Check how your lifetime allowance is affected by the public service pensions remedy
If you have pension lifetime allowance protection or have had a benefit crystallisation event, check if the public service pensions remedy (known as McCloud) has affected these.
How the public service pensions remedy could have affected your lifetime allowance charges
Before 6 April 2023, if the combined value of all your pension funds were over either the standard lifetime allowance or a higher protected lifetime allowance, you would have to pay a lifetime allowance charge on the excess amount.
If you have had a benefit crystallisation event (when the value of your pension is tested against the lifetime allowance, for example, when your pension is first put into payment) in a public service pension scheme, the amount of lifetime allowance used up might have been affected by the public service pensions remedy.
The type of public service pension scheme you are a member of will determine how you are affected.
If you’re not sure if you’re affected by the public service pensions remedy, you can check if the remedy affects you or read the full guidance on the remedy.
Chapter 1 scheme member
If you have been rolled back into a Chapter 1 legacy scheme, any benefit crystallisation events that have happened under the new scheme before 1 October 2023 will be treated as having happened under the legacy scheme, with the exception of the part of the benefit crystallisation event relating to:
- any pensionable service on or after 1 April 2022
- member voluntary contributions
- transfers received by the Chapter 1 new scheme
If you have an updated benefit crystallisation event, your scheme administrator will send you an updated benefit crystallisation event statement with any changes to the amount of lifetime allowance you have used.
Chapter 2 scheme member
If you are an unprotected or a taper-protected member of a Chapter 2 scheme and decide to take the legacy scheme benefits, any benefits you received from the 2015 scheme will now be treated as if they came from the legacy scheme. This means that any benefit crystallisation events that took place in the 2015 scheme will be treated as if they didn’t happen, with the exception of any part of the benefit crystallisation event relating to:
- member voluntary contributions
- transfers received by the 2015 scheme
You will receive an updated benefit crystallisation event statement showing the updated percentage of lifetime allowance used, even if it’s 0%.
If you are a taper-protected member and choose the 2015 scheme, any benefits you received from the legacy scheme relating to service from 1 April 2015 will now be treated as if they were always under the 2015 scheme. As these benefits are moving from an unregistered scheme to a registered pension scheme, you will receive a new benefit crystallisation event statement, letting you know the updated amount of lifetime allowance used.
Chapter 3 scheme member
If you’re a member of a Chapter 3 scheme, the extension of the final salary underpin could entitle you to extra benefits. If you receive these extra benefits, any previous benefit crystallisation events will not be updated.
If you receive extra benefits that are put into a payment, they will be paid as a new benefit crystallisation event starting from that date. You will get a new benefit crystallisation event statement confirming the amount of lifetime allowance used by this new event. The lifetime allowance that will be used for testing against these extra benefits is based on the lifetime allowance value at the time when the extra benefits are put into payment.
If you receive a revised benefit crystallisation event statement
You will get a revised benefit crystallisation event statement from your public service pension scheme if the amount of lifetime allowance used has changed. This may mean that you have a:
- new lifetime allowance charge
- increased lifetime allowance charge
- decreased lifetime allowance charge
You must tell HMRC about any changes to your lifetime allowance charge position.
Update other pension schemes about changes in your lifetime allowance
If you have had a benefit crystallisation event under another pension scheme after your public service pension scheme benefit crystallisation event, you will need to share any updated benefit crystallisation event statement with the scheme administrator of that scheme.
If the amount of lifetime allowance used has increased and you have a new or increased lifetime allowance charge in a non-public service pension scheme, the scheme administrator can apply for the charge to be discharged, meaning you are solely liable for the charge. If the charge occurred because of the public service pensions remedy, you can ask your public service pensions scheme to pay the charge for you.
If your lifetime allowance charge decreased
If your lifetime allowance charge decreased and the benefit crystallisation event occurred between 6 April 2015 and 5 April 2019, you can claim compensation for the difference.
If your charge decreased and the benefit crystallisation event was between 6 April 2019 and 5 April 2023, HMRC will refund the difference. Depending on who paid it, it will either be refunded:
- directly to you, if you originally paid the charge
- to your scheme administrator, if they originally paid the charge — they will request the refund and adjust your benefits accordingly
You should use the Calculate your public service pension adjustment service to report the changes to HMRC.
If you got a new or increased lifetime allowance charge
If you have a new or increased charge and the benefit crystallisation event occurred between 6 April 2015 and 5 April 2019, in most cases neither you nor your scheme administrator will have to pay any additional tax due to the remedy.
If you have a new or increased charge and the benefit crystallisation event occurred between 6 April 2019 and 5 April 2022, you will be jointly liable for this with your scheme administrator. Your scheme administrator will let you know how much the lifetime allowance charge is.
Report any new or increased lifetime allowances charges using the Calculate your public service pension adjustment service.
If you have a lifetime allowance charge for the tax year 2022 to 2023, you should report this on your Self Assessment tax return as normal. If you are unsure if the amount of the charge will change, you should complete your Self Assessment tax return based on the information given to you by your pension scheme administrator at the time.
If there are any changes following the remedy, you should report any new or increased lifetime allowances charges through the Calculate your public service pension adjustment service.
Extended time limits and deadlines
The time limits have been extended where tax charges have occurred as a result of the remedy, between 6 April 2019 and 5 April 2023.
Where there are changes to liability to these tax charges, the remedy makes retrospective changes these. You will be able to use the calculate your public pension adjustment service to report changes to any lifetime allowance charges.
If you are impacted by the remedy, you must report charges, or changes to previous charges by 31 January 2025 if you are a member of a:
- Chapter 1 scheme who, before 1 October 2023 had not started to take a pension, or if you’re a beneficiary of a deceased member they had not died before this date
- Chapter 2 scheme
- Chapter 3 scheme
You must report any charges or changes to previous charges by 31 January 2027 if you are affected by the remedy and you were a pensioner or the beneficiary of person who had died before 1 October 2023.
If you are more than one type of member, such as active in one scheme and pensioner in another, you have until the later of the dates to report charges, or changes to previous charges, to HMRC.
Overpaid tax originally paid by the member
Where, as a result of the remedy, you have previously overpaid tax, you will be able to request a refund from HMRC. We will let you know if your refund request is successful or not.
If you are impacted by the remedy, you must report charges, or changes to previous charges by 31 January 2029 if you are a member of a:
- Chapter 1 scheme who, before 1 October 2023, had not started to take a pension, or if you’re a beneficiary of a deceased member they had not died before this date
- Chapter 2 scheme
- Chapter 3 scheme
You must report any charges or changes to previous charges by 31 January 2031 if you are affected by the remedy and you were a pensioner or the beneficiary of person who had died before 1 October 2023.
Repayment interest
If, as a result of the remedy, you have a decrease in your lifetime allowance charge between 6 April 2019 and 5 April 2023, we will work out repayment interest based on the tax year which the charges relate to.
Lifetime allowance protection
Different lifetime allowance protections have been introduced since 6 April 2006. They protect you from reductions in the standard lifetime allowance. If you have or previously had lifetime allowance protection, it might have been affected by the remedy.
Apply for individual protection 2016
You can apply for individual protection 2016 if after the remedy the value of your pension pot on 5 April 2016 is above £1 million. This could have happened if you are:
- a Chapter 1 scheme member and elect for new scheme benefits
- a Chapter 1 scheme member who rolls back from the new scheme to the legacy scheme
- a Chapter 2 taper-protected member and elect for 2015 scheme benefits
- an unprotected Chapter 3 scheme member
How fixed protection 2016 is affected
If you have fixed protection 2016, you will not lose this protection from an increase in benefits as a result of the remedy if you are a:
- Chapter 1 member and choose new scheme benefits
- Chapter 3 member
This is because any benefit accrual that has happened as a result of your election or the underpin (for Chapter 3 members) is not included when considering if benefit accrual has occurred.
Your pension scheme must also transfer the sum and assets representing your uncrystallised rights under the partnership pension account to the relevant legacy scheme if you are a Chapter 1 or Chapter 2 member and:
- hold rights under the partnership pension account
- made a choice for the legacy scheme
If you hold Fixed Protection 2016, this transfer will be ignored when considering if it is a permitted transfer, and so will not affect your protection.
Reinstate previously lost lifetime allowance protection
You can ask for your one of the following lifetime allowance protections to be reinstated if the reason you lost it (for example, joining a new pension scheme) no longer applies:
- enhanced protection
- fixed protection
- fixed protection 2014
- fixed protection 2016
You can also ask for your protection to be reinstated if the original reason that you lost your protection no longer applies, but you have since done something to lose your protection. You will need to tell HMRC about the change in the date of loss of your protection. This will only be relevant for you if you have had a benefit crystallisation event between the two dates.
How pension sharing orders are affected
If you have a pension sharing order and are a pension debit or pension credit member (for example following a divorce) of a Chapter 1 or Chapter 2 scheme, how your pension debit or credit is treated may be impacted.
Pension debit member
If your pension sharing order includes pension rights related to remediable service, the amount of the debit will be determined by your chosen benefits. This means that as a pension debit member, your entitlement could increase or decrease.
Pension credit member
If you are a pension credit member and the pension sharing order includes pension rights related to remediable service, you will receive pension rights based on the higher value between the cash equivalent transfer value for legacy scheme accrual or new scheme accrual.
The pension credit amount may change, but the change will not apply retrospectively if the pension sharing order was made:
- before 1 October 2023 for a Chapter 1 scheme
- before the options exercise for a Chapter 2 scheme
If your pension credit benefits are in payment and the amount of your pension credit changes, your original benefit crystallisation event will not be changed.