As a reminder, statements are only issued if:
• a member’s pension input amounts under the scheme for the tax year are more than the annual allowance amount in section 228 Finance Act 2004 (for example, £40,000 for tax year 2016-17), or
• the scheme administrator believes the individual has flexibly accessed a money purchase arrangement and the individual’s money purchase pension input amounts under the scheme for the tax year are more than £10,000.
So, for individuals who are subject to the tapered annual allowance, they will not receive a pension savings statement as a matter of course, unless their input has exceeded £40,000. This could possibly leave a large proportion of people who will need the information having to request it and knowing that they have to request it.
The first group that will be impacted will be those who are contributing to two or more pension schemes and not exceeding the annual allowance in either of them. As the pension input amount in each scheme is less than £40,000 then neither scheme administrator will automatically provide the savings statement but the overall pension input amount could total over £40,000 and therefore an annual allowance charge could be applicable.
We have even heard of cases where both schemes are under the same employer but because they are separate schemes nothing is provided.
The second group, as mentioned above, is those that are impacted by the tapered annual allowance. It isn’t feasible for a scheme administrator to know if a member is impacted by the tapered annual allowance so they couldn’t provide a pension savings statement for all those with pension input amounts of less than £40,000 who are still impacted.
The only way to make sure all those impacted in this case receive a statement would be to provide one to all those with pension input amounts of over £10,000 but the member may still then fall into the category above if they are in more than one scheme.
Thankfully there is still time for those that don’t automatically get the statements to get the correct information in order to calculate if they have an annual allowance charge but members need to know to do this and how to get the information. More and more members are going to be impacted by the tapered annual allowance or at least need the information to check if they are, so this could cause delays.
Thankfully, the scheme pays deadline for those that are eligible for 2016-17 isn’t until 31 July 18, so we do have some time on our hands to get this right and get the scheme to pay.
This all just adds unnecessary complexity to an already complex area of pensions planning, the only way to solve this would be to issue statements to all active members but this would be costly and may also result in more questions that scheme administrators could do without, with everything else they have to deal with currently.
Claire Trott is Head of Pensions Strategy at Technical Connection