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Extension to Phase 7 Automation - Scheme Financial Reconciliation (SFR)
In response to concerns raised across the Pensions Industry, we are extending Phase 7 Automation and Scheme Financial Reconciliation.
What is happening in the extended period
We will be re-running the automated exercises below:
- Not In Scheme – Contributions Equivalent Premium (NIS CEP)
- CEP Debit
- Scheme Financial Allocations
- CEP Enforcement
We will also be running exercises which have been deferred from the original Phase 7 plan, these are:
- SFR Enforcement
- Final Scheme Membership Data Output
What this means for Pension Scheme Administrators (PSAs)
After the 31 October 2018 deadline date for Scheme Reconciliation Service (SRS) queries or the 31 December deadline date for Scheme Cessation queries, you may have identified members where:
- you have liability in your scheme
the period of service meets the following automated solution CEP criteria:
- the period of contracted-out ends in the 1987/88 tax year or earlier and the total period spans no more than six tax years
- the period of contracted-out ends in the 1988/89 tax year or later and the total period spans no more than three tax years
- you would like HMRC to record a CEP
- you would like to pay the CEP
The NIS CEP solution allows you to do so.
Additionally, you may have received a clerical CEP bill that:
- you have not paid
the following clerical CEP bill payment timescales have expired:
- a CEP was shown as not paid 4 months after the issue date of the original clerical CEP bill (not the reminder bill) therefore HMRC has automatically cancelled the CEP and re-instated liability in your scheme
- HMRC needed your payment and payment breakdown within 3 months of the issue date of the original clerical CEP bill to ensure the CEP was shown as paid within 4 months
- HMRC has automatically re-instated liability in your scheme for non-payment of the CEP
- you would like HMRC to re-instate the CEP
- you would like to pay the CEP
The NIS CEP solution allows you to do so.
All legislative CEP criteria for submission of a CEP still applies other than the period. The automated solution cannot validate periods of service, it can only validate tax years.
NIS CEP is not a calculation service. HMRC will record a CEP and debt will be raised in your scheme financial account. This debt will either be offset by money held in your scheme or will be billed in the re-run of the billing exercise.
If you have previously sent a clerical SRS query incorrectly asking HMRC to record a CEP which you have paid within the clerical bill payment timescales and you want to re-instate liability in your scheme, the CEP Debit solution allows you to do so.
The money you have paid for the incorrectly clerically notified CEP will be used to offset debt within your scheme or will be refunded in the re-run of the refund exercise.
Additionally, if you have previously sent an automated SRS query incorrectly asking HMRC to record a CEP then you can use the CEP Debit solution to correct this. The debt will be cancelled and will not be billed in the re-run on the billing exercise. Any money previously offset against the debt will become available for offsetting again or will be refunded in the re-run of the refund exercise.
Additionally, if you have received a breakdown of your bill from the original Phase 7 SFR billing exercise and:
- a clerically notified CEP debt for a member has passed the clerical bill payment timescales (see notes below)
- you want to re-instate liability in your scheme
The CEP Debit solution allows you to do so.
Note 1: The issue date of the original CEP bill is shown as the ‘receivable raised date’ on breakdowns from the SFR billing exercise.
Note 2: There are instances of CEP debt on SFR breakdowns that fall outside the clerical bill payment timescales but HMRC has not cancelled the CEP and re-instated liability in scheme. This is due to a historic HMRC IT system issue which has been resolved since the debt was raised.
Scheme Financial Allocations
If you have paid your bill from the original Phase 7 SFR billing exercise we will be allocating your payment to the debt included in your bill amount i.e. your debt that was raised on or before 11 January 2019.
We will also be re-running all our scheme financial allocation exercises with a revised cut-off date in advance of the re-runs of the billing and refund exercises. This will allocate all outstanding money to all outstanding debt within your scheme.
Our allocation exercises generally allocate money to oldest debt first. This means that money paid for one member may be offset against debt for another. However, unlike SRS, the allocations, refunds and billing exercises are reconciling the overall scheme financial position not that of individuals within the scheme.
If you have paid any clerical CEP bills after the payment timescales and the money has not been used in offsetting debt within your scheme we will:
- identify these for you
- cancel the liability in your scheme
- re-instate the CEP
- allocate your payment to the debt
- mark the CEP as paid
This automated solution does not require any input from PSAs.
We will be re-running the SFR Billing Exercise with a revised cut-off date. Therefore if you have been unable to agree and pay your bill from the original run, you can choose not to pay until you receive a revised bill from the re-run, assuming you are still in debt overall.
The cut-off date for the re-run will be after all clerical SRS queries are complete to remove the confusion that has been caused by HMRC reconciling financials whilst clerical financial activity is ongoing. We currently expect all clerical queries to be completed by the end of June 2019.
For this reason also, we are inhibiting all clerical CEP bills and this came into effect in the week commencing 29 April 2019. The debt that would have been clerically billed will be picked up in the re-run of the billing exercise unless it is offset in our allocations exercises.
Any previously issued clerical bills should continue to be paid within the clerical bill payment timescales to prevent the automatic cancellation of the CEP and reinstatement of liability in scheme. The latest date of issue on any clerical bill will be 3 May 2019 which means that reinstatement could take place up to 3 September 2019.
Our billing exercise starts on 6 August 2019 so if you do not want debt that has been clerically billed appearing on your output from the billing exercise, you should pay your clerical bills by the end of June and by mid-July at the latest.
If you pay clerical bills after mid-July but within the payment timescales and the debt appears on your breakdown from the billing exercise, you should deduct the amount already paid from your final SFR billing amount before submitting your final payment.
We will also be re-running the SFR refunds exercise with a revised cut-off date.
If you engaged in our SFR process within our original deadline of 28 February and you were in surplus when the original refunds exercise ran then you will still receive a refund. The refund letters have been issued.
You need to bank your cheques from the original refund exercise because the money has been used in your payment. This means it will not be available for the re-run of the refund exercise.
For the same reasons that we have inhibited the clerical CEP bills, we are also not clerically refunding CEPs and Limited Revaluation Premiums (LRPs). These will be refunded as part of the refund exercise unless they are used in offsetting in our allocations exercises.
We have deferred the SFR Enforcement that was originally planned for Phase 7.
This means that if you defer paying your bill from the original billing exercise, liability will not be re-instated in your scheme for the members included within our bill.
The exercise will now run after the re-run of the billing exercise.
Final SRS Data Cuts
We have also deferred the SRS Final Data cuts that were originally planned following the completion of clerical SRS queries. The exercise will now run after the deferred SFR Enforcement Exercise.
Extended Phase 7 dates that PSAs need to be aware of
SRS query re-runs file submission deadlines
You need to complete NIS CEP and CEP Debit SRS query template which can be found in:
- the Guidance and Templates folder in your SRS e-room, or
- in the New Process – Instructions and Templates folder in your Scheme Cessation Shared Workspace e-room (SWS)
You need to follow both the guidance in your e-room and in the automated solution summary documents or your entire file may be rejected. You will not then be able to re-submit it. See SRS Automation Portfolio - Not in Scheme - CEP Automation Solution and SRS Automation Portfolio - CEP debit automation solution for further information.
You need to load your completed template as a new item in your e-room by close of business on the PSA Input File Deadline Dates below.
You will receive your automated responses by close of business on the HMRC response dates below.
If any of your queries fall out of the automated solution for clerical action you will not receive a response for those but you will still receive a response for any on the same file that were successfully automated.
If you send a SRS query template for queries that are held on SWS, you will not receive an individual SWS response.
You will not receive CEP bills for queries that are successfully processed by the NIS CEP solution but the automated response will show the CEP amount that will be included in the scheme financial allocations, refund and billing exercises.
|Solution||PSA Input File Deadline||HMRC Automation Response||HMRC Clerical Response|
|NIS CEP||Tue, 04 Jun 19||Thur, 11 July||N/A|
|CEP Debit||Tue, 18 Jun 19||Tue, 23 July||N/A|
Outputs from the Billing and Refund Exercises
The automated output from the billing exercise is currently expected on 15 August 2019. We will then need to generate the letters and arrange delivery via post. We still need to discuss this with impacted HMRC stakeholders but we expect the letters to be with you by early September and payments to be returned to us by early October.
The automated output from the refunds exercise is currently expected on 28 August 2019. We will then need to generate the letters and arrange delivery via post. We still need to discuss this with impacted HMRC stakeholders but we expect the letters to be with you by mid-September and refunds will be issued to you via cheques as soon as possible from September onwards.
If you do not receive either a refund or a bill then you can assume that your scheme financial account is in balance. This means that you have no unused funds in your account and no outstanding debt. The majority of schemes are in this position and are therefore already reconciled.
We will provide breakdowns of all bills via SRS or SWS e-rooms as soon as possible after 15 August so that you can see which members are included in your bill and which may be re-instated in your scheme if you do not pay. You therefore need to check your e-rooms regularly and/or switch on overnight notifications for alerts.
We will not provide breakdowns of refunds. There is no enforcement action in relation to refunds and whilst debt always shows the details of the individual members, money does not.
Scheme Financial Allocation and Enforcement
We currently expect to allocate the payments for your final bill by 17 October 2019 and by 8 November, enforce liability back in your scheme for any members who still have an unpaid CEP.
We will not change your liability if you do not pay your LRPs. However we would encourage you to do so. This is debt that is rightly due to HMRC.
In addition, if both CEP and LRP debt is included in your final bill and you deduct the total amount of LRPs from your final payment, we cannot guarantee that we will not allocate your payment to LRPs because the allocations exercise does not make a distinction between the types of debt.
This could mean that in this scenario, even if your intention is to pay all your CEP debt, we cannot guarantee that we will not enforce liability back in your scheme for some of these members.
Final SRS Data Cuts
The final SRS and SWS data cuts will include any members that have been enforced as described above. We currently expect to start issuing these mid to late November 2019.
How this impacts our previous engagement in the SFR Process
If you previously engaged in the SFR Process by requesting your financial position by the original deadline of 28 February 2019, you will be automatically re-engaged for the re-runs of the billing and refunds exercises.
If you engaged after the original deadline of 28 February 2019, we will automatically engage you in the re-runs.
Whether you engaged before or after the original deadline, you will need to re-engage if any of the details you originally provided have changed, for example payee details for refunds. Unless you provide an alternative payee name for refunds, your cheque will be made payable to the scheme name on HMRC records.
If you did not previously engage we would encourage you to do so for the reasons provided in Countdown Bulletin 40 although we will need to consider a cut-off date for this.
We have also made the following changes to our SFR engagement process:
- if you are engaging a new scheme for the first time or re-engaging a scheme because the details previously provided to us have changed, you will need to complete a scheme engagement template.
- you will need to send your completed template to: firstname.lastname@example.org (PT Operations) This is the only inbox we are using for the re-runs of the billing and refunds exercise and you should use it for both live and ceased Defined Benefit (DB) schemes (or DB parts of mixed benefit schemes) regardless of any ongoing clerical activity in the scheme cessation and scheme reconciliation areas.
- we will not be providing surplus and deficit figures in advance of the re-runs of the billing and refund exercises. Feedback from PSAs suggests that these have caused confusion.
For more information read HMRC: pension schemes reconciliation services
Earlier editions of the National Insurance Services to Pension industry: countdown bulletins
Guidance on the end of contracting-out for scheme administrators and trustees HMRC: pension schemes end of contracting-out guidance
For general queries about contracted-out pensions please contact the helpline on Telephone: 0300 200 3507.
General queries about the Scheme Reconciliation Service or Scheme Cessation should be made to the Customer Relationship Team at email: CRM.email@example.com