Setting up multiple companies to separate business interests can seem very straight forward. There are however important considerations. We explore the implications of owning too many companies.
The McCloud Remedy: Public Sector Pension Reform Update
8 February 2024
Reducing Tax
Public Sector Pensions: What is the McCloud Remedy?
Back in 2015, the government decided to change most public sector pension schemes, which would see pension entitlement now based upon career average salaries (the reformed scheme), as opposed to the final – salary basis (the legacy scheme).
What did this mean?
Broadly, the McCloud Remedy saw individuals being ‘staggered’ onto the new scheme, with those closer to retirement continuing under the legacy scheme, and those further away from retirement being moved onto reformed schemes.
In many cases, the reformed scheme was much less beneficial than the legacy scheme.
Now this came under fire as being unlawful under the Equalities Act 2010, being discrimination based on age, and the Court of Appeal confirmed this and sided with the members as opposed to the Government.
The Latest Guidance for Public Sector Pensions
HMRC have released their long-awaited guidance on how the confusion of the McCloud Remedy will now be handled.
Scheme administers must now ‘roll back’ any individuals with any remedial service into a legacy scheme – that is members accruing benefits pre-31 March 2012.
All such individuals who were moved onto a reformed scheme in 2015, will now be treated as if they had remained in the legacy scheme.
Any roll back will only be for all pension entitlement accrued between 1 April 2015 and 31 March 2022 – the ‘remedy period’.
How will the roll back affect my tax position?
Individuals are subject to the pension annual allowance, that is the maximum amount of tax-free growth your pension can grow by in a tax year.
The standard annual allowance was £80,000 for 2015/16, £40,000 from 6 April 2016 until 5 April 2023 and £60,000 from 6 April 2023.
If you have pensionable service in the remedy period that has been rolled back, your pension tax position may now have changed.
You may have either paid too much annual allowance charge previously, or not paid enough.
What do I need to do?
All scheme administrators will be recalculating the pension input amounts for members affected by the roll back.
You should receive a ‘remediable pension savings statement’ with the new positions.
HMRC have confirmed that individuals affected will not need to resubmit any self-assessment tax returns, as a new dedicated digital service has been set up for members to correct their positions.
This service can be used to:
- Make an application for a refund of any previously overpaid annual allowance charges for tax years 2019/20, 2020/21 and 2021/22.
- Make an application to claim compensation for any overpaid annual allowance charges for tax years 2015/16 to 2018/19.
- Pay any underpaid annual allowance charge for 2019/20, 2020/21 and 2021/22.
Due to being out of time under the 4-year rule, HMRC will not demand any underpaid annual allowance charges for the tax years 2015/16 to 2018/19.
Whilst refunds cannot be claimed for any overpaid annual allowances charges from the same periods, an application for compensation can be made.
Get in touch with us
If you think you’re affected by the public sector pension scheme reforms and are unsure what you need to do or how your tax is affected, then please get in touch and we’d be happy to review your situation.
If you would like to find out more, please contact Christie Inns or call us on 01634 731390
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The content in this blog is correct as at 8th February 2024 See terms and conditions.
