Public Service Pension Schemes: Understanding the McCloud Judgement and Reclaiming overpaid tax
This article discusses the implications of the McCloud Judgement on Public Sector Schemes and focuses on potential reclaims of previously paid Annual Allowance and Lifetime Allowance charges. It explains the choice members have in treating the Remedy Period and the process to reclaim excess charges.
The authors offer a calculator to check the credibility of Pension Savings Statements and provide guidance on making informed decisions regarding pension entitlements. With extensive knowledge in public sector pensions, John and Peter help members get accurate information and reach the right decisions for them.
Public Service Pension Schemes – Regulations Update June 2023
There has been significant coverage of the outcome of the McCloud Judgement and the impact on members of Public Sector Schemes.
In a series of articles we will provide commentary on the implications as they become made aware through the regulations.
In this article we focus on the Policy Paper (updated in June 2023) and in particular provide an insight into potential reclaims of previously paid Annual Allowance and Lifetime allowance charges.
You will be given the choice how you wish, the period from 01/04/2015 to 31/03/2022 ( Remedy Period ) to be treated. Whether this is to be treated as 1995/2008 or 2015 service.
The scheme will be required to issue new notifications of Pension savings if you elect to have the Remedy Period treated as service in your old scheme.
In addition, this may have an impact upon the Annual Allowance tax charge you may have paid personally . The policy statement allows, in certain circumstances ,that any excess charge can be reclaimed.
The process to reclaim is not made under the existing Self Assessment and instead there is a need for you to personally request a repayment of any excess charge. There is a requirement that you sign a declaration that the information you have provided is correct.
Therefore, you need to be confident that the calculation for reclaim is accurate and correct. We can provide this reassurance, you will be in safe hands
The regulations also require if you elect to have the Remedy Period treated under the old scheme and this means an increase in Annual Allowance charges you will be liable to pay.
You may be entitled to make a scheme election to pay the charge.
For the tax year 2022/2023 you will receive Pension Savings Statement by the 6th October.
However, these may well be incorrect if you opt for the Remedy Period to be treated under the old scheme. This is because you will become a new member of the new 2015 scheme with effect from 01/04/2022.
As the Remedy Period has not yet been selected the scheme will issue Pension savings Statements based upon the current position.
The regulations state that you should complete your Self Assessment based on the information received and if required you can amend the submission later once you have made a decision in respect of the Remedy Period.
Whilst the above deals with Annual Allowance charge, the regulations also allow for a reclaim of any Lifetime Allowance charge if the recalculation of the Remedy Period, means an overpayment in certain years. This is because the Regulations puts you back in the position you would have been in had the changes implemented by the Government not taken place.
Summary
As can be seen from the brief outline above it will not be possible to consider your personal position until the scheme issues you with a Remediable Service Statement.
It will be important to analyse your personal position and to ensure that the information issued by the scheme is correct.
We can help in a number of ways:
- We have created a calculator which will be able to check that the information provided in respect of the Pension savings statements is credible.
- We can explain to you the comparator position in respect of the choice that you have,
- Help in the assessment of your annual allowance and lifetime allowance , where appropriate.
- We will inform you of your options to enable you to make an informed decision
Visual of calculator.
How we can help
We will check the information issued by the scheme using the above calculator. We will ensure that this is correct and look at your own personal overall position – looking back over the past years and confirming or recalculating your pension entitlement.
John and Peter have extensive knowledge of the pensions annual allowance and lifetime allowance. We will ensure that you have the correct information to reach a decision that is right for you.
