSP(NI) will send you a Pension Savings Statement if:
- your Pension Input Amount has exceeded/breached the Annual Allowance limit of £40,000*
- you request one
(*Please note – individuals with adjusted income over £240,000 may be subject to a tapered (reduced) Annual Allowance and therefore may need to request a Pension Savings Statement as one will not automatically be issued. It should be noted that this is not based on salary alone, if you have other sources of income you may need to include this when calculating your adjusted income. Further information on how to calculate your adjusted income and tapered annual allowance can be found at: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance )
The deadline for a PSS to be issued is normally 6 October each year.
Will these pension changes result in any tax changes for members?
The vast majority of members will see no changes to their tax position. In some cases, individuals may be due an Annual Allowance tax charge refund or pay higher Annual Allowance charges, but typically only where their projected pension at retirement has increased. Similarly, a small number of members that are already in receipt of their pension may need to pay additional Lifetime Allowance charges when the total value of their pension has increased.
Where a member’s tax liability does increase, this will not exceed what they would have paid had they always been a member of the scheme they are moving into or receiving equivalent benefits.
How will the changes affect my past Annual Allowance position?
The legal process will take into account the tax implications and HMRC are working alongside HM Treasury and CSP(NI) to make sure that this important issue is taken into account.
HMRC have stated that it would be helpful for members to retain their tax paperwork for 2015/16, what paperwork should I retain?
As the pension policy proposals are still being finalised, it is not possible at this stage to say how they will interact with the tax system.
Therefore, it would be helpful if you would keep tax paperwork relating from April 2015 onwards. This would include:
- Self-assessment returns
- P60s
- Annual Allowance and
- Lifetime Allowance.
How will the 2015 Remedy (McCloud) affect my tax position?
Most members will see no changes to their tax position as a result of the remedy or will receive a refund as a result of the remedy.
In the instances where your tax liability does increase, in the vast majority of cases this will reflect an increase in value of your pension benefits received.
Will public sector workers have to pay additional taxes as part of the remedy? If so, how big will their tax bill be?
Most members will see no changes to their tax position as a result of the remedy; if a member has overpaid tax, they will receive a refund for in scope tax years and compensation for out of scope years.
In the instances where a member’s tax liability does increase, in the vast majority of cases this will reflect an increase in value of their pension benefits.
How many individuals will need to pay extra tax?
Given that the remedy relies largely on a member’s choice, which will differ depending on their circumstances, it is not possible to give a meaningful estimate of the number of tax corrections needed as a result of the remedy.
However, the majority of members will see no changes to their tax position or will receive a refund as a result of the remedy.
In the instances where a member’s tax liability does increase, in the vast majority of cases this will reflect an increase in value of their pension benefits.
What changes are being made for tax?
The tax system will in most instances work in the usual way and follow the new pension rights accrued from the remedy taking effect. There are some situations where changes to pension rights due to the McCloud remedy produce disproportionate tax results that cannot be resolved through powers provided in the Public Service Pensions & Judicial Offices Act 2022 (PSP&JOA 2022).
Therefore, the Government has made changes to tax legislation, using provisions contained in the Finance Act that received Royal Assent on 24 February 2022, to ensure that the remedy can be implemented smoothly.
HMRC consulted on the first set of tax regulations from December 2022 to January 2023; these regulations were subsequently made and laid on 6 February 2023 and came into force on 6 April 2023. Further tax regulations were consulted upon from May 2023 to June 2023; these regulations were made on 15 August 2023, laid on 17 August 2023 and came into force on 14 September 2023, ahead of implementation of the remedy.
Why are you making people pay tax on their legacy pension benefits when they might ultimately choose new scheme benefits?
When individuals are moved back into their legacy schemes, they will be legally entitled to receive legacy benefits which have accrued during remedy period years – and that needs to be reflected in their tax treatment.
In the majority of cases this is likely to result in a refund of overpaid tax and/or compensation (in the form of increased pension benefits, or a cash sum), rather than additional tax being due. If an active or deferred (someone who is no longer building up entitlement) member then chooses new scheme benefits when they retire, those benefits will be adjusted at that point, and tax applied as appropriate – not with retrospective effect.
Where the choice of new scheme benefits which arrive all at one point means a higher tax bill that year than if the individual had chosen to keep legacy benefits for remedy period years, the Government will intervene. This is because the design of the remedy could trigger a disproportionately high AA charge.
Tax implications of member’s choices will be complex and require specialist support – what plans does the Government have to resource support systems and enable members to make the best choices?
Where possible, the Government and schemes will take proportionate steps to minimise the administrative burden on members. Although ultimately, decisions made by members will be individual choices.
There will also be further guidance to complement existing HMRC guidance and schemes’ processes which are already in place to help individuals with their tax affairs.
Schemes will also be able to provide compensation where a member has incurred reasonable additional costs as a result of an agent, i.e. where receipts or invoices can be provided by a tax adviser or accountant, who helped to resubmit information to HMRC.
Will the remedy require individuals to undertake extensive paperwork to ensure they receive appropriate compensation, even though this is the Government’s mistake?
In practice, most individuals will not have to correct their position, either through the tax system or by claiming compensation.
For those that do, the Government has worked hard to remove additional burdens that arise from addressing the discrimination.
Where possible, the Government and schemes will take proportionate steps to minimise the administrative burden on members, but it will not be possible to completely remove individuals from this process in all cases.
If as a result of the remedy an individual has less tax to pay, they may be able to claim a repayment of overpaid tax from HMRC. If they are unable to get a repayment through the tax system, the Act allows them to claim compensation (in the form of increased pension benefits or a cash sum).
The Government acknowledges the need to provide clear and accurate information to members going through this process, to enable them to take the required actions. There will be material to support individuals through this process, including guidance and calculators. Schemes will also be able to provide compensation where a member has incurred reasonable additional costs as a result of an agent, i.e. a tax adviser or accountant, having to resubmit information to HMRC.
The tax changes are all far too complicated – how do you expect anybody to comply?
This is a unique set of circumstances that the Government is addressing.
The existing legislation and scheme rules covering public service pensions were not created with a view to making retrospective pension provision. So the changes made by the Public Service Pensions & Judicial Offices Act 2022 (PSP&JOA 2022) and other legislation are not straightforward but, as far as individuals are concerned, the complex changes are being made ‘under the bonnet’.
Individuals will have a choice to make, and they will have the necessary information available to them when they come to do so. The majority will be provided with a simple choice between two options.
However, for more complicated scenarios, the Government acknowledges the need to provide clear and accurate communication and information to members going through this process. There will also be further guidance to complement the existing HMRC guidance and schemes’ processes which are already in place to help individuals with their tax affairs.
Schemes will be able to provide compensation where a member has incurred reasonable additional costs as a result of an agent, i.e. a tax adviser or accountant, having to resubmit information to HMRC as a result of the remedy.
What measures will be in the Public Service Pensions & Judicial Offices Act 2022 (PSP&JOA 2022), Finance Act and Scheme Regulations?
The PSP&JOA 2022 contains the core remedy, as well as the bespoke remedy measures for the Judicial Pension Scheme and Local Government Pension Scheme and was published on 20 July 2021. It sets out what the core remedy will mean for member’s contributions, benefits, pension payments and compensation.
Some elements of the Act concerning contributions, timing of changes to pension rights, and deeming provisions regarding which schemes are making or receiving payments, have been included to ensure proportionate and reasonable tax outcomes, in line with policy set out in the consultation and published response document.
The tax system will in most instances work in the usual way and follow the new pension rights accrued from the remedy taking effect.
There are some situations where changes to pension rights due to the McCloud remedy produce disproportionate tax results that cannot be resolved through powers provided in the PSP&JOA 2022. Therefore, the Government has made changes to tax legislation, using provisions contained in the Finance Act that received Royal Assent on 24 February 2022, to lay tax regulations, which will ensure that the remedy can be implemented smoothly. HMRC consulted on the first set of tax regulations from December 2022 to January 2023; these regulations were subsequently made and laid on 6 February 2023 and came into force on 6 April 2023. Further tax regulations were consulted upon from May 2023 to June 2023; these regulations were made on 15 August 2023, laid on 17 August 2023 and came into force on 14 September 2023, ahead of implementation of the remedy.
What guidance is available from HMRC?
The HMRC Digital Service
Your pension tax position in remedy period years may be affected due to rollback. HMRC have introduced a new digital calculator and interactive guidance, to help you identify whether you need to take any action. This can be found here:
- Calculator / Digital Service (‘Calculate your Public Service Pension Adjustment’)
- The McCloud GOV.UK guidance collections page
- The 2015 Remedy (McCloud) Newsletter
If you’ve any new annual allowance charges or changes to your annual allowance charges, due to rollback, you can use the service to:
- reassess any previous annual allowance charges during the remedy period tax years
- make an application for a refund of any previously overpaid annual allowance charges for tax years 2019/20, 2020/21 and 2021/22
- make an application to claim compensation for any previously overpaid annual allowance charges for tax years 2015/16 to 2018/19
- pay any underpaid annual allowance charges for tax years 2019/20, 2020/21 and 2021/22
The digital service will also apply to other tax charges such as lifetime allowance charges and unauthorised payments charges.