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EPN462 - Pensions Taxation

Audience:

  • Pension Leads & HR Managers
  • Internal Communications Managers

Action:

  • To note the timetable for issuing pensions savings statements and the obligations on members to check whether they have a tax charge.
  • To inform members affected by tax legislation of the timescale and support services that are available to them.

Timing:

  • Immediate

Detail

This notice is to provide you with an update on the following aspects of the Pensions Tax:

  • Timing of pension savings statements
  • Support services available for those who have been or, are likely to be, affected by the recent tax changes
  • Action required and timetable for members
  • Support for employers

Pension Savings Statements – timing

From 1 September, MyCSP will be issuing Pension Savings Statements (PSS) to members who have:

a) Breached the Annual Allowance in 2015/16; or

b) Earn over £100,000; or

c) Request a statement

The distribution of these statements will be staged by employer, and will be completed by 6 October. The PSS letter will contain;

  • A covering letter
  • A guidance insert outlining the support available to staff 
  • 1 or 2 Pension Savings Statements. This is because each separate scheme (i.e. the relevant section of PCSPS and alpha) requires a PSS. Protected members will receive 1 statement and dual members (PCSPS and alpha schemes) will receive 2.

Support available to members

This topic is complicated for members and the scheme can provide support, whilst being mindful that tax is an individual responsibility and that the scheme cannot provide financial advice.

To support the Pension Savings Statements, an online step-by-step guide has been produced and is available on the Civil Service Pensions website on the FAQs, Help and Support section of the Pensions and Tax page. The product is similar to the Annual Benefit Statement guide, which has received positive feedback from both members and employers.

There are a number of different session options available to the member, and these are set out below along with their costs.

Group sessions (1:20)
£1,700 Group session
£3,200 Cost per day (3x Group sessions)
Individual sessions
£695 Tailored 1-1 Session
£1,150 Tailored 1-1 Session with personalised letter and follow up

We are aware that some smaller employers may have only small numbers of staff affected. Therefore, smaller employers may wish to join with other employers to run group sessions together. Other employers have expressed logistical difficulties with providing sessions for staff overseas, but those employers should be able to arrange sessions via phone or video conference, rather than face-to-face.

To book sessions on behalf of your staff you should complete a Tax Support Enquiry Form which you can find on the Civil Service Pensions website on the Pensions and Tax Help and Support page and send it to Taxsupport@mycsp.co.uk. Alternatively you can call the Tax Support booking number on 01903 835717.

Due to tight deadlines (which are fully set out below), there is only a relatively condensed period to run guidance sessions for them to be fully effective and therefore employers should look to schedule sessions before the end of October if possible.

Action and timetable for members

Members who receive a Pension Savings Statement will need to firstly work out whether they have a tax charge to pay and, if so, to determine how to pay that charge. Members can either pay their tax directly to HMRC via self assessment or can opt for the charge to be taken out of their pension (called “Scheme Pays”). You should be aware that a large proportion of members will not have any tax charge to pay, but will need to engage with the process regardless.

Members may also need to obtain Pension Savings Statements from any other pension arrangements, including from outside of the Civil Service to determine if they have a tax charge to pay.

If members have calculated that they have a tax charge to pay they will need to have made that payment by 31 January 2017 if they have pension inputs in both their pre-2015 pension scheme and alpha or they may be liable for a late payment penalty charge levied by HMRC.  This is a HMRC requirement and not a scheme decision. To meet a 31 January deadline, the following timetable is required;

  • 6 October – Deadline for members to receive PSSs
  • During October – Members consider PSS, attend Tax support session (if needed), and work out whether they have a tax charge to pay
  • 9 November – Deadline for members to request Scheme Pays quote (if choosing to use Scheme Pays)
  • 30 November – Deadline for MyCSP to issue Scheme Pays quotes
  • 14 December – Deadline for members to return form accepting quote
  • 31 December – Deadline for MyCSP to process Scheme Pays deductions
  • 31 January – Deadline for HMRC to have received notification and payment of the tax charge from MyCSP

If members only have pension input in a single scheme, eg protected members or alpha-only members, they can use mandatory scheme pays which has a longer deadline of 31 July to finalise.

The deadline for members to complete their self assessment tax return remains as 31 October if paper and 31 January if online.  

Many members will not be aware of the different deadlines that apply this year. Previously members had until 31 July to complete the process. It is important staff appreciate the urgency and tighter deadlines which apply this year. A letter will be sent to all members by 26 October to remind them of the deadlines for using Scheme Pays.

Support and action for employers

We know that it will be important for employers to understand which members will be receiving statements. We have agreed with MyCSP that a list of members who will receive Pension Savings Statements will be sent to each employer (HR Director and/or lead pension contact) at the time of dispatch. This will allow you to target your internal communications and arrange for the relevant member sessions to be arranged.

We will also write again in early October to provide an update on the PSS process and remind employers of the timetable.

It would be helpful if employers provide some core messages to members who are likely to be affected in advance of them receiving Pension Savings Statements. Key messages that you may wish to make are:

  • Pension Savings Statements will be issued to affected members over the next month who have;
    • Breached the Annual Allowance in 2015/16; or
    • Earn over £100,000; or
    • Request a statement
  • Members who receive a statement will need to engage with the process and calculate whether they have a tax charge to pay. They may need to request Pension Savings Statements from other pension providers.
  • There is material on the Civil Service Pensions website and an online HMRC calculator to assist members.
  • Group seminars are also available to assist members and help them understand pension taxation and how to calculate whether they have a tax charge due.
  • If you receive a statement and would like to attend a session please contact [DN: Employer will need to arrange and fill in details here]
  • If members have a tax charge to pay, they will need to calculate this tax liability and inform the scheme by 9 November if they wish to use Scheme Pays.

Other information

If you require any further assistance, please contact Kevin.Hughes@cabinetoffice.gov.uk or Sally.Rowles@cabinetoffice.gov.uk 

Contacts

If you have a question about the distribution of EPNs contact employerpensionnotice@cabinetoffice.gov.uk.

You can find electronic copies of the Employer Pension Guide, all current EPNs and forms on our website.

This notice is for employers and should not be issued to scheme members.

If members have a question about their pension they can find information on this website or by contacting MyCSP.