Annual allowance – pension savings statements for 2018/19 being issued

by Alexander Beard, on Nov 18, 2019 2:25:18 PM

By 6 October 2019, pension scheme administrators must have issued annual allowance (AA) pension savings statements to those members who have exceeded the AA for this tax year.

Pension savings statements must be issued to:

  • Scheme members who made pension savings of more than the AA (£40,000) to that particular pension scheme. Those who have exceeded their tapered AA but not £40,000 won’t be informed but must still take action.
  • Members of money purchase pension plans who the scheme administrator has reason to believe are subject to the money purchase annual allowance (MPAA) and whose pension savings under that scheme are more than £4,000.
If a member exceeds their AA or the MPAA (or both) across all pension schemes and does not have sufficient unused AA to carry forward from previous tax years, an AA tax charge will be due.

The pension savings statement relates only to that particular scheme so it’s up to the member to take into account their pension funding under all registered pension schemes for that tax year when assessing whether the AA has been exceeded.

Where the AA has been exceeded, the first step is to look at whether there is any scope to use carry forward in order to absorb the excess. If the excess can be absorbed fully by the use of carry forward then there is no taxable element and HMRC doesn’t need to be informed.

If there is an annual allowance excess that can’t be absorbed using carry forward, this must be declared on the member’s self assessment return (deadline 31 January following the end of the relevant tax year, so for 2018/19 the deadline is 31 January 2020). In some cases the pension scheme can pay the tax charge out of the member’s pension benefits (called ‘scheme pays’) but even where this is the case, the member must still declare the annual allowance charge on their self assessment return.

Article taken from ‘Round Up’ from Threesixty – Autumn 2019.
Topics:Annual AllowancePensionsSavings