Administrative complications may arise where a scheme’s “scheme year” (used, for example, to determine pensionable salary) and the tax year are out of sync with their PIP. This is set to be exacerbated by the Government’s proposals to reduce the annual allowance. In particular, the Government intends to require schemes to provide certain information to members:
- Where individuals have contributions (or deemed contributions in the case of defined benefit accrual) above the annual allowance in a pension arrangement, pension schemes will be required to provide members with their pension input amount for the relevant year within six months of the end of the tax year.
- Where individuals have exceeded the annual allowance, pension schemes will also be required to provide this information for the previous three years, to allow individuals to take advantage of the carry‑forward facility.
For reasons of administrative convenience, schemes may wish to align their PIP with the administrative scheme year and the tax year, so that they have an obligation to provide the information as at one single date.
Schemes are able to nominate a different PIP. However, the legislation is drafted in such a way that the PIP would need to be changed retrospectively. (Broadly, prospectively changing a scheme’s PIP to end on 5 April would mean it would fall in the same tax year as that in which the last PIP ended. It is only possible to do this for the first PIP, not subsequent ones.)
There is some uncertainty as to whether this can, in fact, be done retrospectively. Even if it is possible, any retrospective nomination purportedly made before the new legislation comes into force also runs the risk that the legislation (which is still only in draft form) may change.
If schemes cannot align their PIP with the tax year, then they will be faced with producing and providing specific information as at different reference dates. This will be particularly unfortunate where schemes have adopted the default PIP, as that period end just one day after the end of the tax year.