Guidance

Newsletter on the public service pensions remedy — September 2024

Updated 26 September 2024

Calculate your public service pension adjustment — service update

In Public service pensions remedy newsletter — June 2024 we explained that the calculate your public service pension adjustment service was temporarily closed due to a technical issue. We can now confirm that the service is now available, with a number of additional improvements.

Triage

We have introduced a triage service to help members decide whether they need to use the full calculator and submission service or not. They will be asked a series of questions about their specific circumstances.

Where it is determined they do not need to use the service, a message confirming this will be displayed to them.

Where it is determined that they do need to use the service, they will be taken on to complete the relevant questions.

Save and return

Members will have the option to sign in using their Government Gateway username and password and save their progress to return to it later. They will have nine months from when they last saved their progress, to make a submission.

After this period, information will be deleted for security purposes, and they will have to start again from the beginning.

Members who do not have a Government Gateway username and password will still be able to use the calculator but will not be able to save and return.  If members want to, they can register online to create a Government Gateway account.

When members are signing in to their Government Gateway account, they may need to answer additional security questions before proceeding on to the service.

It is important for those who wish to use the save and return functionality to sign in to their Government Gateway account at the beginning of the triage journey, otherwise they will not get another opportunity until after they have got their results.

The removal of original pension input amounts for the remedy period

For the tax years 2015 to 2016 through to 2021 to 2022, members will no longer be asked to enter the value of their original pension input amount.

This reduces the amount of information that they need to provide as part of their calculation and submission.

You may wish to still provide this information to your members if you feel like it may be helpful to them.

Income sub-journeys — tapered annual allowance

In cases where the member does not know the amount of their net income or threshold income, they will be presented with additional questions throughout the submission for the service to complete the relevant calculation.

Using the information entered, the service will determine if the member’s threshold income is above the threshold income limit for the relevant tax year and, if so, then the service will ask further questions to establish if the member is above the adjusted income limit for the relevant tax year.

If the member’s income is above the adjusted income limit for the relevant tax year, the service will retain and use the adjusted income amounts to calculate the member’s tapered annual allowance.

The service will also ask members to enter their personal allowance for each year. This is to ensure that the tax charge is calculated correctly to give an accurate result of any charge or repayment due. Where a member does not know their personal allowance, the service will ask some additional questions to determine the correct amount to use.

Scheme pays — credits

Where, as a result of the remedy, a member’s annual allowance charge in any of the tax years 2019 to 2020 through to 2021 to 2022 is reduced, and the scheme originally paid the charge, HMRC will send details straight to the pension scheme.

This is for the scheme to check the information provided and return the details with their repayment claim. Where applicable, the member will be presented with a message telling them that this will happen.

Scheme pays — elections

Where, as a result of the remedy, a member has more tax to pay, they will have to use the calculate your public service pension adjustment service to declare the tax charge (rather than declaring this on their self-assessment return).

Originally the member would have been required to contact the scheme administrator with details of each scheme pays election that they decide to make. The member can now make their scheme pays request through the digital service and we will then share it with the scheme administrator directly, provided the scheme that will pay the charge is a public service pension scheme.

The digital service also makes the member aware that we will be sharing their scheme pays information with the scheme administrator directly and that their benefits will be adjusted accordingly. The government will introduce regulations to support this.

As a result, in all circumstances where additional tax is due as a result of the remedy, where a member uses the digital service to indicate they want their public service pension scheme to pay, they will no longer need to contact the scheme administrator directly.

We will provide the applicable pension scheme with details of the increased tax charge and the details of a member, through the Secure Data Exchange Service (SDES), so they can report and pay the charge on the Accounting for Tax return on the Managing Pension Schemes Service.

Agents acting on behalf of a member will not be able to use the service to make a scheme pays request to the scheme, as the election must be made by the member. As a result, members using agents will need to continue to contact the scheme directly to make their scheme pays election.

Reporting interest as savings income

We have attached to this newsletter an appendix with guidance on interest that you pay to your members relating to the Public Service Pensions Remedy. They may need to report the interest to HMRC as savings income and pay tax on it.

We intend to publish this at a later date as GOV.UK guidance, but we have included this here so that it is available to you as soon as possible. You should use this to help inform your members which of the payments you are making to them are taxable and the action they will need to take.

In Appendix A, you can find further information about member guidance for tax on interest.

Reclaiming unauthorised payments charges (including offsetting) under the mandating procedure

You will need to provide members who had started to receive their benefits after 1 April 2015 and before 1 October 2023 with an immediate choice as to the type of benefits (legacy or new scheme) they want for the remedy period, 1 April 2015 to 31 March 2022.

Read ‘actions for scheme administrators’ in Chapter 1 pension schemes — scheme administrators’ guidance for more information.

Unauthorised payments charges

Where a member previously received a lump sum that exceeded the maximum limits to be paid tax free, an unauthorised payments charge would have been due on the amount over that limit.

If when making their choice that member chooses different benefits to those they received before 1 October 2023, you will need to adjust the amount of benefits you pay the member as required by the remedy.  This can retrospectively change the maximum amount of the tax-free pension commencement lump sum (PCLS).

Offsetting

This means the amount of the original lump sum payment that was an unauthorised payment may reduce where the members choice results in an increased PCLS.  Any top-up lump sum payment may also be an unauthorised payment.  As a result, members and scheme administrators may have overpaid tax in relation to the lump sum paid before October 2023 and now owe tax in relation to a top-up lump sum payment.

Where tax has been overpaid on the original lump sum and further tax is due on a top-up to that lump sum, it is not always possible to set off one tax against the other and the unauthorised payments charge cannot be reclaimed where paid under the mandating procedure.

Read the section covering ‘the mandating procedure’ in Pension schemes and unauthorised payments for further information.

The government understands that the retrospective nature of the remedy increases the number of cases where this may happen.

To reduce the administrative burden and improve the customer journey, the government will introduce legislation in the current tax year to allow for overpaid amounts of unauthorised payments charge to be offset against further amounts of unauthorised payments charge due. Similar changes will be made in respect of the scheme sanction charge.

This will be possible only where scheme administrators used the mandating procedure to pay the unauthorised payments charge in relation to the payment of pension benefits and the amount of charge payable changes as a result of the remedy.

To ease the process, the government will make scheme administrators jointly and severally liable for the unauthorised payments charge in this case.  This means you will not need to obtain a mandate from the member to deduct the unauthorised payments charge from the lump sum due to the member.

Interest

Schemes are required to pay interest in respect of underpaid benefits at the rate set under The Public Service Pensions (Exercise of Powers, Compensation and Information) Directions 2022 or The Public Service Pensions (Exercise of Powers, Compensation and Information) Directions (Northern Ireland) 2023.

As set out in Pension Schemes Newsletter 156, interest paid in respect of an unauthorised payment is an unauthorised payment. 

As you have no choice over the amount of interest payable, the government will also introduce legislation in the current tax year to exempt this interest from the scheme sanction charge. You will still be required to pay the scheme sanction charge on the unauthorised payment.

Scheme administrator reclaims where offsetting can’t be used

Where the amount of the overpaid unauthorised payments charge is more than the charge on the amount of the top-up lump sum, the offsetting procedure will not be able to give complete repayment of the overpaid tax charge.

Scheme administrators should offset the maximum amount possible and will then be able to claim a refund of the balance of the overpaid unauthorised payments charge, from HMRC, where that tax charge arose on or after 6 April 2019.

To claim this refund, you will need to provide information about the original payment of the charge and the lump sum position after the member has made their choice.  We will provide further details on what you will need to tell HMRC about the repayment request in due course.

Treasury directions will provide that the member can claim compensation from the scheme manager for overpaid unauthorised payments charges arising before 2019 to 2020, where the offsetting process cannot be used.

Guidance

In Appendix B, you can find further information about the offsetting process for the unauthorised payments charge.

This guidance does not apply where the member paid their own unauthorised payments tax charge directly to HMRC. Instead, members will need to follow the guidance in How unauthorised payments are affected by the public service pensions remedy when considering what further action is required.

How you can help us

We’re committed to working with schemes and are looking for volunteers to help us develop the proposed changes.

If you’re interested in talking to us, email publicservicepensionsremedy@hmrc.gov.uk and put ‘Digital service changes’ in the subject line.

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

Contacting HMRC

All aspects of the public service pensions remedy are handled centrally by our specialist team.

If you have any questions including queries about legislation, how the remedy operates, our processes, guidance or our digital service, email publicservicepensionsremedy@hmrc.gov.uk.

This mailbox is monitored daily and where necessary queries will be escalated to the relevant areas for a response.