Response and draft legislation issued 14 October 2010  

Draft clauses for the Finance Bill and explanatory notes issued on 9 December 2010. Technical consultation ended on 9 February 2011

Finance Bill issued on 31 March 2011, expected to have effect from 6 April 2011  

Response to consultation issued March 2011

Draft regulations issued May 2011, some following previous consultation. Comments are requested by 24 June 2011

The draft Registered Pension Schemes (Provision of Information) (Amendment No. X) Regulations 2011

The draft Registered Pension Schemes (Notice of Joint liabilities for the Annual Allowance Charge) Regulations 2011

The draft Registered Pension Schemes (Modification of Scheme Rules) Regulations 2011

The draft Registered Pension Schemes (Accounts and Assessment) (No. 2) Regulations 2011

The annual allowance provisions will be amended with effect from 6 April 2011.  

Changes include:

  • the annual allowance has been reduced to £50,000 from 6 April 2011, for defined benefit and defined contribution schemes;
  • where an individual exceeds the new annual allowance, any unused annual allowance in the previous three tax years (assumed to be £50,000 for 2008/09, 2009/10 and 2010/11) may be used to offset the additional pension saving;
  • accrual in a defined benefit scheme will be valued using a flat rate factor of 16;
  • death benefits and total commutation in cases of serious ill health will be exempt from the annual allowance;
  • enhanced ill health retirement will only be exempt from the annual allowance where the individual is unable to work in any capacity until State Pension Age;
  • enhanced benefits on redundancy will not be exempt from the annual allowance; and
  • benefit structures such as employer-financed retirement benefit schemes (EFRBS) are intended to be no more attractive than other forms of remuneration.

HMRC has issued draft regulations which will make consequential amendments to tax regulations following the reduction in the annual allowance and will also:

  • set out requirements for administrators and employers to ensure members have access to the information they need to calculate and report any annual allowance charge;
  • set out the requirements for a member to notify a scheme that they want the scheme to pay their annual allowance charge in return for a reduction in benefits;
  • provide a statutory override of existing rules to allow a member's benefits to be modified where the scheme pays the annual allowance charge on the member's behalf;

make changes to the accounting and assessment regulations to enable scheme administrators to pay any annual allowance charge they are jointly liable for.