In January we issued a briefing explaining the changes to the Annual Allowance which will affect all Pension Input Periods (PIPs) ending on or after 6 April 2011. If trustees of DB schemes have not nominated a PIP then the PIP year will run from 7 April–6 April. This means that members may already be subject to the new, much reduced, Annual Allowance regime. HMRC have indicated in guidance that, where no previous nomination has been made, the PIP can still be changed retrospectively, but only in relation to the entire period since 6 April 2006. So if trustees make a retrospective nomination for the first PIP to end on 5 April 2007, all subsequent PIPs will then be aligned with the tax year. This will delay by almost a year the impact of the new Annual Allowance. This is a reminder that this facility is only available until the current Finance Bill receives Royal Assent, which will be some time this summer. Trustees wishing to consider this option should seek urgent advice.
The position is more complex for DC schemes as individual members may make their own nominations – it may still be open for the trustees to make a retrospective nomination if no member nomination has been received.
If a retrospective nomination is not made by the date of Royal Assent then it will still be possible to change the PIP in relation to future tax years (effective from 2012/2013 onwards).
If the Finance Bill is enacted in its current form, in future the default date for PIPs (where no nomination has been made) will be aligned with the tax year. This will apply only to schemes or arrangements established on or after 6 April 2011.