Annual allowance: transitional rules for tax year 2015-16: pension input periods
Section 228C Finance Act 2004
Transitional annual allowance rules apply for tax year 2015-16.
For annual allowance purposes only, the 2015-16 tax year is split into two ‘mini’ tax years - the ‘pre-alignment tax year’ and the ‘post-alignment tax year’ (see PTM058010 for more details).
An individual’s total pension input amount must be calculated for either, or each, of the pre and post-alignment tax years.
In order to test the total pension input amounts for the pre and post-alignment tax years there are transitional rules covering the way pension input periods start and end for an arrangement during each ‘mini’ tax year.
Pension input periods for the pre-alignment tax year
Sections 238 & 238ZA Finance Act 2004
Pension input periods that apply for the pre-alignment tax year in respect of an arrangement are those pension input periods which end that ‘mini’ tax year. The pre-alignment tax year runs from 6 April 2015 to 8 July 2015.
Any pension input periods open on 8 July 2015 are ended on 8 July 2015, whether they started during the pre-alignment tax year or in tax year 2014-15. This is also regardless of when the pension input period might have ended but for the transitional rules.
In practice, this means there might be one or two pension input periods ending in the pre-alignment tax year for any one arrangement.
The next pension input period starts on 9 July 2015.
Pension input periods for the post-alignment tax year
Sections 238, 238ZA & 238ZB Finance Act 2004
Pension input periods that apply for the post-alignment tax year are any that start on or after 9 July 2015 but no later than 5 April 2016 (i.e. any that start during the post- alignment tax year).
Any pension input periods that start during the post-alignment tax year will end on 5 April 2016.
Typically a pension input period for an arrangement will start during the post-alignment tax year because:
- it started on 9 July 2015 as a consequence of the previous pension input period for the arrangement ending on 8 July 2015, or
- it is the very first pension input period for the arrangement, such as for a new arrangement starting on or after 9 July 2015 (if the first pension input period starts on 5 April 2016 it will also end on the same 5 April 2016).
In practice this means any arrangement has one pension input period ending in the post-alignment tax year.
After the one ending on 5 April 2016 the next pension input period for an arrangement is the tax year 2016-17 (i.e. starting on 6 April 2016 and ending on 5 April 2017) and so on for subsequent tax years.
Carl’s only arrangement has a pension input period that started on 1 June 2014 and ended on 31 May 2015.
The next pension input period for the arrangement started on 1 June 2015 and, in the absence of the transitional rules, would have ended on 31 May 2016 (i.e. it would have ended in tax year 2016-17).
Instead, under the transitional rules, the pension input period that started on 1 June 2015 ended on 8 July 2015.
This means that Carl’s total pension input amount for the pre-alignment tax year (6 April 2015 to 8 July 2015) is the aggregate of the pension input amounts for the periods 1 June 2014 to 31 May 2015 and 1 June 2015 to 8 July 2015.
The following pension input period for Carl’s arrangement starts on 9 July 2015 and ends on 5 April 2016. (The pension input period after that being the tax year 2016-17 - i.e. starting on 6 April 2016 and ending on 5 April 2017 and so on for subsequent tax years.)
How the pension input amounts are calculated for the periods 1 June 2014 to 8 July 2015 and 9 July 2015 to 5 April 2016 depends on the type of arrangement (i.e. whether other money purchase, defined benefits, cash balance).