Guidance

Newsletter 157 — March 2024

Published 28 March 2024

Statutory Instruments

The following statutory instruments and related explanatory memorandum have been laid and are currently before Parliament.

The Finance Act 2004 (Registered Pension Schemes and Annual Allowance Charge) Order 2024

As announced at Spring Budget 2023, this instrument will allow for negative pension input amount in a legacy public service pension scheme (PSPS) to be offset against positive pension input in a connected reformed PSPS as part of the annual allowance calculation. This will have effect in relation to pension input periods ending in tax year 2023 to 2024 and subsequent years.

The Authorised Surplus Payments Charge (Variation of Rate) Order 2024

As announced at Autumn Statement 2023, this instrument will reduce the amount of tax due on an authorised surplus payment from 35% to 25% from 6 April 2024.

The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024

As announced at Spring Budget 2023, the lifetime allowance will be completely removed from tax legislation from 6 April 2024. These regulations make further minor technical changes to achieve this outcome.

The HMRC Pension Tax Manual will be updated as appropriate to reflect the above changes once the instrument comes into force.

Applications to register new pension schemes

This is a reminder that when we update the status of an application to register a new pension scheme, you can view this online, but all letters are sent by post.  This means that you’ll be able to see the updated status before you receive the letter.

You should wait until you have received a letter before contacting HMRC about any status updates.

Managing Pension Schemes service — additional security

We have introduced a further level of security on the Managing Pension Schemes service to ensure the integrity of our system and the data held within it. This additional security information will be required for all individual scheme administrator and practitioner IDs.

When accessing the service for the first time since the change was introduced on Monday 18 March 2024, you’ll be asked to provide additional information to verify your personal individual details. You’ll need to complete these before being allowed to proceed on to the service.

Once completed, these additional security questions will not be presented to you again.

Relief at source

Welsh Income Tax rates

The Welsh Government has made a commitment not to raise Welsh rates of Income Tax, as outlined in the draft budget announcement in December 2020. This will mean that the rates of Income Tax paid by Welsh taxpayers will continue to be the same as those for 2023 to 2024.

For 2024 to 2025 the Welsh rates are as follows:

• the basic rate will be 20%
• the higher rate will be 40%
• the additional rate will be 45%

You can find more information about Welsh Income Tax in our guide Income Tax in Wales.

As there are no changes to the basic rate for Wales in 2024 to 2025, you should continue to operate relief at source as you do now.

Annual return of information for the tax year 2023 to 2024

To make sure that we can process your annual return of information, you should always use the versions of the spreadsheet and electronic flat text file specifications that are currently on GOV.UK and not a version that you’ve saved from a previous year.

If you’re submitting an annual return of information for the tax year 2023 to 2024 you should use the:

• 2019 version of the relief at source spreadsheet
• 2019 version of the electronic flat text file specifications

It is important that you also make sure that you use the correct naming convention when you submit your annual return through the Secure Data Exchange Service and that the file name reference matches the sub reference included in the return.

You can find details of how you should name your files in both the relief at source spreadsheet and electronic flat text file specifications.

We would like to remind pension scheme administrators to make sure that when they send in their annual return of information, all fields are completed in the correct format and do not include unacceptable characters or exceed the maximum amount of characters.

We have seen examples of files containing too many characters in some fields, for example using decimal points in monetary fields or address fields containing too many characters. The correct structured format for submitting data on your annual return of information can be found on How to complete your annual return of information for pension schemes operating relief at source. If you use the spreadsheet to submit your annual return using the spreadsheet, we’ve included conditional formatting to help you submit the information successfully. This means that if you’ve entered too many characters in a cell, the spreadsheet column header in rows 1 and 2 will turn red and stay red until you have corrected the errors.

It is important to submit your return in the correct format as your file could fail, be rejected or mean you may not get a residency status report for your members.

APSS590 annual return of information declaration

You must also submit the APSS590 — Annual return of information declaration as part of your return. Without the APSS590, we will consider your return to be outstanding and this could lead to future relief at source interim repayments being stopped.

You can send the APSS590 annual return of information declaration either by post or email reliefatsource.administration@hmrc.gov.uk and put ‘APSS590 — Annual return of information declaration’ in the subject line of your email.

Pension scheme return

In Pension Schemes Newsletter 155 we told you about the delay in implementing the new function to submit pension scheme returns on the Managing Pension Schemes service for pensions.

This delay will give you more time to collate and prepare the necessary information required to file your pension scheme return on the Managing Pension Schemes service for the 2024 to 2025 tax year. To help you prepare for this, we published guidance on Pension Scheme Return for Pension Scheme Administrators.

We have recently amended the guidance to remove the information on what you need to know to complete a self invested personal pension (SIPP) pension scheme return on the Managing Pension Schemes service. This is because we are currently reviewing the data for this return, and we will republish an updated version as soon as possible.

Pension scheme migration

Take action to migrate your pension schemes.

As a scheme administrator, if you have not already, you must first enrol on the Managing Pension Schemes service, using the Government Gateway username and password for your existing ‘A0’ administrator ID. If you have multiple scheme administrator IDs, you must enrol on the Managing Pension Schemes service using the username and password for your ‘Master’ ID. 

You can find more information on ‘Master’ and ‘Ancillary’ IDs on GOV.UK.

To migrate your pension schemes, you’ll need to: 

1. Sign in to the Managing Pension Schemes service.
2. Select ‘Add a pension scheme from the Pension Schemes Online service’.
3. Select each scheme you need to migrate and provide the information requested. 

Transfers to Qualifying Recognised Overseas Pension Schemes (QROPS) – changes to forms

In the Lifetime allowance guidance newsletter —December 2023 and the Lifetime allowance guidance newsletter — March 2024, we told you about the overseas transfer allowance, and the updates to the APSS262 form, from 6 April 2024.

The updated APSS262, used to report a transfer of funds or assets from a registered pension scheme to a QROPS, will be available from 06 April 2024. Please ensure you are using the correct version of the form when making a submission. For any transfers where the date of transfer is on or after 06 April 2024, we will only accept the new version of the APSS262.

Following the introduction of the overseas transfer allowance we will be updating the following forms. Ensure you are using the correct version of the forms when making a submission from 6 April 2024:

• APSS242 — Minor amendment to ‘reason for notification’ section
• APSS243 — Minor amendment to ‘reason for notification’ section
• APSS244 — Added new section to allow scheme managers to report a charge under section 244IA of Finance Act 2004 and updated the name of the form to ‘Scheme Manager to HMRC — change in member’s residence’
• APSS252 — Updated the list of relevant benefit crystallisation events; added a new section to report transfer from a relieved relevant non-UK scheme to a QROPS and updated the name of the form to ‘Report of Relevant Benefit Crystallisation Events or Transferring relieved relevant non-UK scheme assets’
• APSS253 — Updated the ‘payment’ section for an onwards transfer to a QROPS and added a new section to allow the scheme manager to report when the original transfer was from a relieved relevant non-UK scheme to a QROPS
• APSS253 insert — Updated to reflect the changes to the APSS253
• APSS262 — Added new questions to allow PSAs to report a charge under section 244IA of Finance Act 2004 and provide more details on quoted and unquoted shares

The APSS252 supplementary page and the APSS254 will be removed altogether.

APSS262 ― How you can help us

In lifetime allowance guidance newsletter — December 2023 we told you we’d be introducing the function to submit the APSS262 form on the Managing Pension Schemes service. We’re looking for scheme administrators and practitioners to help us develop this feature.

You can take part in this user research and give us feedback by joining the Managing Pension Schemes user panel. To sign up or for more information email pensionsuserresearchrecruitment@hmrc.gov.uk. As a member of the panel, we’ll only contact you about the Managing Pension Schemes service and you can get involved in testing new features and providing feedback on the service.

Your input will be invaluable to helping influence the future design and development of the service.

Event Report

In lifetime allowance guidance newsletter — December 2023, we also told you that for the tax year 2024 to 2025 onwards, Event 24 will be added to the Event Report on the Managing Pension Schemes Service. This event is for reportable payment of lump sums or lump sum death benefits (LSDB) and has been introduced as a result of fully abolishing the Lifetime Allowance (LTA) from April 2024.

For the tax year 2024 to 2025 onwards, the Event Report will also be updated to remove:

• Event 2
• Event 6
• Event 7
• Event 8
• Event 8A

Lifetime Allowance (LTA) abolition ― frequently asked questions

Question 1: Is it correct that where a dependant or nominee dies under age 75 after 5 April 2024, that pension income received through flexi-access drawdown or an annuity will be tax-free?

Yes. Lifetime allowance guidance newsletter — December 2023 confirmed that a dependant’s or nominees’ flexi-access drawdown or annuity (BCE 5C and 5D) would not be brought into taxation. This also applies to a flexi-access drawdown or an annuity on the death of a dependant or nominee under age 75, continuing the current tax treatment of such benefits.

Question 2: Can an uncrystallised funds pension lump sum (UFPLS) be paid which is entirely taxable?

Yes. An individual does not need available allowances to be paid an UFPLS, as their available allowances determine only the tax treatment of the lump sum paid. Therefore, an UFPLS can be paid when an individual has no available allowances remaining and would be entirely taxable at the individual’s marginal rate.

Question 3: Can a pension commencement excess lump sum (PCELS) be paid to members of both defined benefit and defined contribution schemes?

Yes. The amended legislation for the PCELS does not limit its payment to individuals who are members of particular arrangements. However, a PCELS cannot be paid where another authorised lump sum could instead be paid. Therefore, if the individual could be paid an UFPLS they cannot be paid a PCELS.

Question 4: Will there be a minimum level of related pension in connection with which a PCELS can be paid?

No. Although the payment of a PCELS is tied to an individual becoming entitled to a relevant pension, there is no minimum level of pension specified in legislation. However, an individual must have exhausted their lump sum allowance or lump sum and death benefit allowance to be paid a PCELS. As a result, they must have taken at least £1,073,100 of pension benefits.

Question 5: Does payment of a PCELS trigger the money purchase annual allowance?

No, payment of a PCELS does not trigger the money purchase annual allowance.

Question 6: If lump sum death benefits paid from funds which crystallised before 6 April 2024 are not chargeable to income tax, does this mean they do not reduce an individual’s allowance?

Yes, a lump sum death benefit paid from funds which crystallised before 6 April 2024 will not further reduce an individual’s lump sum and death benefit allowance. This is because these funds will already have been tested against the LTA and so are reflected in the amount deducted from their available lump sum and death benefit allowance under the transitional arrangements.

Question 7: Why does the March Lifetime allowance guidance newsletter state that lump sum death benefits paid from dependents’, nominees’ or successors’ drawdown will be tested against these individuals’ available allowance when it had been confirmed that LSDBs will not be tested against a beneficiary’s allowance?

Lump sum death benefits will not be tested against a beneficiary’s allowance. However, a lump sum death benefit paid from a dependant’s, nominee’s or successors’ drawdown will be tested against the dependant’s, nominee’s or successors’ available lump sum and death benefit allowance. This is because, in such circumstances, the dependant, nominee or successor is not the beneficiary of that payment. They are treated as if they were the original member.

Respondents to the Lifetime allowance guidance newsletter — March 2024 have highlighted that is not currently the case. This is because, under the LTA, the payment of a flexi-access drawdown fund lump sum death benefit or a drawdown pension fund lump sum death benefit were not benefit crystallisation events (BCEs). The funds from which the lump sum death benefit was paid would already have been tested against the original member’s LTA when they crystallised the funds during their lifetime.

From 6 April 2024, it is necessary for the payment of these lump sum death benefits to be relevant BCEs in order to ensure that unlimited amounts cannot be paid free from Income Tax. In the case that they are paid on the death of a dependant, nominee or successor, it is that individual’s available allowance that the lump sum death benefit should be tested against, and not the available allowance of the original member.

Question 8: Will lump sum death benefits paid in respect of a deceased dependant, nominee or successor be tested against their available allowance if these funds crystallised prior to 6 April 2024?

No. As with payments in respect of a deceased original member, where a lump sum death benefit is paid in respect of a deceased dependant, nominee or successor from funds which crystallised prior to 6 April 2024, paragraph 131 of Finance Act 2024 provides that these funds are not retested against an individual’s lump sum allowance. This is because they would have already been tested against the LTA.

Question 9: Will a lump sum death benefit paid from funds which crystallised prior to 6 April 2024 still be limited by the permitted maximum at sections 637H to 637M?

We are aware that the legislation operates to ensure that lump sum death benefits paid from funds which crystallised prior to 6 April 2024 will not reduce an individual’s lump sum and death benefits allowance, but that the permitted maximum could still limit the tax-free amount that can be paid. As previously confirmed, the policy is that lump sum death benefits paid from such funds would be tax-free because these funds have already been tested against the LTA.  Further legislation will be brought forward, through regulations, to ensure that the correct policy outcome is achieved. 

Question 10: If a member transfers to a new provider after 6 April 2024, including funds which crystallised prior to this date, how will the receiving scheme know what part of a lump sum death benefit should not be subject to taxation due to paragraph 131 of FA 2024?

Further legislation will be brought forward, through regulations, which introduces a new reporting requirement to address this point. It is intended this will require the scheme from which a transfer is made to provide the receiving scheme with information about what portion of those funds crystallised prior to and after 6 April 2024.

Protections and enhancement factors

Question 11: Could you clarify question 37 of the March LTA Guidance Newsletter which states that individuals will not be able to transfer pension savings to a new provider and retain their enhanced protection?

This question stated that individuals will not be able to transfer pension savings to a new provider and retain the benefit of their enhanced protection, because their ‘permitted maximum’ for each lump sum is tied to the maximum amount that they could have been paid on 5 April 2023 or 5 April 2024.

The answer was updated to confirm that further changes were being considered to provide that an individual could retain their permitted maximum should they transfer to a new arrangement. We can now confirm that such changes will be brought forward, through regulations, to achieve this outcome.

To confirm, protection cessation events will continue to apply only for those individuals whose application for enhanced protection was received on or after 15 March 2023.

Question 12: Will the legislation be amended to ensure that individuals with primary protection or enhanced protection with protected lump sum rights of more than £375,000 can take a PCLS which is not limited by their lump sum allowance?

Yes. The Lifetime allowance guidance newsletter — March 2024 confirmed that, for these individuals, the permitted maximum for PCLS does not reference available lump sum allowance. We are aware that modifications are also required to paragraph 1(b) of Schedule 29 to Finance Act 2004 to ensure that these protected individuals can receive a PCLS in excess of their permitted maximum. These changes will be brought forward through regulations.

Question 13: How does a PCLS paid under scheme-specific lump sum protection reduce an individual’s allowances?

The Explanatory Note for Schedule 9 of Finance Act 2024 and question 11 of the Lifetime allowance guidance newsletter— February 2024 set out that these individual’s lump sum allowance will only be reduced by the standard 25%, and not the full value of the lump sum paid under scheme-specific lump sum protection. This meant 25% of the lump sum paid plus the relevant pension in connection with which the member became entitled to that lump sum. For instance, if the member was paid a lump sum of £200,000 and became entitled to a relevant pension of £200,000, their lump sum allowance should be reduced by £100,000: 0.25 × (£200,000 + £200,000). 

However, we are aware that the legislation at paragraph 87 of Finance Act 2024, which inserts paragraph 34(3) of Schedule 36 to Finance Act 2004, does not currently achieve our policy intent. Regulations will be brought forward later this year to amend this legislation. These regulations will be subject to the affirmative procedure (meaning they must be actively approved by Parliament before it becomes law) and if approved would be retrospectively effective from 6 April 2024. 

Question 14: For members permitted to take benefits before normal minimum pension age (NMPA), why is their lump sum allowance reduced without accounting for any protections, whereas their reduced lump sum and death benefit allowance does account for protections? 

This is consistent with the treatment under the LTA. Currently, paragraph 23A of schedule 36 to Finance Act 2004 provides that, where certain individuals are permitted to take pension before NMPA, their available portion for a PCLS should be calculated using the current standard LTA. The calculation does not account for any protections.

By contrast, there is no equivalent provision where a member is taking a serious ill health lump sum or lump sum death benefit. Therefore, any reduction is made to the individual’s LTA, accounting for any valid protections held. These circumstances are replicated for the lump sum allowance and lump sum and death benefits allowance following the abolition of the LTA.

Question 15: For members permitted to take benefits before normal minimum pension age (NMPA), why does the reduction of 2.5% per full year only apply at the time of crystallisation?

Under the LTA, where a member with a protected pension age (PPA) of below 50 took pension benefits before NMPA, their LTA was reduced by a ‘relevant percentage’. This was 2.5% for each complete year falling between the date of their BCE and the date on which they reached NMPA. This was provided for at paragraph 19(4) of Schedule 36 to Finance Act 2004.

From 6 April 2024, the ‘relevant percentage’ will remain unchanged. However, consistent with the fact that the new allowances will no longer consider pension benefits already taxed elsewhere, the reduction to a member’s allowances will only occur when the benefits they take before NMPA constitute a relevant benefit crystallisation event (RBCE).

Reporting requirements: Event 24 and RTI

Question 16: When reporting on Event 24, is it the aggregate of lump sum death benefits paid or the aggregate lump sum and death benefits allowance usage within the scheme that triggers the reporting requirement? 

Schemes should report on Event 24 when the aggregate of the values of any lump sum death benefits paid by the scheme exceeds £1,073,100.  

Question 17: When reporting on Event 24, should schemes report when the tax-free element of an UFPLS exceeds the individual’s available lump sum allowance, or when the total value of the UFPLS exceeds this amount?

Schemes should report on Event 24 when the full value of an UFPLS exceeds the individual’s available lump sum allowance.

Question 18: Will schemes need to report members’ reliance on scheme-specific lump sum protection on Event 24? 

Yes. The protections and enhancement factors listed under event 24 will include scheme-specific lump sum protection. Whilst we understand that this was not previously a requirement when reporting a PCLS, it was a requirement when reporting a standalone lump sum (under reportable event 8A).  

Question 19: Will schemes need to report members’ reliance on a transitional tax-free amount certificate (TTFAC) on Event 24?  

No. There is nothing on event 24 requiring schemes to report where a member relies on a TTFAC.

Question 20: For members with primary protection and protected lump sum rights of more than £375,000, because their PCLS is not limited by their available lump sum allowance, how should schemes report a PCLS on Event 24?

For these individuals, schemes should report on Event 24 where the PCLS or standalone lump sum paid exceeds the ‘standard’ lump sum allowance of £268,275 or where it exceeds £375,000. This is because the legislation provides that a lump sum is reportable En event 24 where it would have exceeded an individual’s lump sum allowance had that individual not been relying on a valid protection.

Question 21: For members with enhanced protection, because schemes will need to determine the tax treatment of lump sums paid by reference to the member’s permitted maximum and not their available allowances, how should schemes report on Event 24?

For these individuals, schemes should report on Event 24 where the PCLS or standalone lump sum paid exceeds the “standard” LSA of £268,275 or where it exceeds £375,000. This is because the legislation provides that a lump sum is reportable on Event 24 where it would have exceeded an individual’s lump sum allowance had that individual not been relying on a valid protection.

Schemes should also report on Event 24 where the aggregate of lump sum death benefits paid exceeds £1,073,100. This applies for individuals with enhanced protection as it does for those without protections.

In the case of individuals with enhanced protection, HMRC is aware that schemes will not be able to report the payment of an UFPLS which or serious ill health lump sum which exceeds the individual’s available allowances. Schemes will only know whether payment exceeds the individual’s permitted maximum under that scheme. The payment should still be reported under Real Time Information (RTI).

Question 22: Do lump sum death benefits paid to members age over 75 need to be reported both on Event 24 (when the aggregates exceed £1,073,100) and on RTI?

Yes. Event 24 is for the reporting of relevant benefit crystallisation events (RBCEs) which exceed the new allowances, whether or not there is a tax-free element which reduced an individual’s allowances. RTI is the reporting mechanism for any benefits taxed as pension income. They therefore serve separate purposes.  

Question 23: Where a lump sum death benefit is paid from funds which crystallised before 6 April 2024 and so does not use up an individual’s lump sum and death benefit allowance, should this be reported under Event 24 or RTI?

The payment of a lump sum death benefit from funds which crystallised prior to 6 April 2024 are not RBCEs so do not need to be reported on Event 24.

The point at which funds crystallised do not impact whether the payment of a lump sum death benefit needs to be reported under RTI. See question 14 of the Lifetime allowance guidance newsletter — March 2024.

Question 24: Will an entirely tax-free serious-ill health lump sum need to be reported through RTI?

No. As now, a serious ill-health lump sum where there is no charge to Income Tax will not need to be reported under RTI.

Question 25: Will CWG2 guidance be updated given the changes to reporting under RTI?

This will be updated as part of an annual review cycle in readiness for the tax year 2025 to 2026. This is so that the guidance aligns with the system in place. As previously confirmed, although the legislation to amend PAYE regulations will be introduced during the tax year 2024 to 2025, the new data fields on RTI will not be available until April 2025. Continue to follow the guidance in the Lifetime allowance guidance newsletter — 2024.

Reporting requirements: member statements

Question 26: Why are annual statements required to show an individual’s lump sum allowance and lump sum and death benefit allowance used, in monetary amounts, whereas paragraph 130 statements need to show their LTA percentage used?

As confirmed in the Lifetime allowance guidance newsletter — February 2024, from 6 April 2024, annual statements should convert an individual’s LTA percentage used to the monetary amount of their lump sum allowance and lump sum and death benefit allowance used. This is because the LTA is being removed from legislation. Individuals will now need to be notified of their allowances used in order to be able to establish their available lump sum allowance and lump sum and death benefits allowance.

As confirmed in the Lifetime allowance guidance newsletter — February 2024 and Lifetime allowance guidance newsletter — March 2024, one-off statements issued under paragraph 130 should show an individual’s LTA percentage used under that scheme as at 5 April 2024. This is to ensure that, where individuals are not receiving annual statements, they have an up-to-date notice of their LTA percentage used for the purposes of the transitional arrangements, including any application for a transitional tax-free amount certificate that they may wish to make.

Question 27: When should annual RBCE statements be produced?

As under the LTA, annual statements are required to be issued at least once each tax year.

As confirmed in Pension Scheme Newsletter 155, pension scheme administrators may continue to use P60s to report allowances used, in which case the annual statement can be issued up to 31 May following the end of the tax year to which it relates. Where schemes are using P60s relating to the 2023 to 2024 tax year to report allowances used, this newsletter also confirmed that schemes should be reporting the member’s LTA used under the scheme. This is because the LTA remains in force for the 2023 to 2024 tax year. However, the Lifetime allowance guidance newsletter — February 2024 also highlighted that, should schemes have already updated their systems in readiness for 6 April 2024, they may include the lump sum allowance and lump sum and death benefits allowance used on these statements.

For absolute clarity, any other annual statements issued during and following the tax year 2024 to 2025 should notify members of their lump sum allowance and lump sum and death benefits allowance used.

Question 28: Will members over 75 need a one-off statement under paragraph 130 of Finance Act 2024, or would they simply fall back into the regular annual reporting? 

If the member has rights remaining in the scheme and are not receiving an annual statement, then they would need to be issued with a one-off statement under paragraph 130. If they are not receiving an annual statement, but they had been in receipt of an annual statement which stopped because they turned age 75, then they would fall back into the regular annual reporting. 

Question 29: Should pension schemes include ‘deemed BCE’ LTA usage in annual RBCE statements where we performed the ‘deemed’ calculation at the members first BCE after 6th April 2006?​

There is no requirement to include LTA usage from a ‘deemed BCE’ in the RBCE statement; however, schemes may choose to do so. This mirrors the approach under the LTA in respect of annual BCE statements.

Question 30: Should pension schemes continue to include the percentage of LTA used up in respect of funds subsequently transferred to drawdown (TVID) in the RBCE statement?​

The information which is required to be included in an annual RBCE statement is the amount of member’s lump sum allowance and lump sum and death benefits allowance expended by RBCEs in respect of the scheme where they have not been transferred to another pension scheme. In addition, where the scheme has received a transfer in respect of the member, the amount of lump sum allowance and lump sum and death benefits allowance used on any RBCE in respect of these funds.

Question 31: At the point of an RBCE, can schemes still establish a member’s available allowances via self-certification or must they request the member’s RBCE statements and any TTFAC?

As under the LTA, it is a matter for the scheme administrator to decide how to obtain information in order to be able to determine a member’s available allowances, and therefore whether a tax charge arises on the payment of an RBCE. Schemes are expected to retain documentary evidence of any information they have relied on so that, if required, they can show that they have reasonable grounds for believing that a chargeable amount did not arise.

Transitional Tax-Free Amount Certificates (TTFAC)

Question 32: Is it correct that members can provide further evidence within the 3-month window?

Yes. This was confirmed at question 20 of the Lifetime allowance guidance newsletter — March 2024. We are aware that this answer conflicts with information provided in the draft Pensions Tax Manual (PTM) guidance on TTFACs. Final PTM guidance will be corrected to align with question 20.

To confirm, it is not HMRC’s expectation that members can therefore provide evidence piecemeal to the receiving scheme. An application must still be accompanied by complete evidence. However, should the member realise that they have not submitted all their evidence, or should schemes wish to inform members that there is evidence missing, there is nothing in legislation preventing that further information from being provided to the scheme as part of the same application. There is also no compulsion on schemes to request further evidence from a member where they realise that evidence is missing which the member may hold.

In addition, we can confirm that the 3-month window does not restart each time a member provides additional evidence. The 3-months starts on the date on which the application is received.

Question 33: If a TTFAC is cancelled, should past RBCEs still be based on the certificated amounts, should they be recalculated based on the actual amounts, or should they be recalculated based on the standard transitional calculation?

Question 25 of the Lifetime allowance guidance newsletter — March 2024 confirmed that, on cancellation of a TTFAC, any past RBCEs will continue to be reduced by the transitional tax-free amounts. This means the actual transitional tax-free amounts. It does not mean the erroneous amounts stated on the individual’s certificate which have been the cause of its cancellation.

We are aware that this answer conflicts with information provided in the draft Pensions Tax Manual (PTM) guidance on TTFACs. Final PTM guidance published will be corrected to align with question 25.

Question 34: Whose responsibility will it be to recalculate past RBCEs and whose responsibility is it to inform any schemes under which an RBCE has previously occurred?

As highlighted in the Lifetime allowance guidance newsletter — March 2024, this point is under consideration, and we will confirm the process as soon as possible.

Question 35: When applying for a transitional tax-free amount certificate, will members need to provide evidence of tax-free lump sums taken which were not BCEs and so did not use up any of their LTA?  

No. They would only need to provide evidence in respect of those amounts which used up their LTA or were ‘deemed’ to use up their LTA (i.e. tax-free lump sums taken prior to 6 April 2006).  

Standard transitional calculation

Question 36: Where does the legislation provide that the standard transitional calculation should be based on a member’s protected LTA where they hold a valid protection?

Where the availability of an individual’s lump sum allowance or lump sum and death benefits allowance needs to be determined in accordance with paragraphs 125 and 126 of Finance Act 2024, the reduction to their allowances is based on their LTA previously-used amount. This is defined at paragraph 129(5) as ‘the amount that would have been the previously-used amount for the purposes of section 219 of FA 2004 (availability of individual’s lifetime allowance)’. An individual’s LTA, as opposed to the standard LTA, accounts for any protections held. 

Transitional scenarios

Question 37: Where a member’s retirement date is on 6 April 2024 and their paperwork was returned before this date, should any PCLS paid be assessed under the current LTA regime or the new regime?

It should be assessed under the new regime because a member’s entitlement to a PCLS cannot be before 6 April 2024 if that is their retirement date. 

Question 38: Where a member’s retirement date is before 6 April, but the necessary paperwork is received after 6 April, should their benefits be assessed under the current or the new regime?

This will depend on when the member’s entitlement to benefits is deemed to arise for tax purposes, which will vary depending on the circumstances of the case. For instance, it may be that if a member has a retirement date before 6 April 2024, but their paperwork is not provided in full until on or after 6 April 2024, their benefits will need to be assessed under the new regime.

Question 39: Where a member’s retirement is after 6 April, but retirement paperwork is received before 6 April, should their benefits be assessed under the current or the new regime?

Their benefits should be assessed under the new regime because their entitlement to the benefits will not arise until their retirement date, which will be after 6 April 2024.

LTA abolition: further regulations

The abolition of the LTA was achieved through Finance Act 2024. Pension Scheme Newsletter 155 confirmed that there would be further minor technical changes. These cover areas which were not included in Finance Act 2024 and amendments which ensure that legislation achieves the intended policy outcome, as previously communicated to schemes and stakeholders. 

On 14 March 2024, the government made several of these further technical legislative changes through The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (SI 2024/356), which comes into force on 6 April 2024. The Explanatory Memorandum explains these changes. Further information on was provided to the LTA Working Group last week. You can request a copy of this summary by emailing policypensions@hmrc.gov.uk, putting ‘LTA Abolition: Further Regulations’ in the subject heading.