How unauthorised payments are affected by the public service pensions remedy
If you had unauthorised payments to your pension in the remedy period, find out how the public service pensions remedy (known as McCloud) could have affected these.
If you had unauthorised payments from your pension scheme in the remedy period, find out how the public service pensions remedy (known as McCloud) could have affected these.
As a result of the public service pensions remedy, the amount of benefits payable by your pension scheme that were treated as an unauthorised payment may have changed if your benefit entitlement has changed. This could result in an increase or decrease of the lump sum you originally received. This could mean that:
- you may no longer have an unauthorised payment
- your unauthorised payments charges have reduced
- your unauthorised payments charges have increased
If you’re not sure if you’re affected by the public service pensions remedy, you can check if the remedy affects you or read the full guidance on the remedy.
What an unauthorised payment is
The tax rules specify the conditions that need to be met for payments to be authorised. Any payment that does not meet these conditions is an unauthorised payment.
Common examples of when payments are classed as unauthorised include:
- taking a pension commencement lump sums of more than 25% of your pension pot, known as an excess lump sum
- most lump sum payments to cash-in or access pension funds before you are 55, except:
- when the member retires due to ill health
- if before 6 April 2006, the member had the right under the pension scheme to take their pension before they were 55
- where the maximum lump sum payable under the scheme rules is more than the maximum permitted pension commencement lump sum
If your scheme has overpaid your benefits
If, as a result of the remedy, you have received an overpayment of benefits from your scheme, your scheme may ask you to repay the excess amount you received.
If the excess lump sum that was considered an unauthorised payment is repaid, as a result of the remedy, it is treated as never having been an unauthorised payment. This means that the unauthorised payment charges may be reduced or may no longer apply.
For the tax years between and including 2019 to 2020 and 2021 to 2022, you can claim a refund for overpaid tax charges by contacting HMRC.
For the tax years between and including 2015 to 2016 and 2018 to 2019, you can claim compensation for overpaid tax charges by contacting HMRC.
Getting a refund
If the decrease in the charge was between and including the tax years 2019 to 2020 and 2021 to 2022 and:
- you paid the original charge — HMRC will refund you directly
- your scheme paid the original charge — your scheme will contact HMRC for a refund
If the decrease in the charge was between and including the tax years 2015 to 2016 and 2018 to 2019 and:
- you paid the original charge — your scheme will contact you to arrange a refund
- your scheme paid the original charge — your scheme will make the necessary changes
If you have an additional charge to pay
If your excess lump sum is now higher than it previously was, as a result of the remedy, your unauthorised payment charges may increase.
If the unauthorised payment occurred between and including the tax years 2015 to 2016 and 2018 to 2019, you do not need to pay any additional charges.
If the unauthorised payment occurred between and including the tax years 2019 to 2020 and 2021 to 2022, you will need to pay the increased charge. Your scheme may offer to pay the unauthorised payments charges on your behalf, however you remain solely liable for the tax.
If you decide to pay the charge yourself, contact HMRC to raise an assessment for the new charge. You do not need to update your Self Assessment tax return.