Annual allowance: pension input amounts: pension increase exchanges (or ‘PIEs’)
It may be decided to alter the existing terms of a defined benefits arrangement by offering ‘pension increase exchanges’ (known as PIEs) - where a pension which would normally be due guaranteed levels of increases is exchanged, as an option, for a higher pension with no future increases.
A PIE done as an exercise for pensioner members should not be subject to the annual allowance if any BCE 3s that occur as a result of the increase in pension do not occur in the last pension input period for the arrangement
PIE at retirement
The increase in the starting amount of pension as a result of the PIE would be tested for annual allowance purposes in the pension input period during which the PIE is granted at retirement. This is due to the extra amount of BCE 2 that is added back into the closing value for the purpose of the pension input amount.
Promising the member the option to postpone the PIE one year after retirement
Giving the member the option to postpone the PIE until, for example, one year after retirement could be an avoidance inspired post entitlement enhancement.
Depending on the circumstances, this might be distinguished from a member having the option one year after retirement because of the scheme happening not to offer the option generally to pensioner members until that time.
Deferred member carve-out
A PIE offered to a member who currently qualifies for the deferred member carve-out is likely to mean that the carve-out will no longer apply. This is likely to be due to the increase being offered under an option introduced into the scheme rules after 14 October 2010. The increase in deferred pension would be measured for annual allowance purposes in the pension input period in which the PIE is granted, as well as causing the loss of the carve-out.