EPN685 - Annual Allowance 2022/23

This notice will be of interest to:

• HR managers
• Pension leads

• Understand that there may be an increase in the number of members who breach the Annual Allowance in 2022/23
• Understand the support and options available to members

From August 2023

We anticipate that more alpha members will exceed their Annual Allowance for the 2022-23 tax year compared to previous years.

This is because there is a difference in the inflation rates used to adjust pension benefits, which affects the calculation of the Pension Input Amount. The Pension Input Amount is used to determine if the Annual Allowance has been exceeded or not.

For a detailed explanation of the situation, please refer to the Q&A material provided in Annex A.

Support for members

Members who are affected will receive Pension Saving Statements (PSS) in the summer or autumn of 2023. Employers have the option to provide support in the following ways:

• Employers can arrange and pay for group or one-to-one tax awareness training through MyCSP by contacting taxsupport@mycsp.co.uk or they can find and arrange their own training.
• There is a wealth of information available on the Civil Service Pensions website (https://www.civilservicepensionscheme.org.uk/your-pension/yearly-pension-update/pension-saving-statement/), which we are reviewing to ensure it is up-to-date and meets the needs of members.

Scheme Pays

An option for members to pay a tax charge is called Scheme Pays.  If a member's pension value increases by more than the Annual Allowance and they owe a tax charge, they can request that Civil Service Pensions pays the charge on their behalf in exchange for a reduction in their pension benefits.  Further information about Scheme Pays is available at https://www.civilservicepensionscheme.org.uk/your-pension/yearly-pension-update/pension-saving-statement/scheme-pays/

Partnership

The partnership pension account is a defined contribution scheme, provided as an alternative option for alpha members who do not wish to be a member of the alpha scheme.

Further information about the partnership scheme is available at https://www.civilservicepensionscheme.org.uk/knowledge-centre/pension-schemes/partnership-pension-account/

Members need to give a notice of two months if they want to switch from alpha to partnership. The switch will not affect the 2022/23 tax, but partnership may be a viable option for members who are worried about potential tax charges in relation to the tax year of 2023/24, due to the different tax treatment of partnership.

The distribution of Pension Saving Statements (PSS) to members impacted by 2015 Remedy (‘McCloud’)

The way in which 2022/23 Pension Saving Statements (PSS) are distributed will be affected for certain members who had alpha service between 2015 and 2022. This is because their service during that period will be adjusted, or 'rolled back' into their relevant legacy scheme, resulting in changes to the Pension Input Amounts (PIAs) for that period.

We will recalculate their Pension Input Amounts (PIAs) and issue a PSS for the 2022/23 tax year to them by 6 October 2024.

PSS will be issued to members who are not impacted by the 2015 Remedy and/or not impacted by the 2015 Remedy rollback.

Further information

We expect this to be a one-off event and therefore we do not propose to implement any changes to the scheme.  Further information is contained in the Q&A material at Annex A.

The Chancellor announced changes to the pension tax regime, including the Annual Allowance, in the Spring 2023 Budget on 15 March 2023.  We are reviewing the implications of this and will update the scheme website with further information as soon as possible.

If you have a question about the distribution of EPNs, or would like to receive them in a different format, please contact EPN@MyCSP.co.uk.

You can find electronic copies of the Employers’ 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 at:
http://www.civilservicepensionscheme.org.uk/