The ‘scheme pays’ mechanism – the process by which members who exceed the Annual Allowance can have their relevant tax charge paid via the pension scheme, has been queried by the Association of Consulting Actuaries (ACA) in their recent letter to HM Revenue & Customs (HMRC).

The letter focuses on the operation of the scheme pays mechanism, and in particular on the complex law surrounding the time when a member retires, and highlights that the guidance published by HMRC in August failed to fully address the ACA’s concerns, and has instead raised additional issues.

In addition to those setting policy for the future, the issues raised in the letter could be of importance to members retiring now. HMRC’s views in response to this letter would provide welcomed clarity in this area.