Calculating pension input amounts for Chapter 1 members

When you calculate the pension input amount for Chapter 1 members you will need to consider:

• the members protected status (if they’re protected, unprotected or taper-protected)
• if the member is active or deferred on 1 October 2023
• if the member was a pensioner or had died before 1 October 2023
• their rollback into the Chapter 1 legacy scheme
• their choice of benefits (including ‘immediate choice’)

When calculating pension input amounts, for members that have made voluntary contributions during the remedy years the pension input amounts in respect of voluntary contribution rights will not change.

Members who were active or deferred during the remedy period

For protected members who were active or deferred during the remedy period in the Chapter 1 legacy scheme only, you do not need to recalculate their pension input amount for the remedy period as their benefits will not have changed.

Pension input amounts will change for the years that the member was in the Chapter 1 new scheme as a result of rollback for members who:

• were active or deferred during the remedy period in the Chapter 1 legacy scheme and the Chapter 1 new scheme (taper-protected members)
• have only been in the Chapter 1 new scheme (unprotected members) during the remedy period

You will need to calculate the legacy benefit accrual for the years affected and you may need to provide a pension savings statement to the member.

Effects of immediate choice on pension input amounts

If a member has remediable service and started receiving their pension benefits before rollback, they will have an immediate choice of benefits.

Where a member has an immediate choice, the pension input amount may change depending on the member’s status (protected, tapered-protected or unprotected) and the choice they make with their benefits. The pension input amounts will only change in the remedy period years if the member (both of the following):

• is a taper-protected member or unprotected member
• chooses legacy scheme benefits

The pension input amount will only change in the retirement pension input period if the member (both of the following):

• is a protected member or taper-protected member
• chooses new scheme benefits and the new scheme benefits pension input amount is lower than the legacy scheme benefits

If a protected member or a taper-protected member chooses new scheme benefits and the new scheme benefits pension input amount is higher than the legacy scheme benefits, the new scheme benefits election is ignored. There is no change in the pension input amount in the retirement pension input period.

If a member is a protected member and chooses legacy scheme benefits, there are no changes to their pension input amounts.

If the member is an unprotected member and chooses new scheme benefits, there is no change to their pension input amount.

Where there is a change in the member’s pension input amount, you may need to issue a new pension savings statement for each year affected or for members who’s pension input amounts are only affected during the retirement pension input period.

Active members’ deferred choice election

If a member has a deferred choice election (meaning they will choose at retirement), their choice of benefit could affect their pension input amount in the year they start taking their benefits.

If the member chooses legacy scheme benefits, there is no change to the pension input amount.

If the member chooses new scheme benefits, in the year the member starts to take benefits, the opening value will be calculated using legacy benefits. The closing value will be the lower of the value of the legacy scheme rights and new scheme rights.

Effect on deferred member carve-out

Where a member has a deferred member carve-out in the new scheme and rolls back into the legacy scheme, they will keep their pension input amount of ‘Nil’ for the affected years.

If the member has a deferred member carve-out in the legacy scheme and elects for new scheme benefits, they will keep the ‘Nil’ pension input amount under the legacy in the year of that election.

The member may not meet the conditions for deferred member carve-out if:

• they paid voluntary contributions to the new scheme to secure the earlier payment of pension
• replacement rights are provided under the legacy scheme

The deferred member carve-out will not apply if, in the year the replacement rights are provided under the legacy scheme the increase in the value of the member’s rights is more than:

• the relevant percentage
• the relevant statutory increase percentage

Where the member is no longer eligible for deferred member carve-out, the pension input amounts will need to be calculated for the affected years and pension savings statements may need to be issued.

Calculating pension input amount for Chapter 2 members

Members of Chapter 2 schemes who are taper-protected or unprotected will have to choose between the legacy scheme and 2015 scheme under their options exercise before their pension input amount for each affected year are to be considered.

Where a member has made voluntary contributions to the 2015 scheme during the remedy period the pension rights in respect of these contributions remain in the 2015 scheme. The pension input amounts in respect of voluntary contribution rights will not change.

If a member chooses a legacy scheme

The pension input amounts do not need to be worked out as the scheme is an unregistered scheme. The 2015 scheme administrator must tell the member that any previously issued pension savings statements are no longer valid, but members may wish to keep these for the purpose of working out any compensation for tax years between and including 2015 to 2016 and 2018 to 2019 or refund of overpaid tax for tax years between and including 2019 to 2020 and 2021 to 2022.

If a taper-protected member chooses the 2015 scheme

For taper-protected members who choose the 2015 scheme, you will need to calculate the pension input amount for the benefits now under the 2015 scheme. The pension savings statement may need to be issued to the member for each year that is affected.

If an unprotected member chooses the 2015 scheme

Where an unprotected member chooses to remain in the 2015 scheme during the remedy period, their pension input amount for the affected years should remain the same.

Calculating pension input amounts for Chapter 3 members

For members of Chapter 3 schemes who have an increase in pension rights as a result of the final salary underpin, the increase should be ignored when working out pension input amounts. The pension input amount should be calculated on career average revalued earnings (CARE) basis only.

If you have previously issued pension savings statements for a remedy period year to a member on a final salary basis instead of CARE, you may need to issue a revised pension savings statement.

Members with pension sharing (pension credit or debit)

Where there is an adjustment to an existing pension credit or debit as a result of the public service pensions remedy, this should be ignored when calculating the member’s pension input amount.

Partnership pension account for Chapter 1 members

For members who opted out of the Chapter 1 scheme, joined a partnership pension account, and who choose to opt back into the Chapter 1 legacy scheme, any uncrystallised rights under the partnership pension account must be transferred to the Chapter 1 legacy scheme. This transfer will be a recognised transfer and should be ignored when calculating the legacy scheme pension input amount in the year the transfer is made.

The partnership pension account pension input amount for each year of the remedy period will remain unchanged.

Where the member has opted back into the Chapter 1 legacy scheme they are treated as always having accrued pensionable service under that scheme during the remedy period. To prevent double counting, when calculating the legacy scheme pension input amount for each remedy period year:

• where all the member’s partnership pension account rights are uncrystallised at the time of the transfer — deduct the amount of the partnership pension account pension input amount from the legacy scheme pension input amount
• where all the member’s partnership pension account rights are crystallised at the time of the transfer — do not adjust the amount of the legacy scheme pension input amount
• where only part of the partnership pension account rights are uncrystallised at the time of the transfer — deduct the proportion of the partnership pension account pension input amount that relates to those uncrystallised rights from the legacy scheme pension input amount

Example of working out pension input amount

The pension partnership account pension input amount for the tax year 2020 to 2021 is £5,000. However, before the transfer takes place 40% of the pension partnership account rights are crystallised leaving 60% uncrystallised. Reduce the Chapter 1 legacy scheme pension input amount by £3,000 (60% of £5,000).

Deadline for sending new pension savings statements

Where members have changes in pension input amounts, you may need to issue a new or revised pension savings statement for each of the relevant tax years.

For members affected by the remedy, the deadlines to send an automatic pension savings statement have been extended to 6 October 2024. Chapter 1 members who were pensioners or died before 1 October 2023 are not included in the extension.

If the member is a Chapter 1 member who was a pensioner or had died before 1 October 2023 the deadline is the latest date of:

• 6 October 2024
• 6 months after the member has made their choice of benefit
• a year after the remediable service statements have been issued

Where you do not automatically issue a pension savings statement, members can still request a revised pension savings statements for the affected tax years in the remedy period. The deadlines for sending these have been extended to the latest date of either:

• 6 months after receiving the request
• 6 October 2024

Annual allowance charges made through scheme pays

When a member has a new or additional annual allowance tax charge to pay as a result of the remedy between and including the tax years 2019 to 2020 and 2022 to 2023, members can elect the scheme to pay on a mandatory basis. This will make you jointly and severally liable to pay the annual allowance charge. They can do this even if:

• the pension input amount for the tax year does not exceed £40,000
• the tax is not £2,000 or more
• the member has crystallised all of their scheme benefits before they make the scheme pays election

For the scheme pays election to be made on a mandatory basis, the member must notify you by either:

• 86 July 2025 — for active or deferred members
• 86 July 2027 — for pensioners

If a member does not elect for scheme pays by the deadline, they can still ask you to pay the tax charge. If they do this, they will be solely liable to pay the annual allowance charge together with any additional interest or penalty charges that arise.

Reporting new or additional annual allowance charges under scheme pays

Where you are paying a new or additional annual allowance charge under scheme pays as a result of the remedy, you should not amend any previously submitted Accounting for Tax (AFT) return for the member.

Report new or additional annual allowance charges under scheme pays on the AFT return in the quarter after you receive the scheme pays election.

When reporting the additional tax on the AFT return, you will need to provide details of the new or additional annual allowance tax charge for the relevant tax years.

If you are a Chapter 1 scheme administrator you will also need to provide:

• confirmation of who reported and paid the original annual allowance tax charge (if this was another scheme, the pension service tax reference of the scheme)
• the amount of the original annual allowance tax charge and the date it was paid
• the tax year which the annual allowance tax charge relates
• details of the AFT quarter the original annual allowance tax charge was reported

Normal AFT filing and payment deadlines apply for paying these charges. If payment is not received by the due date, you’ll be charged interest and penalties if the election was made on a mandatory basis.

Decreases in previous annual allowance charges

Where you previously paid an annual allowance tax charge under scheme pays and the charge reduces as a result of the remedy, for the tax years including and between 2019 to 2020 and 2021 to 2022, you will be due a refund from HMRC.

You must not amend the AFT return that it was originally reported on. HMRC will provide you with a form containing details of members, where as a result of the remedy, their annual allowance tax charge has decreased, and the original annual allowance tax charge was paid by the scheme. You will need to check the information provided and submit your response through the Secure Data Exchange Service.

We will raise a credit on the scheme to issue a refund for the agreed amount and you can view this on your pension scheme financial information.

You will have until 1 April 2027 to reclaim any annual allowance overpayment of tax.

Where the member had a reduction in annual allowance tax charge, as a result of the remedy, for any tax years before 6 April 2019, you will need to compensate the member if they ask for compensation.

Information to send between scheme administrators

When rolling back a Chapter 1 member who had previously made an election for scheme pays for tax years within the remedy period, the new scheme administrators must send the following information to the member’s legacy scheme:  

• the member’s name
• the member’s National Insurance number
• the scheme name and pension scheme tax registration number
• the date and amount of the scheme pays election
• if the scheme pays election was mandatory
• the tax year the charge relates to
• the amount of tax charge paid
• the date of payment of the tax charge
• the quarter and year the tax charge was reported

This information is required for the legacy scheme to process any changes in annual allowance tax during the remedy period.