Pension saving statements

17 November 2021
Fiona Hanrahan and Ryan Medlock from our Intermediary Development and technical team discuss the who, what and when of pension saving statements.

Listen to our latest podcast as part of our 5 minute download series where Moira Warner and Ryan Medlock look at the different pension saving statements that exist and what information they each provide. We will also look at the deadlines for sending out pension saving statements and how advisers can support their clients during this time.

Ryan: We're at that time of year when advisers email inboxes are overflowing with queries about annual allowance tax charges from scheme members who've received the Pension Saving Statement or PSS for short. So, in this podcast we're going to whisk through the who, when and what of PSS. I'm joined by our expert Moira, who will be answering my questions today. So, Moira, starting with First Principles, what exactly is a PSS?

Moira: It's a statement which gives scheme members retrospective information about the growth in their pension savings over any particular tax year, and from there it enables them to work out whether they need to pay a tax charge to HMRC, and it will also help them work out how much they can save in future years without incurring a tax charge.

Ryan: And which members will receive one?

Moira: The individuals who are entitled to automatically receive a PSS are those whose pension input exceeds either the standard annual allowance or if the members flexibly access their pension savings, the money purchase annual allowance, and so in line with this, there are two types of PSS, logically a standard pension savings statement and the Money purchase pension savings Statement.

Ryan: So, what about cases where pension input exceeds an individual's tapered annual allowance?

Moira: Well, scheme administrators can't really know for certain whether an individual will be subject to the tapered annual allowance, and if they are the level at which it bites. So, they can't know whether the tapered annual allowance has been exceeded and aren't required to automatically supply a PSS if it does.

Ryan: We know that schemes are busy sending out their PSS just now. But what is the legal deadline?

Moira: The deadline is the 6 October after the end of the tax year to which the PSS relates. So, for example, 6 October 2020 is the deadline for tax year 2019/20 statements.

Ryan: And what about statement members requests but which aren't provided automatically? How do the deadlines work for these on demand statements?

Moira: On demand statements must be provided by the scheme within three months of receiving the request or 6 of October following the end of the tax year to which the request relates, if that's later. So just as an example, if an individual requests a statement in respect of tax year 2021 in March 2021, the scheme won't be required to provide that until six of October 2021 at the latest, but a request made on the 1 November 2020 in respect of 19/20 would need to be filled within three months.

Ryan: Now you mentioned earlier that there are two types of statements, a standard PSS and the money purchased PSS. Can members ask for both?

Moira: No, from a legal perspective, Ryan, members can ask for one or the other, but not both, but the content of the statement is kind of such that both are really unlikely to be needed.

Ryan: Well, that brings me nicely to the information these statements must contain. First of all, will it differ depending on whether the PSS is one I've received automatically or is one I've requested?

Moira: No, there's no difference between the content of automatic and on demand PSS.

Ryan: So, starting off with a standard PSS, what pension savings information does this provide?

Moira: It will detail the total value of pension saving under all scheme arrangements for the year in question and the three previous tax years, and it's worth just going off at a short tangent here for a moment. Just if I may. All pension saving that looks as if it's under the same scheme isn't necessarily under the same scheme and therefore wouldn't be covered by any single statement. NHS there is a case in point where pension input in respect of final salary, career average and money purchase AVC savings benefits are each covered by separate PSS, as each of these are legally separate schemes.

Ryan: That's a great point. Thank you. So, what else must a standard PSS contain?

Moira: It must also state the annual allowance for the year concerned and the three previous tax years. And collectively this information allows the member or their adviser to calculate whether there's any unutilised annual allowance from any of those earlier years to carry forward and offset against excess saving in the current or future years.

Ryan: And what about money purchase pension savings statements? Do the information requirements differ at all?

Moira: I suppose here the clue is really in the title. The requirements are broadly the same, but the value of the individual's money purchase savings specifically must be stated separately from the value of other types of pension savings and also the amount of the money purchase annual allowance for the year in question and the three previous years must be included.

Ryan: So, that I think covers off the who, the when and the what of pension savings statements. But before we sign off, I've got a what if to throw into the mix. Now, occupational schemes aren't going to be able to produce these statements without data from members employers. What if the scheme doesn't get this data in time to meet the deadlines?

Moira: That's a good point, Ryan. Well, legislation compels employers and other responsible parties to provide the necessary data by the six of July following the end of the relevant tax year.

Ryan: So schemes then have a full free months to calculate input and get the automatic statement out in time for the 6 October deadline.

Moira: Yes, all things being equal, that is what should happen. But unfortunately, some employers do seem to struggle with this despite the threat of penalties. And quite clearly schemes can't provide statements where they haven't got enough information to do so. So where data is provided to them late, they've got three months from receipt to then provide the PSS to the member.

Ryan: Now obviously, there are real people at the end of the chain who could be impacted by late delivery of PSS. What should advisers do to ensure that their clients are not negatively impacted by any failures? Favour up the chain?

Moira: Well, we always need to remember that liability to an annual allowance charge must be included on the client's self-assessment tax return. So, if the exact liability can't be calculated because the scheme hasn't provided a PSS in time, then an estimate should be included. Instead, no benefit statements which members get contain a good deal of information which will be helpful to these calculations.

Ryan: For DB members in particular that won't always be straightforward and brings us full circle to the volume of annual allowance queries and the need for advice.

Moira: Yes, there's nothing quite like the prospect of a tax charge to help people understand the value of financial advice, is there?

Ryan: Moira, it's been nice chewing the fat over PSS with you today. Thank you for joining me.

Moira: Thanks Ryan.

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