Guidance

Pension schemes newsletter 137 ― February 2022

Published 28 February 2022

1. Public service scheme members with fixed or enhanced protection

To keep fixed or enhanced protection your members must take action by 1 April 2022.

As a public service employer or scheme administrator of a public service pension scheme, if you think that some of your members may hold a form of fixed or enhanced protection from lifetime allowance charges, you need to tell them to take action before 1 April 2022 if they want to avoid losing their protection.

Your members may wish to seek independent financial advice to help them to understand the impacts and decide the best course of action regarding protections from lifetime allowance charges.

1.1 Background

In 2015 the government introduced new career average schemes to replace a range of existing public service pension schemes. These career average schemes are commonly referred to as reformed pension schemes. At the same time the Government introduced transitional protection to accompany reformed pension schemes. This protection was for members within 10 years of their pension scheme’s normal pension age when the reforms were announced in 2012. Transitional protection allowed them to remain in their existing scheme (legacy schemes) until they retired. Those within 13 and a half to 14 years could choose to remain in their legacy scheme for a period of time. All other members moved to their reformed scheme immediately. It was this difference in treatment that the court found to be discriminatory (the McCloud case).

From 1 April 2022, all active members of public service schemes will accrue benefits under the reformed pension scheme.

To remedy the discrimination, in 2023 the government will return individuals to their legacy scheme for the period 1 April 2015 to 31 March 2022. This will mean that individuals who originally lost their enhanced or fixed protection solely due to joining the reformed scheme (and not due to a subsequent action, such as benefit accrual) will not have lost their protection. However, they will lose their protection if they accrue benefits under the reformed scheme from 1 April 2022.

To keep fixed or enhanced protection:

• individuals who have not yet joined the reformed scheme will need to opt out of joining that scheme by 1 April 2022.
• individuals already in the reformed scheme will need to stop accruing benefits from 1 April 2022

Members will need to speak to you, as the scheme administrator, about how to:

• opt out of the reformed scheme
• stop accruing benefits from 1 April 2022

We’ll provide further guidance on what members need to do to reinstate their protection as a result of the 2023 McCloud remedy, at a later date.

2. Loss of Lifetime Allowance protection

We want to remind you to encourage your pension scheme members to make sure they tell us as soon as possible if they have lost their Lifetime Allowance protection.

They can lose their enhanced protection or any type of fixed protection if:

• they make new savings in a pension scheme
• they’re enrolled in a new workplace pension scheme
• they transfer money between pension schemes in a way that does not meet the transfer rules
• they have enhanced protection and, when they take their pension benefits, their value has increased more than the amount allowed in the enhanced protection tax rules – this is called ‘relevant benefit accrual’
• they have fixed protection and the value of their pension pot in any tax year grows at a higher rate than is allowed by the tax rules – this is called ‘benefit accrual’.

You can also refer them to the Pensions Tax Manual for more information to help them determine if they’ve lost their Lifetime Allowance protection.

Members must tell HMRC in writing if they think they’ve lost their Lifetime Allowance protection. They’ll need to provide us with:

• their full name, address and National Insurance number
• the exact date that they lost protection
• the reason why they lost protection (for example benefit accrual, auto enrolment)
• the type of pension arrangement (defined contribution or defined benefit)
• their original certificate (if you still have it), these were not issued for Individual Protection 2016 or Fixed Protection 2016

3. Relief at source

3.1 Notification of residency status report for 2022 to 2023

You should now have received your January 2022 notification of residency status reports. As we explained in Pension schemes newsletter 135 you had 6 days (144 hours starting from when we made the report available to you) to download your file. You should have received an email and a reminder when your file was available for you to download.

Email us at: reliefatsource.administration@hmrc.gov.uk and put ‘Relief at source – January 2022 residency report’ in the subject line if you:

• did not receive your report by the end of January 2022 and submitted your annual return of information for the previous tax year

• have questions about the data within your report

3.2 If you did not receive a notification of residency status report

If you did not receive a residency report in January 2022, you can check your members’ residency status for relief at source. You can check the residency tax status for single or multiple members or default to the UK basic rate for your members.

You should also use this service to check a member’s residency status if they:

• do not appear on your notification of residency status report
• are unmatched

Use the rest of UK residency status if:

• you cannot check a member’s status before you apply for relief at source for them
• they do not appear on either the annual report or the look up service

You must not apply a tax rate based on the member’s address. Once you have used a residency status to claim relief at source for a member, you must use this for the whole of the tax year, even if their residency status changes.

4. Digitisation of relief at source

The government confirmed at Spending Review 2021, that it will invest to improve the administration of pension tax reliefs. We’re committed to delivering a modern, data driven tax administration system for pensions. This includes work to digitise the current paper claims system for relief at source to improve the process and reduce errors occurring for you, your members, employers and HMRC.

In response to the Call for Evidence published in October 2021, the government said that it would work closely with you to ensure that the changes deliver a digital solution to:

• support the provision of information and declarations
• provide quicker payments to relief at source schemes and help reduce errors

We’ll also legislate in a future Finance Bill to provide the proper framework to achieve this.

Since the publication of the response, we’ve been developing our understanding of you, as our customers, to help inform the design of the new digital service; we’ve already asked some of you to help us understand how you currently operate relief at source.

We are :

• establishing a working group to ensure that your views and needs are fed into the design process for the digitisation of relief at source

• developing the plans on how this working group will contribute to the project and how we make the most of your valued time, which we’ll share with you shortly.

If you would like to like to join the working group, email us at: pensionsprogramme@hmrc.gov.uk and put ‘Digitising relief at source working group’ in the subject heading.

5. Scheme Pays reporting

As mentioned in Pension schemes newsletter 134, the government is legislating through Finance Bill 2021-22 to extend Scheme Pays reporting and payment deadlines in relation to annual allowance charges. The government also intends to extend further deadlines through secondary legislation to ensure that Scheme Pays works as intended for previous tax years.

Draft regulations were published for technical consultation on 18 February 2022. The consultation closes on Tuesday 15 March 2022. Responses can be sent to pensions.policy@hmrc.gov.uk.

6. Managing pension schemes service

6.1 Pension scheme migration

In Pension schemes newsletter 136 we told you that from early April 2022 scheme administrators will be able to migrate their pension schemes from the Pension schemes online service to the Managing pension schemes service. We can now tell you that the feature for migrating pension schemes will be released on 11 April 2022.

Scheme administrators must be enrolled on the Managing pension schemes service to be able to migrate their pension schemes.

To migrate pension schemes to the Managing pension schemes service, you’ll need to provide some up-to-date information for each scheme. You can find information on how to prepare to migrate your pension schemes.

If you’ve enrolled on the Managing pension schemes service you can view a ‘read only’ list of pension schemes that were registered on the Pension schemes online service. Only schemes with a status of ‘open’ will be included in the list.

Check guidance on how to notify us if you:

• can see schemes that are inactive and should be wound up
• can see schemes that you do not recognise
• cannot see listed all the schemes you have registered on the Pension schemes online service

If you’ve enrolled but have not viewed your list of pension schemes, we’d encourage you to do this as soon as possible and take any action necessary to prepare for migration.

You cannot migrate your pension schemes until 11 April 2022. You should not try and re-register any existing pension schemes. If you have incorrectly tried to re-register an existing pension scheme that you’re an administrator for, please email migration.mps@hmrc.gov.uk and put ‘Incorrect scheme registration’ in the subject line.

6.2 Filing Accounting for Tax returns

From 14 March 2022, you’ll no longer be able to compile and submit any new Accounting for Tax (AFT) returns for any quarter from 1 April 2020 on the Pension schemes online service.

This means that if you need to submit a return for the quarter 1 January 2022 to 31 March 2022, you must migrate your pension scheme in time to compile and submit the return by the filing deadline of 15 May 2022. If you think this will cause issues for you, please email migration.mps@hmrc.gov.uk using ’31 March 2022 AFT’ in the subject line. We’ll then contact you to discuss this further.

You can find information on how to submit an Accounting for Tax return on the Managing pension schemes service. If you’ve compiled, but not yet submitted, a new return on the Pension Schemes Online service for any quarter from 1 April 2020, you’ll not be able to successfully submit this on that service from 14 March 2022. If you try to do this, you’ll receive an error message explaining that you’ll need to re-compile and submit the return on the Managing pension schemes service.

If you’ve already submitted a return for a quarter between 1 April 2020 and 31 December 2021 on the Pension schemes online service, you’ll still be able to view and amend these on that service.

Between 14 March 2022 and 11 April 2022, you’ll be unable to submit any new AFT returns for a pension scheme with a PSTR beginning with ‘0’. If this you think this will cause issues for you, email migration.mps@hmrc.gov.uk and put ‘AFT submission issue’ in the subject line.

6.3 Bulk reporting for Accounting for Tax returns

From 11 April 2022, when compiling an Accounting for Tax (AFT) return on the Managing pension schemes service, you’ll be able to bulk upload data from a spreadsheet, directly on to the service to populate the return.

This means that from 11 April, you’ll be able to upload the details of:

• annual allowance charges
• lifetime allowance charges
• overseas transfer charges

You’ll need to upload a different spreadsheet for each charge. If you upload more than one spreadsheet for the same charge, the original upload will be overwritten.

All spreadsheets will need to be uploaded as CSV files. The CSV files will be available on the service. However, if you’d like to see a version of this in advance to prepare your systems, email: pensions.administration@hmrc.gov.uk using ‘AFT CSV file’ in the subject line.

6.4 Filing Accounting for Tax returns using third party software

From 14 March 2022, you’ll no longer be able to successfully submit any Accounting for Tax (AFT) returns for any period using third party software. You’ll need to compile and submit the return directly on the relevant service as previously explained.

If you try to submit a return using third party software, you’ll receive an error message signposting you to guidance on how to submit the return.

6.5 Pension scheme practitioners

If you’re a pension scheme practitioner who files Accounting for Tax (AFT) returns on behalf of a scheme administrator, you must make sure you’ve enrolled on the Managing pension schemes service before you’ll be able to submit any returns.

After the pension scheme administrator has successfully migrated the pension scheme, you’ll automatically be authorised to the scheme if you’ve enrolled on the service. You’ll then be able to submit any AFT returns on behalf of the pension scheme administrator.

6.6 Payments relating to accounting for tax returns

For a short period of time, from 14 March 2022, you’ll be unable to make a payment for a charge using the Pension Scheme Tax Reference (PSTR) as the reference.

If you need to make a payment, you must use the relevant charge reference so that your payment is allocated correctly.

If you do not know what the correct charge reference is, you should email pensions.administration@hmrc.gov.uk and put ‘Accounting for Tax – charge reference’ in the subject line of the email.

We’ll confirm when you can start making payments using the PSTR as the reference in a future newsletter.

6.7 Schemes without a Pension Scheme Tax Reference (PSTR)

Some pension scheme administrators do not currently have access to a number of pension schemes that were registered before 6 April 2006. For many of these schemes, you may only hold the superannuation fund (SF) reference number, rather than a PSTR.

If you’re a scheme administrator for a pension scheme that you do not currently have access to, you’ll need to tell us that you are the scheme administrator, to make sure that the pension scheme appears on your list of pension schemes available to migrate.

If you have 5 or less of these pension schemes

Complete Appendix D of the Managing pension schemes newsletter – March 2021 Email the appendix to: migration.mps@hmrc.gov.uk and put ‘Pre-A Day pension schemes’ in the subject line.

If you have more than 5 of these pension schemes:

Send an email with ‘Multiple Pre-A Day schemes’ in the subject line, to: migration.mps@hmrc.gov.uk. We’ll provide further instructions on how to tell us about these pension schemes.

We’ll let you know when we have processed this information and any next steps you need to take.