Pensions – Annual Allowance Statements

Wed 24 Sep 2014

HMRC has announced that “Pension providers will soon be sending annual allowance pension statements for the 2013 to 2014 tax year to all pension scheme members contributing more than £40,000 per year to a pension scheme.

Finance Act 2011 legally requires pension providers to send these statements.” (HMRC What’s New, 15 September). There are two things wrong with that statement:

• the statements are for 2013/14 when the annual contribution limit was £50,000; and
• if you look for the legal requirement to provide statements in FA 2011 you won’t find it because it’s in the Registered Pension Schemes (Provision of Information) Regulations 2006 – Statutory Instrument 2006/567 – Regulation 14A.

October 6 is the deadline for pension providers to send contribution statements to certain scheme members for 2013/14. However, not every scheme member will receive a statement. Statements will only be sent out automatically where contributions for the year exceeded the annual allowance limit.

What the statements contain

The statement will include:

• both actual (defined contribution) and notional (defined benefit) contributions for the year 2013/14 and the preceding three years: 2010/11; 2011/12 and 2012/13; and
• the amount of the annual allowance limit for each year.

The information in the statements is designed to help provide the information necessary for claims to carry forward unused allowances and to determine whether there is a liability to tax under the annual allowance charge.

Pension input periods

The annual limit is not measured by contributions in the tax year but against the PIP which ended in the year. The PIP is usually the anniversary of the day after the scheme was set up unless it has been changed in the meantime, although a number of older schemes may have had their PIP end day set as 6 April in which case the PIP for 2013/14 would be the year ended 6 April 2013.

Look out for 2010/11 PIPs that began before 14 October 2010 as these fall partly into the period when the annual allowance limit was higher (£250,000) and special apportionment calculations may be needed.

Individuals with more than one scheme may need to request statements

Pension providers cannot know how much a scheme member has contributed overall, only the amount contributed to that provider’s scheme(s). Therefore individuals can only be sure of receiving statements from single schemes where their contribution to any individual scheme in the scheme’s ‘Pension Input Period’ (PIP) exceeds the annual allowance limit. The obligation on the provider to provide statements operates on a scheme by scheme basis, so if the individual is a member of more than one scheme under the same provider he may not receive any statements. (Note, however that if there can be multiple arrangements under the same scheme those arrangements must be aggregated and included in a single statement but multiple schemes from the same provider do not have to be aggregated.) Reg.  14B provides the right of members to request a statement where none has been provided automatically.  This information must be provided within three months, broadly speaking.

HMRC guidance on pension contribution statements is at RPSM06107500 et seq and on their website pages covering Annual and Lifetime Allowance Statements.