Annual allowance: tax charge: scheme pays: member notice requirements
The Registered Pension Schemes (Notice of Joint Liability for the Annual Allowance Charge) Regulations 2011 - SI 2011/1793
The member must elect to require the scheme administrator of their pension scheme if they want the scheme to pay an amount of their annual allowance charge liability in return for an appropriate reduction in their pension savings or accrued benefits. This notice must be in writing and must be signed and dated. If the notice is submitted electronically then the member must confirm that they have personally submitted the notice.
Once a member has given their scheme administrator a notice and this has been received by the scheme this cannot be revoked or withdrawn but it can be amended at a later date if the amount of the member’s annual allowance charge changes. (See PTM056440).
PTM056430 has details about the deadlines for giving a notice.
The information required on the notice
The notice given by the member must contain the following information:
- full name
- address (including postcode, if applicable)
- national insurance number (or, if they do not have one, the reasons why they do not qualify for a national insurance number).
Also the member must state:
- the tax year to which the annual allowance charge liability relates
- the amount of their annual allowance charge liability that the member wants the scheme to pay on their behalf for that year, and
- confirmation that the amount of the liability they want the scheme to pay has been calculated at the proper rate.
They must also confirm in the notice that they understand that:
- they cannot withdraw the notice, and
- their benefit rights in the pension scheme will have to be adjusted to take account of the tax that will be paid on their behalf by the scheme.
As well as the information listed above, the member’s notice might need to include confirmation that their total annual allowance charge liability for the tax year exceeds £2,000. This information is necessary only when the member requires their scheme to pay an amount of £2,000 or less.
The member must give this information as one of the conditions for allowing them to require their scheme to pay an amount of their annual allowance charge liability for a tax year, is that their total liability for the year exceeds £2,000.
If their total liability is less than £2,000 they cannot require the scheme to pay although the scheme may do so on a voluntary basis.
Further information needed for the notice if it is given in the year that all benefits are taken (or BCE 5, 5A or 5B occurs)
Where a member will be taking all their benefits from a scheme in a year that they want their scheme to pay their annual allowance charge they will need to give some additional information.
This will be needed only if they give their notification in the same tax year to which their annual allowance charge liability relates. For example, the member gives their notice in the tax year 2012-13 in respect of a liability for that same tax year.
The additional information is that:
- before the end of the tax year, the member intends to take all of their benefits from the pension scheme that they have given the notice to (for example they are approaching their pension scheme retirement age but they have not yet told the scheme that they intend to retire at that time)
at age 75 there will be no change in relation to the following arrangements they have in the scheme that they have given the notice to:
- defined benefit rights not yet in payment will remain undrawn
- funds in a money purchase arrangement or cash balance arrangement that they have not yet drawn (‘uncrystallised funds’) will remain as uncrystallised funds
- drawdown pension funds that started after 5 April 2006 will still be in place.
This particular information is necessary only if the member will reach age 75 in the tax year.
The reason for giving this information is to forewarn the scheme administrator that the member may, for example, take their benefits from the scheme before the scheme may have paid the tax that they have required it to pay. A pension scheme might decide that in order to reduce the member’s benefits to take account of the tax that been paid on their behalf before their benefits are paid that it will not allow the member to take their benefits until the tax liability has been settled. This would mean that no reduction would need to be made once the member’s benefits have come into payment.